As the Union Budget was announced on February 1, 2018, by the Union Minister for Finance, Mr. Arun Jaitley, a lot of curiosity was created about what it meant for the country’s inhabitants. The 2018 budget was a mixed bag of sops with a lot of goodies for the economically weaker sections and the uber-rich, but very little for the middle class.
The Prime Minister, Mr. Narendra Modi, called the budget a “Farmer friendly, common citizen friendly, business- environment friendly, development friendly budget.” But not all of the budget is bright and shiny. Several provisions are definitely not pro-salaried class. The bigger corporate houses are also expected to be disappointed.
We have decided to deconstruct the boring technical jargon and tell you what the budget entails for all of us, and what financial headlines you can expect this year. Let’s begin with the brighter side.
The Bright side
2018 has proved to be a bright year for farmers and lower-income groups. Here’s why:
- The Minimum Support Price (MSP) has been increased to 1.5 times of the previous figure for all Kharif crops. The credit limit has also been upgraded to Rs. 11 lakh crores from Rs. 10 lakh crores in 2017. This will hopefully ease the financial burden of a large number of farmers.
- The allocated funds for National Rural Livelihood Mission have been raised to Rs 5,750 crores in the budget.
- The country’s health also got a priority in funds allocation. The Union Government has launched what it’s calling the world’s largest health scheme. Termed as the National Health Protection Scheme, it is set to cover around 10 million poor families with a limit of Rs. 5 lakhs per family.
- Companies manufacturing agricultural products with turnovers of up to Rs. 100 crores are expected to get a 100% tax deduction for the next 5 years. Liberalizing agricultural product manufacturing will definitely help our farmers.
In addition to this, the budget also contains provisions for the following:
- Senior citizens are in luck in 2018. Medical insurance deductions have been increased to Rs. 50,000 for them. Besides, there will be no TDS deductions on the interest from all FD and RD schemes.
- Budget 2018 is Digital India friendly. 100 cities have been selected to be digitally developed under the Smart Cities Mission with an allocation of Rs 2.04 lakh crores to the project. 5,00,000 proposed Wi-Fi spots are expected to connect rural India digitally. Additionally, NITI Aayog will be initiating a national program to revitalise AI in the country. A national program will also be undertaken by NITI Aayog to intensify efforts in the area of artificial intelligence.
- If Digital India is making waves, the Make In India program has also benefited from Budget 2018. Customs duties on imported mobile phones are increased to 20%, giving a boost to Indian manufacturers.
- The marginalized groups got attention in the budget too. Rs 56,000 crore and Rs 39,000 crore have been allotted for the development of SCs and STs.
The budget has a lot of good provisions, though that didn’t deter our attention from the not-so-great ones. Let’s head over to the dark side.
The Dark Side
While the Budget certainly had some great provisions, it proved to be quite muted when it came to the middle class. The middle class got almost no respite from the ever-increasing cost of living and excessive taxes. Along with a lot of good news, the budget has also brought the following lousy news:
- The salaried middle class remains sandwiched between the rich and the poor. Even being the class of population paying the highest direct taxes did not qualify them for any tax sops. Apart from a IT deduction of Rs 40,000 crore, there is nothing for the middle class.
- Add increased taxation to no tax breaks, and you have a recipe for growing resentment. Cess on income and corporation taxes has been upgraded to 4%. The move has raised several questions if the budget is as excellent as it is projected to be.
- The fiscal deficit has also increased to 3.5% in 2018 from 3.2% in 2017, paving the way for inflation and reduced economic credibility of the government.
- There is a reduction in the tax rate to 25% for companies with a turnover of Rs. 250 crores. While this is good news for medium to large enterprises, the larger companies aren’t pleased. Without any tax break, there is no incentive for them to create jobs.
- Road Safety Works has its allocated funds slashed unexpectedly. This provision exists in the budget despite the increasing occurrences of derailments and deaths. On the other hand, the Bullet Train project got Rs. 7000 crores. Hypocritical much?
Though these portions were depressing, they are nothing compared to the more unsettling provisions that this budget has inflicted on us.
The Union Budget for 2018 also contains some provisions that have seriously rattled us. These provisions aren’t of much use to any particular section of the population. Have a look for yourself:
- Your savings plans might go for a toss in 2018. The government proposes to tax 10% on Long Term Capital Gains which exceed Rs. 1 lakh.
- Your pockets might have deeper dents this year. Budget 2018 increases direct taxes to 18.7%. This might put a deeper pressure on your cost of living.
It remains to be seen if the resentment because of these unpopular measures affects the government’s re-election bid in 2019.
Summing it up
Overall, the 2018 Budget proved to be one meant to attract the farmers and lower classes of the vote bank. Only time can tell the impact of this budget on the financial landscape of the country. But you need not wait to see how the Union Budget affects you. mymoneykarma can guide you in achieving financial success. Take action today!