What is Budget?
The Annual Financial Statement or the Statement of the Estimated Receipts and Expenditure of the Government of India in respect of each financial year is popularly known as the Budget.
Presentation of the budget:
The Budget is presented to Lok Sabha on such day as the President may direct. Immediately after the presentation of the Budget, the following three statements under the Fiscal Responsibility and Budget Management Act, 2003 are also laid on the Table of Lok Sabha:
- The Medium Term Fiscal Policy Statement.
- The Fiscal Policy Strategy Statement.
- The Macro Economic Framework Statement.
No discussion on Budget takes place on the day it is presented to the House. Budgets are discussed in two stages—the General Discussion followed by detailed discussion and voting on the demands for grants.
General Discussion on the Budget:
During the General Discussion, the House is at liberty to discuss the Budget as a whole or any question of principles involved therein but no motion can be moved. A general survey of administration is in order. The scope of discussion is confined to an examination of the general scheme and structure of the Budget, whether the items of expenditure ought to be increased or decreased, the policy of taxation as expressed in the Budget and in the speech of the Finance Minister. The Finance Minister has the general right of reply at the end of the discussion.
Consideration of the Demands for Grants by Departmentally Related Standing Committees of Parliament:
With the creation of Departmentally Related Standing Committees of Parliament in 1993, the Demands for Grants of all the Ministries/Departments are required to be considered by these Committees. After the General Discussion on the Budget is over, the House is adjourned for a fixed period. During this period, the Demands for Grants of the Ministries/ Departments are considered by the Committees. These Committees are required to make their reports to the House within specified period without asking for more time and make separate report on the Demands for Grants of each Ministry.
Discussion on Demands for Grants:
The demands for grants are presented to Lok Sabha along with the Annual Financial Statement. These are not generally moved in the House by the Minister concerned. The demands are assumed to have been moved and are proposed from the Chair to save the time of the House. After the reports of the Standing Committees are presented to the House, the House proceeds to the discussion and voting on Demands for Grants, Ministry-wise. The scope of discussion at this stage is confined to a matter which is under the administrative control of the Ministry and to each head of the demand as is put to the vote of the House. It is open to members to disapprove a policy pursued by a particular Ministry or to suggest measure for economy in the administration of that Ministry or to focus attention of the Ministry to specific local grievances. At this stage, cut motions can be moved to reduce any demand for grant but no amendments to a motion seeking to reduce any demand is permissible.
Union Budget 2018: Major Highlights
The Union Finance Minister Arun Jaitley on February 1, 2018 presented the Union Budget 2018 in the parliament. In the independent India, this will be the 88th budget and the fifth of the Modi Government.
This year’s budget session is crucial as it comes after government’s two big financial decisions – demonetisation and the implementation of Goods and Services Tax. It will be also NDA government’s last full budget presentation before next year’s Lok Sabha elections.
The Budget 2018 has identified various sectors including agriclutre, infrastructure, financial, public services, etc as key drivers of the economy. Accordingly, Arun Jailtley announced following initiatives:
- This year’s Budget will focus on generating higher income for farmers and higher prices for their produce.
- For better price realisation, farmers need to make decisions based on prices likely to be available in the market.
- Minimum Support Price shall be increased by 1.5 times.
- More than 86 per cent farmers are small and marginal, they will be strengthened through government initiatives like MNREGAS with corpus of Rs 2000 crore.
- Organic farming will be encouraged and women self help groups will be encouraged for organic farming
- Allocation of Rs 1400 crore for Food processing, doubled from last year’s budget which allocated Rs 715 crore.
- Operation Green will be launched for agriculture with corpus of Rs 500 crore.
- Rs 1290 crore allocated for restructured bamboo production mission.
- Setting up of Fishery and Aquaculture fund and Animal Husbandary fund with total corpus of Rs 10000 crore
- Ujjwala Yojana, the free LPG connection scheme will be expanded to eight crore women.
- The Saubhagya Yojana will be another focus for the government.
- Free power connections to 4 crore homes.
- A dedicated affordable housing fund will be set up this year.
- Loans to self-help groups will increase to Rs 75000 crore.
- Allocation of Rs 5750 crore to National Livelihood Mission and Rs 2600 crore to the groundwater irrigation scheme.
- Budget 2018 proposes to treat education holistically without segmentation from pre-nursery to Class 12.
- An integrated B-Ed programme will be initiated for teachers.
- Gradual progress from blackboard to digital board.
- Revitalising of Infrastructure and Systems of Education (RISE) will be launched by 2019.
- Setting up of two new full-fledged schools of planning and architecture.
- 18 new schools of planning and architecture will be set up in the IITs and NITs.
- Prime Minister’s fellowship programme will be launched to subsidise research.
- National Health Protection Scheme will be launched to cover 10 crore poor and vulnerable families. Under this, up to Rs 5 lakh will be provided to each family per year in secondary and tertiary care institutions. This scheme will have 50 crore beneficiaries.
- This scheme will generate lakhs of jobs, particularly for women.
- Tuberculosis claims more lives every year than any other disease. The government will provide Rs 600 crore as nutritional support to all TB patients.
- 24 new government medical colleges will be set up by upgrading existing district hospitals in the country. At least one medical college will be there for three parliamentary constituencies.
- Mass formalization of MSME sector is happening after demonetization and GST. Online loan sanctioning facility will be refurbished to speed up the complete process by banks.
- Rs 3 lakh crore is allocated as target for the Mudra Yojana for the year 2018-19. Additonal measures will be taken to boost the growth of venture capital funds and angel investors.
- The government will contribute 12 per cent of wages of new employees for all sectors.
- Woman’s contribution to the Provident Fund will be reduced to 8 per cent from now onwards for the first 3 years of her employment with no reduction in employer’s contribution.
- Allocation of Rs 7148 crore for the textile sector.
Infrastructure and Transport
- Rs 1. 48 lakh crore have been allocated for the Indian Railways for the year 2018-19.
- 18000 km of railway line will be doubled to eliminate capacity constraints.
- Government will work on Eastern and Western dedicated freight corridor and will give special attention to the maintenance of track infrastructure.
- Budget will also encompass the increase in the use of technology, fog safe train protection and warning system.
- Redevelopment of 600 major railway stations will be taken up.
- All railways stations with more than 25000 footfalls will have escalators.
- An institute is under its way at Vadodara to train manpower for high-speed railway projects.
- UDAN scheme will now connect 56 unserved airports and 31 unserved helipads in the country.
- Airport Authority of India has 124 airports in total. The airport capacity will now be enhanced to handle more than one billion trips every year.
- NITI Aayog will establish a National Programme to direct government’s efforts in the area of Artificial Intelligence towards national development.
- The government will explore use of blockchain technology proactively to boost digital economy. However, the government will not consider cryptocurrency as legal tender.
- Enterprises will now have to own their unique IDs.
- System of toll payments by cash will be digitized.
- The Union Commerce Ministry will develop a National Logistics Portal as a single window program to boost the logistics sector.
- Recapitalisation: The Union government will recapitalise public sector banks to help them lend an additional Rs 5 lakh crore.
- Unit Trust of India, Oriental Insurance and National Insurance will be merged and then listed.
- The total expenditure of the Union government will be Rs 21.57 lakh crore. The projected fiscal deficit of the FY 2018-19 is 3.3 per cent of the GDP.
- In previous years, the growth rate of direct taxes have been significant. Till January 2018, growth rate of 18.7 per cent was recorded. Over 85 lakh new taxpayers filed their returns.
- The number of effective taxpayers increased from 6.47 lakh crore to 8.27 lakh crore in the previous financial year.
- The excess revenue from personal income tax is Rs 90000 crore.
- 100 per cent tax deduction to farmer-producer companies having Rs 100 crore turnover.
- Corporate tax will be reduced to 25 per cent for companies having turnover of up to Rs 250 crore.
- Long term capital gains tax of 10 per cent will be levied for amounts exceeding Rs 1 lakh.
Figures: Ascending Descending
- Direct Taxes: Corporation > Income Tax > STT
- Indirect Taxes: CGST > Union Excise > Customs > GST compensation Cess > IGST.
- Subsidies: Food > Fertilizer (Urea) > LPG > Kerosene. (Major subsidies~1.4% of GDP)
- Salaries: President (5L) > Vice President (4L) > Governors (3.5L); MP salaries revised with inflation every 5 year.
- Deficits Targets for 2018-19: RD: 2.2%, FD: 3.3%; PD: 0.3% of the GDP. Debt to GDP: 40%
- Disinvestment Targets: 80k Crore (Last Year 72,500 cr). New ETFs, incl. Debt-ETFs planned. Air India to be privatized.
Pradhan Mantri MUDRA Yojana (PMMY)
It is a scheme launched by the Hon’ble Prime Minister on April 8, 2015 for providing loans up
to 10 lakh to the non-corporate, non-farm small/micro enterprises. These loans are classified as MUDRA loans under PMMY. These loans are given by Commercial Banks, RRBs, Small Finance Banks, Cooperative Banks, MFIs and NBFCs. The borrower can approach any of the lending institutions mentioned above or can apply online through this portal. Under the aegis of PMMY, MUDRA has created three products namely ‘Shishu’, ‘Kishore’ and ‘Tarun’ to signify the stage of growth / development and funding needs of the ben eficiary micro unit / entrepreneur and also provide a reference point for the next phase of graduation / growth.
To be an integrated financial and support services provider par excellence benchmarked with global best practices and standards for the bottom of the pyramid universe for their comprehensive economic and social development.
To create an inclusive, sustainable and value based entrepreneurial culture, in collaboration with our partner institutions in achieving economic success and financial security
SUKANYA SIMRIDHI YOJANA
It is a small deposit scheme for the girl child launched as a part of the ‘Beti Bachao Beti Padhao’
campaign. It is currently 8.1 per cent and provides income-tax benefit. A Sukanya Samriddhi
Account can be opened any time after the birth of a girl till she turns 10, with a minimum deposit of Rs 1,000. A maximum of Rs 1.5 lakh can be deposited during the ongoing financial
year. The account can be opened in any post office or authorised branches of commercial banks
PRADHAN MANTRI JEEVAN JYOTI BIMA YOJANA (PMJJBY)
It is a one-year life insurance scheme, renewable from year to year, offering coverage for death.The cover under PMJJBY is for death only and hence benefit will accrue only to the nominee. PMJJBY is a pure term insurance policy, which covers only mortality with no investment component.
PMJJBY is available to people in the age group of 18 to 50 years (life cover up to age 55) having a savings bank account who give their consent to join and enable auto-debit. The cover is for a one-year period, starting June 1 to May 31. As on May 8, 2017, nearly 3.11 crore people had enrolled under PMJJBY, and the total number of claims received till date were nearly 65,083
Under PMJJBY scheme, life cover of Rs. 2 lakhs is available at a premium of Rs.330 per annum per member and is renewable every year. In the case of a joint account, all holders of the said account can join the scheme provided they meet its eligibility criteria and pay the premium at the rate of Rs.330 per person per annum.
On education front, Shri Jaitley announced setting up of Ekalavya Model Residential School on par with Navodaya Vidyalayas to provide the best quality education to the tribal children in their own environment by 2022 in every block with more than 50% ST population and at least 20,000 tribal persons with special facilities for preserving local art and culture besides providing training in sports and skill development. To step up investments in research and related infrastructure in premier educational institutions, including health institutions, a major initiative named ‘‘Revitalising Infrastructure and Systems in Education (RISE) by 2022’’ with a total investment of Rs.1,00,000 crore in next four years was announced . He said that a survey of more than 20 lakh children has been conducted to assess the status on the ground, which will help in devising a district-wise strategy for improving quality of education. To improve the quality of teachers an integrated B.Ed. programme for teachers will be initiated. Shri Jaitley said, the Government would launch the ‘‘Prime Minister’s Research Fellows (PMRF)’’ Scheme this year. Under this, 1,000 best B.Tech students will be identified each year from premier institutions and provide them facilities to do Ph.D in IITs and IISc, with a handsome fellowship. Allocation on National Social Assistance Programme this year has been kept at Rs. 9975 crore.
EKLAVYA MODEL RESIDENTIAL SCHOOLS (EMRS)
In the context of the trend of establishing quality residential schools for the promotion of education in all areas and habitations in the country, the Eklavya Model Residential Schools (EMRS) for ST students take their place among the Jawahar Navodaya Vidyalayas, the Kasturba Gandhi Balika Vidyalay as and the Kendriya Vidyalayas. Eklavya Model Residential Schools (EMRS)
are set up in States/UTs with grants under Article 275(1) of the Constitution of India.The scheme is being implemented by the Ministry of Tribal Affairs, Government of India.
Objectives of EMRS
The objective of EMRS is to provide quality middle and high level education to Scheduled Tribe (ST) students in remote areas, not only to enable them to avail of reservation in high and professional educational courses and as jobs in government and public and private sectors but also to have access to the best opportunities in education at par with the non ST population. This would be achieved by:
- Comprehensive physical, mental and socially relevant development of all students enrolled in each and every EMRS. Students will be empowered to be change agent, beginning in their school, in their homes, in their village and finally in a larger context.
- Focus differentially on the educational support to be made available to those in Standards XI and XII, and those in standards VI to X, so that their distinctive needs can be met.
- Support the annual running expenses in a manner that offers reasonable remuneration to the staff and upkeep of the facilities.
- Support the construction of infrastructure that provides education, physical, environmental and cultural needs of student life.
Coverage of the scheme
As per existing EMRS Guidelines of 2010, at least one EMRS is to be set up in each Integrated. Tribal Development Agency (ITDA) / Integrated Tribal Development Project (ITDP) having 50% ST population in the area
Aayushman Bharat programme
1.5 lakh centres will be set up to provide health facilities closer to home. Rs 1,200 crore to be allocated for this programme
- Flagship National Healthcare protection scheme, with approximately 50 crore beneficiaries. Up to Rs 5 lakh per family per year for secondary and tertiary care hospitalisation. World’s largest government-funded healthcare programme.
- Universal health coverage will be expanded after seeing the performance of the scheme
- Rs 600 crore allocated for tuberculosis patients, at the rate Rs 500 per month during the course of their treatment.
PRADHAN MANTRI AWAASYOJANA
Pradhan Mantri Awas Yojana is a scheme that aims to provide “Housing for all by 2022”. This is the reason why this scheme is also known as HFA (Housing for all) scheme. As per the government, this scheme will provide houses to all the Indian citizens by theyear 2022
To provide pucca house to all who are houseless and living in dilapidated houses in rural areas by 2022
PRADHAN MANTRI SAHAJ BIJLI HAR GHAR YOJANA–“SAUBHAGYA”
It is a scheme to ensure electrification of all willing households in the country in rural as well as urban areas.
The objective of the ‘Saubhagya’ is to provide energy access to all by last mile connectivity and electricity connections to all remaining un-electrified households in rural as well as urban areas to achieve universal household electrification in the country.
Beneficiaries of the project
The beneficiaries for free electricity connections would be identified using Socio Economic and Caste Census (SECC) 2011 data. However,un-electrified households not covered under the SECC data would also be provided electricity connections under the scheme on payment of Rs. 500 which shall be recovered by DISCOMs in 10 instalments through electricity bill.
Pradhan Mantri Ujjwala Yojana is a scheme of the Ministry of Petroleum & Natural Gas for providing LPG connections to women from Below Poverty Line (BPL) households.In India, the poor have limited access to cooking gas (LPG). The spread of LPG cylinders has been predominantly in the urban and semi-urban areas with the coverage mostly in middle class and affluent households. But there are serious health hazards associated with cooking based on fossil fuels. According to WHO estimates, about 5 lakh deaths in India alone due to unclean cooking fuels. Most of these premature deaths were due to non-communicable diseases such as heart disease, stroke, chronic obstructive pulmonary disease and lung cancer.
Indoor air pollution is also responsible for a significant number of acute respiratory illnesses in young children. According to experts, having an open fire in the kitchen is like burning 400 cigarettes an hour.
NATIONAL BAMBOO MISSION
With a view to harness the potential of bamboo crop, Department of Agriculture & Cooperation (DAC), Ministry of Agriculture is implementing a 100% Centrally Sponsored Scheme called Mission for Integrated Development of Horticulture (MIDH) in which National Bamboo Mission (NBM) is being implemented as a sub scheme.
- To promote the growth of the bamboo sector through as an area based regionally differentiated strategy
- To increase the coverage of area under bamboo in potential areas, with improved varieties to enhance yields
- To promote marketing of bamboo and bamboo-based handicrafts.
- To establish convergence and synergy among stake-holders for the development of bamboo
- To promote, develop and disseminate technologies through a seamless blend of traditional wisdom and modern scientific knowledge.
- To generate employment opportunities for skilled and unskilled persons, especially unemployed youths
Operation is essentially a price fixation scheme that aims to ensure farmersare given the right price for their produce.
To promote farmer producers organisations, agri-logistics, processing facilities and professional management. The operation aims to aid farmers and help control and limit the erratic fluctuations in the prices of onions, potatoes and tomatoes
The Budget proposes to expand the airport capacity more than five times to handle a billion trips a year under a new initiative – NABH Nirman. Under the Regional connectivity scheme of UDAN (Ude Desh ka Aam Nagrik) initiated by the Government last year, 56 unserved airports and 31 unserved helipads would be connected.
Turning to rationalization of Long Term Capital Gains (LTCG), the Finance Minister noted buoyancy in the equity market, as a result of reforms and incentives given so far. The total amount of exempted capital gains from listed shares and units is around Rs. 3,67,000 crore (as per returns filed for A.Y. 2017-18). Shri Jaitley said that a major part of this gain has accrued to corporates and LLPs. This has also created a bias against manufacturing, leading to more business surpluses being invested in financial assets. Due to attractiveness on return on investment on equity, even without tax exemption, there is a strong case for bringing Long Term Capital Gains from listed equities in the tax net, the Finance Minister said. He has however only proposed a modest change in the present regime, recognizing that a vibrant equity market is essential for economic growth. Shri Jaitley has proposed to tax such Long Term Capital Gains exceeding Rs. 1 lakh at the rate of 10 percent, without allowing any indexation benefit. However, all gains up to 31st January, 2018 will be grandfathered. The Finance Minister has also proposed to introduce a tax on distributed income by equity oriented mutual funds at the rate of 10 percent, to provide a level field across growth oriented funds and dividend distributing funds. The proposed change in Capital Gains Tax will bring marginal revenue gain of about Rs. 20,000 crore in the first year, in view of grandfathering.
In order to take care of the education and health care needs of Below Poverty Line (BPL) and rural families, The Budget proposes to increase the cess on personal income tax and corporation tax to 4 percent from the present 3 percent. The new cess will be called the “Health and Education Cess” and is expected to lead to a collection of an estimated additional amount of Rs. 11,000 crore.
With the roll of GST, the Budget also proposes to change the name of the Central Board of Excise and Customs (CBEC) to the Central Board of Indirect Taxes and Customs (CBIC).
India only country in the world to impose both the STT and LTCG.
What is LTCG?
- Any profit or gain made after holding shares for more than one year is known an long term capital gain. For example, if one invests in XYZ stock at Rs 100 on 1 Jan 2017 and sold the same at Rs 150 after 1 Jan 2018, the gain of Rs 50 is termed as long term capital gains.
Who will be taxed?
- Anybody who has invested in share market and earns profit from the rise in share value. Earlier, anybody who sold his share after 1 year did not have pay any taxes on the profit. However, that changed. Starting 1st April 2018, all share market investors need to pay taxes on the profit they earn both short-term investors and long term investors.
How will the investors be taxed?
- If one holds shares for more than one year, he will be taxed at 10 per cent, if the gains exceed Rs 1 lakh. Short-term investors will continue to pay 15% short-term capital gains tax if an investor sells share within a year from the date of purchase.
Will people who are already invested be taxed? How?
- Yes, but only marginal gains will be taxed. Gains up to 31 Jan 2018 will be exempt. A stock bought at Rs 100 on Jan 1, 2016 hits a high of Rs 170 on Jan 31, 2018. If the same is sold on Apr 2, 2018 for Rs 200, the long term capital gain will be Rs 30 (As the highest price of Rs 170 will be the purchase price). And the LTCG tax will Rs 3 plus surcharges.
Why GoI reintroduced LTCG?
- Increase tax revenue of GoI.
- Decrease the widening fiscal deficit.
- Argument is that it helps to avoid the erosion of its tax base and helps in increasing financial assets and investment in manufacturing.
- LTCG wrapped in 2004-05 Union budget 2018 announced again the imposition of LTCG tax.
- Whether raising the tax burden on equities, rather than lowering the tax and other barriers to investing in alternative assets, is the right way to address the discretionary effect of taxes?
- Securities Transaction tax(STT), which was introduced in lieu of the LTCG in 2004 and penalizes the buying of stocks for purposes other than just intra-day trading, has been left untouched by the government.
- The smaller differential between short and long-term capital gains tax itself will discourage the long-term holding of stocks in favor of short-term trading activity.
- Increases liquidity in the market temporarily.
- In long run affects the investments in long term equity markets.
- Both LTCG, STT together will prevail short term investments more.
- Both LTCG and STT are setback to foreign investments.(as India alone imposes these 2 taxes in the world)
- The government would try to at least soften the negative impact of the new tax by allowing indexation (allowing a set-off based on inflation rate) of capital gains * Removing the STT on equity investments