The 2018 budget was considered to be a crucial one, as it would be the first since the rollout of the Goods and Service Tax regime in India. It was widely expected that the budget would either increase the exemption limit, or introduce a standard deduction for salaried people to reduce the tax burden, in addition to a reduction of the tax rate for the – slab from 20% to 10%, and an increase in the 30% band above. The budget also came on the heels of a cut in the corporate tax rate in the United States. Printing of the budget began on 20 January 2018 with the traditional Halwa ceremony.
Significant announcements
The budget contained a number of significant announcements. It included a healthcare programme called the National Health Protection Scheme to cover 10 crore poor families. The Government proposed to contribute 12% to the Employees' Provident Fund for new employees for three years. It was proposed that the medical allowance and transportation allowance be replaced by a standard deduction of for salaried employees. The allocation to the Ministry of Defence was, with to be spent on the day-to-day running of the armed forces, and on modernisation, with the rest being allocated for pensions. There was no reduction in personal income tax rates, and the Cess on income tax was to be increased from 3% to 4%. A 10% tax on long-term capital gains was reintroduced after a 14-year absence. The Corporate tax was reduced from 30% to 25% for companies with turnover up to. Customs duties were increased for various products. A special scheme to tackle air pollution in Delhi was also introduced. The salaries of Members of Parliament were doubled and their total emoluments are likely to go up from Rs 1.4 lakh to Rs 2.3 lakh per month. Further, the salaries will be increased every five years.
Both of India's national indices, the BSE SENSEX and NIFTY 50, fell sharply in the aftermath of the budget. The government, however, said that the fall in the stock market was not solely due to the budget. Finance and Revenue Secretary, Dr. Hasmukh Adhia said that fall in stock indices was due to global market meltdown, and not because of the reintroduction of LTCG tax, he added the government will look into the slump.
Others
, Fitch, said that the budget, whilst supporting growth, does not address the problem of fiscal consolidation, and leaves the problem of India's relatively weak finances, to the next government. Economic Affairs Secretary, Subhash Chandra Garg, said, that the government would try to convince credit rating agencies, like Standard and Poor's and Fitch, on its commitments to fiscal consolidation.
