Direct and Indirect Tax Proposals contained in the budget 2018-19 presented by Finance Minister Mr. Arun Jaitley indicate that the central government is not willing to pursue populism even in a pre-election budget. Direct and Indirect Tax Proposals in Budget 2018-19 are consolidated for easy reference.
Budget 2018-19- Direct tax proposals
• Long-term capital gains tax of 10% on equities and equity oriented mutual funds comes back from 1st April 2018. Relief to investors on capital gains till January, 31 2018 offered through grandfather clause.
• 10% distribution tax on dividends by equity oriented mutual funds to ensure parity between growth and dividend payout schemes.
• Standard deduction of INR 40,000 introduced for salaried tax payers. Annual medical allowance of Rs. 15,000 and transport allowance of Rs. 19,200 will disappear. Net tax benefit on Rs. 5800 only.
• Income tax slabs and tax rates for individuals and companies remains unchanged. But, education cess of 3% increased to 4%.
• Senior citizens (age of 60 and above) will have additional deduction of Rs 40,000 on interest from bank deposits (Total Rs. 50,000) and higher exemption limits for medical insurance.
• Corporate tax reduced to 25% for companies with turnover upto Rs. 250 cr (Present ceiling Rs. 50 cr)
• Companies undergoing insolvency resolution under the IBC would be allowed to set off unabsorbed depreciation and brought forward losses while paying MAT. This set off will be allowed even if there is a change in the shareholding.
Budget 2018-19- Indirect tax proposals
• Import duty on mobile phones raised from 15% to 20%
• Import duty on crude edible oils raised from 12.5% to 30% and refined edible oils from 20% to 35%
• Import duty on truck and bus radial tires raised from 10% to 15%
• Customs duty on certain items increased to 25% to indirectly support ‘Make in India’ project.
Excise and Service tax
• Excise duty on petrol and diesel to come down by Rs. 8 per liter and replaced by a cess. Revenues by way of cess are not shared with state governments, and this modification will improve revenues for the central government.
Budget 2018-19- Revenues by way of tax
• Growth in gross tax collections estimated at 16.7% (13.5% y/y)
Corporate Tax 10.3% (16.3%)
Income tax 20.0% (21.1%)
Indirect Tax 19.1% (8.6%)
• 19.1 % growth in indirect Tax projection appears to be ambitious. GST collections are assumed to increase by more than 25% year on year due to tax buoyancy post e-Way bill implementation.
• Against expected earning growth of 15% (yoy) by corporates, corporate tax growth projection on conservative side.