India Union Budget 2018: Modi Govt announces world's largest govt-funded health care scheme, sops for farmers; no relief in I-T rates
In the Budget 2017-18, Jaitley had reduced the income tax rate to 5 per cent from 10 per cent under the income slab from Rs 2.5 lakh per annum to Rs 5 lakh per annum.
Finance Minister Arun Jaitley on Thursday, in Narendra Modi Government's last full-fledged budget before 2019 Lok Sabha elections, did not provide any relief in the income tax rates for 2018-19, but increased the cess levied on it by 1 per cent to raise Rs 11,000 crore. UNION BUDGET 2018: CLICK HERE FOR LIVE UPDATES
Finance Minister Jaitley said in his Budget speech: "The government had made many positive changes in the personal income-tax rate applicable to individuals in the last three years. Therefore, I do not propose to make any further change in the structure of the income tax rates for individuals."
In the Budget 2017-18, Jaitley had reduced the income tax rate to 5 per cent from 10 per cent under the income slab from Rs 2.5 lakh per annum to Rs 5 lakh per annum.
However, Jaitley proposed to hike the cess on personal income tax by one per cent.
"At present there is a three per cent cess on personal income tax and corporation tax consisting of two per cent cess for primary education and one per cent cess for secondary and higher education. In order to take care of the needs of education and health of BPL and rural families, I have announced programs," Jaitley said.
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"To fund this, I propose to increase the cess by one per cent. The existing three per cent education cess will be replaced by a four per cent health and education cess to be levied on the tax payable. This will enable us to collect an estimated additional amount of Rs 11,000 crore."
In addition, Jaitley proposed to "allow a standard deduction of Rs 40,000 in lieu of the present exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses".
"Apart from reducing paper work and compliance, this will help middle class employees even more in terms of reduction in their tax liability. This decision to allow standard deduction shall significantly benefit the pensioners also, who normally do not enjoy any allowance on account of transport and medical expenses. The revenue cost of this decision is approximately Rs 8,000 crore," Jaitley said.
"The total number of salaried employees and pensioners who will benefit from this decision is around 2.5 crore."
The current tax-free limit for medical expense reimbursement is set at 15,000 per annum and transport allowance exemption of Rs 1,600 per month.
Jaitley also raised long-term capital gains (LTCG) tax to 10 per cent from zero at present, reduced corporate tax for 99 per cent of the companies to 25 per cent but left the tax structure for individuals largely unchanged.
Focus on Rural India
The finance minister's focus was on rural india and agriculture, perhaps with an eye on electoral gains for the ruling party at the centre next year, announcing a number of schemes and incentives. For the Kharif agricultural output, the minister increased the minimum support price to one and half times of production cost, raising institutional farm credit to Rs 11 lakh crore in 2018-19 from Rs 8.5 lakh crore. His speech also focused on education and healthcare.
The finance minister indicated a slippage in fiscal deficit for the current year from 3.2 per cent to 3.5 per cent and from 3 per cent to 3.3 per cent (Rs 5.95 lakh crore) of the GDP next year, indicating the government will be borrowing more to balance its books.
"In order to impart unquestionable credibility to the government's commitment for the revised fiscal glide path, I am proposing to accept key recommendations of the Fiscal Reform and Budget Management Committee relating to adoption of the Debt Rule and to bring down Central Government's Debt to GDP ratio to 40 per cent," he said.
India Union Budget 2018 Key Highlights: Personal tax slabs unchanged, Rs 1.48 lakh crore for Railways, Rs 2.95 lakh cr for Defence
National Health Protection Scheme
The National Health Protection Scheme, announced by Finance Minister Arun Jaitley in his Budget for 2018-19, will cover approximately 50 crore people.
The Centre today announced the world's largest government-funded healthcare programme, aimed at benefiting 10 crore poor families by providing coverage of up to Rs 5 lakh per family per year for secondary and tertiary care hospitalisation.
The government is likely to make an expenditure of Rs 4,000 crore on this. The finance minister called it the world's largest health scheme.
To pay for the social welfare schemes, the government has imposed Social Welfare Surcharge at the rate of 10 per cent on aggregate customs duties. The Surcharge replaces the earlier Education Cess and and Secondary and Higher Education Cess.
24 new government medical colleges
Presenting his fifth straight budget in the Lok Sabha, Jaitley said the government will set up 24 new government medical colleges and hospitals by upgrading existing district hospitals in the country.
Noting that only a "swasth Bharat" (healthy India) can be a "samriddha Bharat" (prosperous India), Jaitley said India cannot realise its demographic dividend without its citizens being healthy.
Jaitley said his government has decided to take health protection to a "more aspirational level" and observed that several state governments have also implemented or supplemented health protection schemes with varying coverage plans.
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The present Rashtriya Swasthya Bima Yojana (RSBY) provides annual coverage of only Rs 30,000 to poor families.
Lakhs of families in India have to borrow or sell assets to receive indoor treatment in hospitals, he said, emphasising that his government is seriously concerned about such poor and vulnerable families.
To further enhance the accessibility of quality medical education and health care, the government will set up 24 new government medical colleges and hospitals by upgrading existing district hospitals in the country, the finance minister announced.
"This would ensure that there is at least one medical college for every three parliamentary constituencies and at least one government medical college in each state of the country," he said.
He said the National Health Policy 2017 envisioned health and wellness centres as the foundation of India's health system.
He committed Rs 1,200 crore for the National Health Policy. This would go towards 1.5 lakh health and wellness centres to bring health care closer to the homes of people.
"These centres will provide comprehensive health care, including for noncommunicable diseases and maternal and child health services.
"These centres will also provide free essential drugs and diagnostic services. I am committing Rs 1,200 crore in this budget for this flagship programme. I also invite contribution of private sector through CSR and philanthropic institutions in adopting these centres," he said.
Ayushman Bharat
Jaitley also announced two major initiatives as part of the 'Ayushman Bharat' programme aimed at making path breaking interventions to address health holistically, in the primary, secondary and tertiary care system and covering both prevention and health promotion.
The two "far-reaching" initiatives under Ayushman Bharat will build a New India 2022 and ensure enhanced productivity, well-being and avert wage loss and impoverishment.
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"These schemes will also generate lakhs of jobs, particularly for women. The government is steadily but surely progressing towards the goal of Universal Health Coverage," he said.
Noting that tuberculosis claims more lives every year than any other infectious disease, he said it affects mainly poor and malnourished people.
"My government has, therefore, decided to allocate additional Rs 600 crore to provide nutritional support to all TB patients at the rate of Rs 500 per month for the duration of their treatment," he said.
The stock markets reacted sharply initially, later recovering, to impostion of long term capital gains on shares held beyond one year exceeding Rs 1 lakh in value, which was exempted so far. However, shares bought earlier, but sold by July-end this year would be "grandfathered" where 20 per cent of the gains (upto January 31) would be exempted, beyond which the 10 per cent clause would kick in.
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There will be no indexation and there's no change in the short-term capital gains tax of 15 per cent. The total amount exempted under capital gains, according to the minister, was Rs 3,67,000 crore. The government, therefore, may gain over Rs 36,000 crore from this one measure.
Jaitley also imposed a 10 per cent dividend distribution tax on mutual fund companies which invest in equities.
Speech both in Hindi and English
In his one hour 45 minutes long speech, the finance minister spoke in English but delivered large tracts in Hindi, unlike earlier finance ministers who briefly peppered their speeches with poems or couplets in Hindi.
The government has set a target of Rs 80,000 crore divestment target for 2018-19, the finance minister said adding that target for 2018-19 had exceed the target of Rs 72,500 crore and would touch Rs 1 lakh crore. Despite that, he did keep his aim low for the next year. He announced that the three public sector insurance companies would be merged. The merged entity is expected to be listed at some stage.
In keeping with his earlier announcement of reducing corporate taxation rate to 25 per cent, the finance minister made the change for companies with turnover of upto Rs 250 crore, up from Rs 50 crore announced during his last year budget speech. He said this would take care of almost 99 per cent of the companies and would have an impact of Rs 7,000 crore on government finances. Only about 250 companies would have a turnover above the cut-off level. An ID on lines of Aadhaar would also be set up for companies.
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Jaitley also proposed to increase customs duty on mobile phones from 15 per cent to 20 per cent, on some of their parts and accessories to 15 per cent and on certain parts of TVs to 15 per cent. "This measure will promote creation of more jobs in the country," he said.
Modi Govt's achievements
The minister started his speech by reading out the achievements made by the government led by Prime Minister Narendra Modi and was optimistic about the path taken by the country. "We are now a $ 2.5 trillion economy, and we are firmly on path to achieve 8 per cent plus growth soon," Jaitley said. "We hope to grow at 7.2 per cent to 7.5 per cent in the second half of 2017-18."
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"Our exports are expected to grow at about 15 per cent in 2017-18," he added.
Talking about rural infrastructure, he said in 2018-19, for the creation of livelihood and infrastructure in rural areas, total amount to be spent by the ministries would be Rs 14.34 lakh crore, including extra-budgetary and non-budgetary resources of Rs 11.98 lakh crore. Overall, Rs 5.97 lakh crore was allocated for infrastructure.
"Apart from employment due to farming activities and self employment, this expenditure will create employment of 321 crore person days, 3.17 lakh kilometers of rural roads, 51 lakh new rural houses, 1.88 crore toilets, and provide 1.75 crore new household electric connections besides boosting agricultural growth."
The minister also announced a Mission on Cyber Physical Systems to be launched by department of science and technology, doubling the allocation on Digital India to Rs 3,073 crore. NITI Aayog was asked to initiate a national programme on artificial intelligence. Five lakh WiFi hotspots are planned to be set up.
Railways get largest-ever allocation
Stressing on boosting the safety aspect of Railways and its carrying capacity, Finance Minister Arun Jaitley on Thursday announced the largest-ever allocation of Rs 1.48 lakh crore capital expenditure for the Indian Railways in 2018-19.
"Railways capex for 2018-19 has been pegged at Rs 1,48,528 crore," Jaitley said in his Budget speech. The amount is Rs 17,000 crore higher than the previous year's budget.
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In 2017-18 Union Budget, the total capex of Railways was pegged at Rs 1,31,000 crore.
Jaitley said that modern-train sets with state-of-the-art amenities and features would be commissioned during 2018-19.
The 92-year-old practice of a separate Railway Budget was discontinued from last year and was merged with the Union Budget.
The Finance Minister said that enhancing the carrying capacity has been a major focus of the government. "A large part of the capex is devoted to railways capacity creation," he said.