Budget focus on farm sector, tax blow on long-term capital gains on shares
New Delhi, Feb. 1 (PTI): Finance minister Arun Jaitley on Thursday announced a slew of measures for the agriculture and rural sectors, an ambitious health insurance scheme for the poor and some relief in income tax for the salaried class and senior in the National Democratic Alliance government’s last full budget before general elections next year.
Jaitley raised the health and education cess that is levied on all taxable income to four per cent from current three per cent, and introduced a social welfare surcharge of 10 per cent to fund social welfare schemes.
He lowered the corporate tax for small, micro and medium enterprises with turnover of up to Rs 250 crore to 25 per cent from current 30 per cent, while reintroducing the tax on long term capital gains of over Rs 1 lakh made from the sale of shares.
While keeping the income tax rates and slabs unchanged, Jaitley introduced a standard deduction of Rs 40,000 for salaried employees and pensioners against transport and medical expenses.
For senior citizens, exemption of interest income on bank deposits was raised to Rs 50,000 from the current Rs 10,000. Tax will not be deducted at source on fixed deposits.
Also, exemption on medical expenses on critical illness has been raised to Rs 1 lakh, he said in his 110 minute speech.
Jaitley said a 10 per cent tax long on capital gains exceeding Rs 1 lakh made from the sale of shares has been introduced but those made till Janaury 31 would be grandfathered.
The budget has also proposed a 10 per cent tax on distributed income by equity-oriented mutual funds.
With excise duty and service tax being subsumed in the Goods & Services Tax (GST), Jaitley made changes only in customs duty — raising them in case of mobile phones and lowering for raw cashew.
The government’s focus in the coming financial year would be agriculture and rural India, Jaitley said announced that all kharif crops would be paid a minimum support price (MSP) that is 50 per cent more than the cost of production.
He announced that credit to agriculture would be raised to Rs 11 lakh crore in the coming fiscal from Rs 10 lakh crore.
Kisan credit card will be extended to fisheries and animal husbandary farmers while Rs 2,000 crore provided for development of agri market.
In a bid to provide universal healthcare, he announced a 'National Health Protection scheme' to provide health cover of upto Rs 5 lakh to each of the 10 crore poor family per year.
But, to fund these, he let go on the fiscal consolidation roadmap. As a result, fiscal deficit for current fiscal will widen to 3.5 per cent of gross domestic product as against 3.2 per cent previously targeted, and to 3.3 per cent in FY'19 as against three per cent previously targeted.
The fiscal deficit in 2016-17 was 3.5 per cent of the GDP.
”We have worked sincerely without thinking about the political cost,” he said.
Jaitley also announced 100 per cent tax deduction for farmer- producer firms with Rs 100 crore turnover. The standard deduction allowed will benefit 2.5 crore people.