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Union Budget 2018-19: What It Offers Financial Services?

Mr. C.S. Sudheer | Posted On Friday, February 02,2018, 07:52 PM

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Union Budget 2018-19:  What It Offers Financial Services?



Union Budget 2018-19 was all about farmers, healthcare, MSME and rural growth. Finance Minister Arun Jaitley has kept the MSP (Minimum Support Price), at 1.5 times the production cost of Kharif crops. MSP is the minimum price at which the Government purchases crops from farmers.

There was lots more. About 22,000 rural haats would be turned into Gramin Agricultural markets. The e-NAM (National Agricultural Market) which is a pan-India electronic trading platform for agri-commodities, would be expanded.

All-weather roads would be built to connect rural habitations with agricultural markets. A sum of Rs 500 Crores would be allocated under Operation Green to address price volatility of perishables like Potatoes, Tomatoes and Onions. There were plenty of sops for the food processing industry. Measures would be taken for crop residue disposal.

The highlight of this Budget was the 'World's largest healthcare programme.' This program called National Health Protection Scheme would provide a health insurance cover of Rs 5 Lakhs per family per year.

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Let's take a look at what Union Budget 2018-19 had for financial services and the middle class.

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Union Budget 2018-19:  What It Offers Financial Services?

1. Insurance sees a lot of benefits in this Budget

The National Health Protection Scheme will cover 10 Crore vulnerable families, helping around 50 Crore citizens of India. This is a big positive for insurers in India.

The Government will merge National Insurance, Oriental Insurance and United India Insurance into a single insurance Company, which will be listed on the bourses (Stock Exchange). This is great news for the general insurance sector.

SEE ALSO: What Union Budget 2018-19 Has For You?

2. What the salaried get from this Union Budget?

The salaried and the middle-class had a lot of expectations from this Union Budget. Unfortunately, personal income tax slabs remain unchanged. This was a big disappointment to the salaried, who expected a hike in the income tax exemption limit.

Standard Deduction:

Another point of note in the Union Budget 2018-2019, is the introduction of a standard deduction of Rs 40,000 a year. Standard deduction allows a flat deduction from salary income before calculating taxable income.

The standard deduction will benefit about 2.5 Crore salaried employees and pensioners. The standard deduction of Rs 40,000 will replace the existing transport allowance of Rs 19,200 a year and the medical reimbursement of Rs 15,000 a year. This would mean an additional deduction of Rs 5,800.

A salaried employee who pays an income tax of 5% on his salary, would be able to save Rs 290. A salaried employee who pays an income tax of 20%, would save Rs 1,160. A salaried employee who pays an income tax of 30%, would save around Rs 1,800.

However, education cess has been increased from 3% to 4%. This might not result in much savings for the salaried class.

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3. What senior citizens take home from Union Budget 2018-19?

The Union Budget 2019 has been very kind to senior citizens. Premiums paid for health insurance plans for senior citizens under Section 80D, enjoy tax deduction up to Rs 30,000 a year. This Section 80D benefit has been increased to Rs 50,000. Surely, the senior citizen has reason to smile.

There's more good news. Deduction under Section 80DDB is allowed for money spent on the treatment of a dependent relative, suffering from a listed disease. Some of the diseases covered are Dementia, Parkinsons Disease, Malignant Cancers, Hematological diseases, Full Blown AIDS, Chronic Renal Failure and some other diseases.

Senior citizens used to get a deduction of Rs 60,000 a year and Super-senior citizens get a deduction of Rs 80,000 a year under Section 80DDB. After the Union Budget 2018-2019, all senior citizens will get a deduction of Rs 1 Lakh a year, under Section 80DDB.

Senior citizens would enjoy an increased exemption on interest income for deposits with banks and post offices from Rs 10,000 to Rs 50,000. TDS would not be deducted on such income.

4. What this Union Budget offers the stock market?

Finance Minister Arun Jaitley, has made a proposal to tax Long-Term capital gains (LTCG) on equity shares and equity-oriented mutual funds which exceed Rs 1 Lakh a year, at the rate of 10%, without indexation benefits. He also stated that all gains up to January 31st 2018 would be grandfathered.

The stock markets would have fallen, big time, after hearing this news, but didn't. This is because of the grandfathering clause. The Grandfathering clause is a special provision, exempting any entity from a new rule/law.

Let's understand how this works. You have purchased an equity share of Rs 100 on 31stJuly 2017. The highest price quoted on this equity share on 31stJanuary 2018 was Rs 130. There will be no tax on the gain of Rs 30 if this share is sold one year from the date of purchase (31st July 2018). But, any gain in excess of Rs 30 earned after 31st January, 2018, will be taxed at 10%, if this share is sold after 31st July, 2018. 

The Finance Minister Arun Jaitley has introduced DDT (Dividend Distribution Tax) of 10% in Union Budget 2019, in case of equity oriented mutual funds, which will be charged to the mutual fund house. The fund house will deduct DDT, before declaring dividends. If you are relying on dividends from balanced funds, this is bad news. If you opt for the dividend option in balanced funds, your in-hand returns will reduce.

This has been a superb budget for farmers, MSME and healthcare in India. Be Wise, Get Rich

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