"A budget with something little for everyone

- From a non-tax proposals standpoint, it seems India will be rolling out its most ambitious Health Care Social Scheme, on the back of success of Mahatma Gandhi National rural employment scheme of 2008 – a brainchild of UPA. On expected lines, for addressing distress in the farm sector, minimum support price revision of 150% of manufacturing will come as a big relief.

On tax proposals, levy of customs duty on 5 categories of goods to encourage domestic manufacturing will propel government flagship ‘Make in India’ program. Benefit of standard deduction of Rs.40,000, partly offset by levy of additional 1% cess suggest a targeted approach to the common salaried man, leaving out self-employed who on an average paid relatively pays less tax than the salaried. Though, an across the board corporate tax rate cut was not expected, raising the limit of turnover from 50 to 250 crores for manufacturing to quality 25% rate is suggestive of promoting small and medium enterprises, who have the potential of employment generation. 

- The markets had factored change in the capital gain regime. Three lakh crore of long-term capital gain tax on securities transaction is too tempting a figure to not levy some tax. The impact of tax, in my view is largely alleviated by providing a grandfathering clause (for share purchased upto Jan 31, 2018) and not increasing threshold for long -term gain from 12 to 24 months"

“A budget which opens up new avenues of tax as also concessions / deductions but, takes baby steps in each area and hence effectively, slips in a number of amendments in tax without causing euphoria or heart burn. In the years to come these moves can grow.

The 10% tax on Long Term Capital gains on listed equity continues to recognise the need for special treatment of investment in equity considering the effective double tax on returns on equity (after factoring in the tax on dividends) but, reduces the differential treatment. The standard deduction on salary income, similarly regognises the distinction between salaried employers and other assessees.

One of the most positive features of the Budget is the extension of the lower rate of corporate tax to a large number of companies with turnover upto Rs.250 crore, covering 99% of India Inc. It would be in the fitness of things if this rate was the gross rate – no surcharges and no cess.

But, effectively, the Budget increases tax, particularly, cess and therefore, instead of leaving more money in the hands of assessees, as consumers and investors, it is drawing the money to the Government to fund a variety of welfare schemes in the fields of education, health, agriculture, etc. However, the effectiveness of these is also open to question as the Government seems to be be spreading itself thin – over too many fronts.

Overall, a non eventful budget which is not likely to draw material reaction – positive or negative.”

"The Finance Ministers speech on the tax proposals refers to a few key tax changes. The proposal to extend the lower 25% corporate tax rate to entities having a turnover of upto INR 250 crores is welcome and should reduce the cost of doing business. Besides, it should motivate more taxpayers to fully comply with the law, and is a timely with the rollout of the GST.

The announcement to tax long term capital gains on listed stocks at 10% without indexation and the levy of a 10% tax on income distributed by Equity Oriented Mutual funds will dampen returns from the stock markets, but the grandfathering provisions should minimize immediate volatility in this transition. However, it appears that the capital gains arising on the increase in value between now and March 31 2018 would not be taxable if the stocks are sold by that date.

The benefit of the standard deduction of INR 40,000/- to salaried taxpayers appears to be partly offset by the announcement of removal of medical and other reimbursements. One would of course have to peruse the fine print to understand the full impact of these changes, as well as others which may not have been commented upon in the Speech."

“This budget, the last one before the 2019 general elections has placed a lot of emphasis on the rural economy, health, education, famers and middle class. Personal tax slabs remain unchanged and though standard deduction re-introduced, no major relief for salaried class.

As expected, introduction of LTCG tax @ 10% (albeit with some grandfathering which says that gains accrued upto Jan 31, 2018 will not be taxable) for gains in excess of Rs One lakh – this could give rise to complex tax calculations and uncertainty on treatment of loss accrued upto Jan 31, 2018.  A similar levy on distributions by Equity Oriented Mutual Funds to create a level playing field.

No announcements regarding MAT and DDT. Increase in Education cess from 3% to 4% could dampen corporate spirits. However, as promised, reduced corporate tax rate of 25% would be applicable to all companies with a reported turnover of less than INR 250 crores.  Considering that only a few companies, and these are the ones which have a larger employment generating potential, pay almost 50% of corporate income tax, the non reduction of corporate tax rate is a disappointment.

The focus on e-assessments is significant; the issue is the ability to translate it on the ground.  Incidentally, some facilitating changes have been made for companies under the IBC, particularly, non applicability of Section 79 vis-à-vis brought forward losses and some changes regarding MAT, the latter having already been promised in the press release of 6th January 2018.”

" The focus on the rural and agricultural stakeholders, if delivered fully, could provide a huge impetus to the whole economy .

Corporates with a turnover of over 250cr will see an increase in effective tax out go as a result of increase of 1% of cess.

The expected buoyancy in taxes, especially GST seem ambitious. If the tax numbers are not delivered through the larger tax footprint, there are fears of a more confrontational and litigious tax collection regime.

The expenditures are committed , the resources are in the realm of possibility "

"Announced in the backdrop of a robust global economy, a recovering Indian economy and a soaring stock market, Budget 2018 is along expected lines.  The Budget embodies inclusiveness through enhanced expenditure outlays in several socio-economic schemes and rural programs and several infrastructure initiatives.  On a taxation front there is slight cheer for salaried class wherein standard deduction has been re introduced.  Further,  the popular expectation for corporate tax rate reduction has been met for companies below a turnover of Rs 250 crores wherein the rate has been reduced to 25%.  As feared long term capital gains tax has been reintroduced though a calibrated way, the silver lining being the grandfathering of gains upto January 31, 2018 and a reduced without indexation taxation rate of 10%.  Further,  dividend distribution tax of 10 percent has been introduced on equity oriented funds.  A big relief being non introduction of inheritance tax. Introducing measures to support the VCF/Angel investors coupled with the recognition of hybrid instruments would encourage the industry As expected the revised fiscal deficit estimate is enhanced to 3.5% with a 18-19 estimate of 3.3%.  To sum it all, the proposals are around expected lines with the highlight being the much anticipated introduction of Long term capital gains albeit in a calibrated and responsible way."

"The year witnessed a rapid movement of the OECD-G20 BEPS project to the implementation phase, leaving a fundamentally changed landscape in its wake. Since the release of all the key instruments for BEPS implementation in Oct 2015 by the OECD, countries have legislated or have provided more clarity on how they will implement BEPS measures. Across the globe, new and sometimes highly novel national legislation was released to address BEPS challenges. The impact of BEPS recommendations was seen in the 2016 and 2017 Union Budgets.  The 2018 Union Budget continues the focus on implementation of anti-BEPS measures in the Indian tax law. The concept of “business connection” in the domestic tax law which constitutes the threshold for creating a taxable presence is proposed to be amended to align with the modified Permanent Establishment (PE) rules of BEPS Action 7 which is expected to be implemented in a number of India’s tax treaties through the Multi-lateral Instrument (MLI). The 2018 Budget proposal also seeks to tax the digital economy by clarifying that a “business connection” would include “significant economic presence” in line with one the options discussion in the BEPS Action 1 report. This proposal would create a taxable presence if the non-resident digital enterprise has a significant economic presence in India on the basis of factors that evidence a purposeful and sustained interaction with the economy of the country via technology and other automated tools. As the Government works on the finer details for the new nexus rules, amongst other things, it would need address issues such as determining the income attributable to the significant economic presence and its interaction with the equalisation levy. While tax treaties may still apply to protect a resident of a treaty jurisdiction from the new rules for taxable presence, it is important to note that with the Principal Purpose Test (PPT) expected to be embedded in most of India’s tax treaties through the MLI, access to India’s tax treaty could be under challenge in the absence of adequate economic substance."

“The Finance Minister tabled a budget more for the common men and rural sector, keeping in mind the need for immediate inclusive growth and welfare of the vast population. The proposal of extending healthcare, including insurance facilities, to the economically weaker section of the community, was indeed commendable. Perhaps a greater impetus to the industry for creation of demand; and also jobs, through radical measures of reforms, would have been more welcome, keeping the long term prosperity of the country in mind.

The introduction of long term capital gains tax @ 10% on listed securities was expected. The capital market having not adversely reacted to such proposal, albeit the momentary dip, emphasizes that indices are reflection of liquidity in the economy. One would have expected the Finance Minister to lower the corporate tax rate to 25% across the board, instead of restricting it to small and medium sized companies, having turnover less than INR 250 crore, since though such segment may account for 99% of corporate taxpayers, as stated in the budget speech, yet they do not really represent India in the global map. With larger economies, like US and UK, significantly slashing corporate tax rates, India remains unattractive to foreign MNCs with an overall effective tax rate in excess of 46% (including dividend distribution tax), in case it needs to stand in competition against other developing economies, for being the global hub for manufacture, as the domestic market of India, albeit its optically huge size, does not still have deep pockets, to excite foreign MNCs to invest big time in India, only for catering to the domestic market.”

Being the last full Union Budget of the Modi government, the Finance Minister Arun Jaitley tried to maintain a balance between the governance, economy and development. The Budget is focused on promoting Agriculture, Healthcare, Education, Employment Generation, Infrastructure and Defence. On one hand the budget addresses the concerns relating to the growth of farmers, improvement in health conditions and protection of the poor, the Finance Minister has laid down certain tax proposals which need close consideration.

The Finance Minister has proposed to levy long term capital gains (LTCG) tax on sale of listed equity shares/ units of equity oriented fund @10% (without indexation) after April 01, 2018. However, the Finance Bill has proposed to allow grandfathering to the gains already accrued till January 31, 2018 and hence the government has fulfilled its commitment to not to make any change in law with retrospective effect. However, it is important to note that the grandfathering is allowed only on sale of such shares on which Securities Transaction Tax (STT) were paid at the time of acquisition without providing for any relaxation in certain deserving genuine cases such as acquisition of shares through allotment, due to merger/ amalgamation, gift, inheritance etc.

Regarding the taxation on individuals, the Finance Minister has not proposed any change in the slab rate for individuals leaving them little disappointed. However, the tax proposals contain significant benefits for senior citizens wherein the amount of deductions from total income, as available, have been increased for various purposes.

One of the key changes include providing relief to the companies, against whom an application for corporate insolvency resolution process has been admitted by the Adjudicating authority under Insolvency and Bankruptcy code, from Minimum Alternate Tax (MAT) provisions and relaxation from the condition of continuing minimum shareholding of 51% for being eligible to carry forward and set-off of losses against future years’ income.

The Finance Bill has proposed few changes in the tax treatment of certain specific items, which appears to be in line with the observations made by the Delhi High Court while deciding the validity of the Income Computation and Disclosure Standards (‘ICDS’).

Although, some provisions have been relaxed, including extending the sunset clause from March 31, 2019 to March 31, 2021, for a start-up to be an eligible business for being exempt from payment of tax, but the steps taken in this regard so far are not sufficient enough to encourage a healthy start-up eco-system.

OECD under its BEPS Action Plan 1 addressed the tax challenges in a digital economy wherein several options are discussed to tackle the direct tax challenges arising in digital businesses. One such option is a nexus rule on “significant economic presence”. In line with BEPS Action Plan 1, the Finance Bill, 2018 proposes to introduce the concept of 'significant economic presence' in India that shall also constitute 'business connection'. The proposed amendment shall enable India to negotiate for inclusion of the new nexus rule in the form of 'significant economic presence' in the Double Taxation Avoidance Agreements (‘DTAA’).

The scope of Dependent Agent PE (‘DAPE) provided under Article 5 of DTAAs entered into by India, as modified by Multilateral Instrument (‘MLI’), is wider in scope as compared with the provisions under the domestic tax law. Therefore, scope of DAPE provided under the domestic tax law is proposed to be in line with the MLI.

How did the Finance Minister perform the slog-over.

"The budget is clearly an election budget and targets the agriculture, healthcare, and education space with some incentives for infrastructure development and employment generation.

The key proposals are:

1. 25% Corp tax rate extended to companies with turnover up to Rs 250 cr, no real benefit to talk about.
2. 100% deduction to the farmer producer companies having a total turnover upto Rs 100Cr
3. There is no change in the individual tax slabs, however, senior citizens have been provided some relief with respect to exemption of interest income on bank deposits raised to Rs 50,000 and deduction under section 80D to increase to Rs 50,000 from existing Rs 30,000.
4. Standard deduction of Rs 40,000 for salaried employees in lieu of transport and medical expenses., expected move.
5. There is a small tinkering in section 80JJAA of extending the benefit of reduced minimum number of days of 150 days to footwear and leather industry, however this will not majorly boost employment generation.
6. Women’s contribution reduced to 8.33% towards PF in the first 3 years for new EPF accounts. government will contribute 12% of EPF contribution for new employees in all sectors for the next three years
7. To improve the effectiveness of the tax administration the income tax Act will be amended to regularize e-assessment, procedural.
8. Deemed dividends have also brought under the tax net of dividend distribution tax and is proposed to tax at 30%, a retrograde step.
9. Re-introduction of long term capital gains on sales of equity will make Investors unhappy, the LTCG exceeding Rs 1 lakh on sale of listed equity shares to be taxed at 10%, step looks like one to appease the masses so that equity sale is not tax free.
10. There are no significant changes to promote start-ups, or in case of corporate tax for companies having a turnover above 250 crores.
11. In certain cases, education cess SHE Cess shall be discontinued. However, a new cess, by the name of “Health and Education Cess” shall be levied at the rate of four per cent.
12. Proposal to aligning the scope of “business connection” with modified PE Rule as per Multilateral Instrument. Further, “Business connection” to include “Significant Economic presence”.
13. Provisions relating to Country-by-Country Report are proposed to be amended to bring the same in line with the model legislation of Action Plan 13 of BEPS.

In short no bold moves in this budget to spur up growth and employment."

Being the last full budget of the present Government, Budget 2018 was looked forward to with much anticipation. As expected, the Budget was more on policy measures relating to healthcare, agriculture incentives, infrastructure development, smart cities etc. making a fine balance covering multiple sectors of society and trade.

From a transfer pricing perspective, the expectations were that the treatment of secondary adjustment will be modified to make it more practical, and also some measures to reduce litigation. However, there is no mention on either of these.

The proposal to amend the existing provisions on Country by Country Report (‘CbCR’) notification and filing to improve effectiveness and reduce compliance burden on the taxpayers is a welcome move. With extension of timeline for filing the CbCR to twelve months from the end of the year gives some more time for the obligated entities to populate vast amount of data requested in the CbCR.

However, the due date for filing of CbCR by the Indian subsidiary of a multinational enterprise (‘MNE’) in the event of systematic failure to provide CbCR by the country of the MNE need to be re-looked. On a practical note, by the due date, it may not be clear about the systematic failure of the responding jurisdiction in sharing the CbCR.

The proposed amendment to the definition of ‘agreement’ may pose burden of compliance on the Indian taxpayers e.g., Indian subsidiaries of US multinationals, as the proposed amendment insists existence of both the Double Taxation Avoidance Agreement and the agreement for exchange of CbCR. Considering the intention of the Government in proposing the amendment is to reduce tax compliance burden, expediting activation of CbCR exchange relationship with other countries and concluding bilateral discussions with the US is the need of the hour. Providing suitable relief, by way of administrative clarification in the first year of these filings will alleviate burden on the taxpayers.

"The last full Budget before the elections in 2019 has been a fine balancing exercise by the Finance Minister. Negotiating political necessities without affecting the Government’s finances is a tough ask and here, a number of policy announcements and initiates have been made, revenue numbers are sought to be maintained while at the same time, relief measures have been announced.

From a direct tax perspective, after years of rumour mongering Long-term capital gains tax on sale of equity shares has staged a comeback. The levy of 10 per cent without indexation does not appear to be a deal breaker. On the other hand, with the markets being at an all time high, the grandfathering of the gains that people have been sitting on till yesterday, has taken the sting out of the levy which would otherwise have resulted in retrospective taxation.

The alignment of the definition of ‘business connection’ with the BEPS project seems logical, if not necessary. Nevertheless, the Government has specifically clarified in the Budget proposals that the modifications made in the domestic law will not impact treaty benefits and unless the tax treaties are suitably modified, cross border business profits will continue to be taxed as per the existing treaty rules. This clarification will come as a major relief to digital economy participants.

The rationalisation of MAT provisions for taxpayers under the Insolvency Resolution Process is on expected lines and will provide much needed relief. Taxpayers will now be able to reduce both brought forward loss as well as unabsorbed depreciation in full for computing book profits.

On the personal taxation, much deserving benefits have been granted to senior citizens by way of higher deductions on health insurance premiums, interest income, etc. the common man may feel slightly high and dry. Standard deduction has made a comeback at a sum of Rs. 40,000 but the benefit is effectively curtailed to Rs. 5,800 since exemption in respect of Transport Allowance (Rs. 19,200) and reimbursement of medical expenses (Rs. 15,000) have been withdrawn. The increase in the effective rate of cess from 3% to 4% further wipes out any benefit that would accrue to the salaried taxpayers. The major benefit of this amendment is only that the documentation will get reduced.

PAN has now been made mandatory for all non-individual taxpayers who engage in any financial transaction aggregating to Rs. 250,000 in a financial year. The requirement has been extended to any person who is authorised to act on behalf of such entity. The PAN is intended to be used as a Unique Identity Number and it will be interesting to note how this proposal is implemented on the ground."

"In his Budget speech, the Finance Minister unveiled key tax proposals and the initial reaction to this may be considered as disappointing.

The business community at large expected the headline Corporate Tax rates to be reduced to 25% across the border.  However, while the coverage has been now increased to 99% of tax payers, it has left out a large enough community of tax payers that make significant tax contribution. While India struggles to live up to expectations as an attractive FDI destination, in the wake of new competition even from developed countries such as USA, UK and France, India may not be able to stand up on this aspect. The continued high tax regime would have significant impact on the tax structures which would now be more leveraged towards developed economies that offer significantly lower rates and stable tax regimes.

On the other hand, the much-anticipated introduction of tax on Long Term capital gain is back again. Although diluted to some degree on account of the grandfathering provision, this would be a deterrent to investment in the long run with dual taxation through LTCG and STT.

Overall, the Direct tax provisions fall short of expectations, but this is understandable in the back drop of revenue uncertainty from the still to be stabilized GST regime that was introduced in July 2017."

“Budget 2018, being the last budget to be presented by the current Government before the 2019 national elections presented a tricky challenge of balancing populist expectations and adherence to the fiscal prudence path. At a holistic level, based on the Budget speech, it is evident that the Government has clearly focused on increased spending in critical areas of the economy like agriculture, rural infrastructure, education and healthcare at the cost of slippage on the projected fiscal deficit targets.

On the taxes front, while the Budget has clearly benefited certain categories of taxpayers like senior citizens and corporates with revenues below a threshold, the same cannot be said for all. The proposal to introduce long term capital gains together with unchanged tax slabs for individual assesses (other than senior citizens) appears to be negative to a larger class.

To highlight some of the important changes:

• Corporate tax rate reduced to 25% for companies with turnover less than Rs 250 crore in FY 16-17
• 10% tax on LTCG exceeding Rs. 100,000 introduced (without indexation) with effect from April 1, 2018. However, gains accruing till 31 January 2018 grandfathered
• Tax on distributed income by equity oriented mutual fund introduced @ 10%
• Ability to carry forward business losses irrespective of change in shareholding in case of companies undergoing insolvency proceedings under IBC
• Rationalization of Section 56(2)(x) to exclude receipt of any property by a wholly owned subsidiary from its holding company and vice-versa
• Transfer of derivatives and certain securities by non-residents on stock exchanges located within IFSC exempt from capital gains tax. Further, non-corporate taxpayers operating in IFSC shall be charged Alternate Minimum Tax (AMT) at 9%
• Significant expansion to the definition of ‘business connection’ under Section 9 to bring it in line with the BEPS project

While one would need to delve into the Finance Bill fine print to see other changes that have a significant impact, it might be safe to say that the reintroduction of long term capital gains on listed equity shares is the single biggest change brought in by the current Budget."

“The proposal to align the business connection rule with broadened PE rule under the Multilateral Instrument and also the introduction of the concept of significant economic presence or SEP under the domestic law to potentially create a negotiating position under the DTAA for tackling digital economy are clear indications of Governments resolve to address issues under the OECD’s BEPS agenda.”

“Budget 2018 largely focused to benefit rural, education and infrastructure improvements. Lot of spending to improve roads, railways and suburban railway facilities. Reliefs to salaried class by introducing standard deduction of Rs 40,000 in lieu of transport allowance and medical reimbursement appears to be meagre and will not meet expectations. Also increase in Cess to 4% should have been expected with large outlay on health care under various National Health care protection initiatives. Also the outlay to focus on increasing literacy and teacher education enhancement programs will have good long term benefits to Indian economy. The fine print is surely going to be interesting to ascertain where revenues will come from.

Some important misses are:

1. No major reduction in Corporate taxes for large Corporates considering the worldwide trend of reduced taxes (US reducing from 35% to 21%) and other countries like UK (17% from 2020), Japan (30% to 20%).
2. Probably, no change in DDT, tax in hands of shareholders was being asked.
3. MAT retained; (hoping changes are there to meet problems on waiver of loans, etc.
4. 4.STT continues with LTCG tax @ 10%.
5. No changes in exemption limits of taxable income.

The Government seems to have decided to play safe rather than continue with big benefits and hold reforms.”

“Budget 2018 presented by Finance Minister is betting big on expenditure led recovery of the rural economy with huge and unprecedented outlays on rural livelihood and agriculture credit no doubt encouraged by the spike in personal direct tax revenues with the increase in the tax base brought about by demonetisation and GST. In the process, the FM has consciously chosen to stretch the fiscal deficit target beyond 3% for the right reasons. However, the expected cut in corporate tax rate to 25% across the board as announced in the roadmap spelled out by the FM four years ago did not materialize with the same being restricted to companies with turnover below 250 crores. This has resulted in differing corporate tax rates based on size of a company which may be counterproductive in encouraging businesses to scale up and expand investments and grow. It is hoped that, in due course, there will just one harmonised corporate tax rate of 25% and such distinctions based on size be removed.”

Widening the scope of  “Business Connection” under the domestic law:

The Finance Bill 2018 proposed to align provisions of the domestic law with the position in case of the tax treaties of India after signing of Multilateral Convention to Implement Tax Treaty Related Measures (‘MLI’).

As per the proposed amendment, the “Business Connection” under the domestic law shall also include any business activities carried through a person who, acting on behalf of the non-resident, habitually concludes contracts or habitually plays the principal role leading to conclusion of contracts by the non-resident.

Action Plan 7 of BEPS (OECD) provided recommendations regarding Permanent Establishment (PE) and introduction of an anti fragmentation rule with a view to prevent base erosion and profit shifting. The said recommendations have now been included in Article 12 of the MLI, to which India is also a signatory. Consequently it has automatically modified India’s bilateral tax treaties covered by the MLI. Accordingly, the current treaty provisions of Dependent Agent Permanent Establishment (‘DAPE’) of India’s tax treaties as modified by the MLI, have become wider in scope than the current provisions contained in domestic law dealing with “Business Connection principles”.

Consequent to this amendment, it would be necessary to have a detailed examination of the functions performed by the Indian taxpayers acting as commission/indenting agents on behalf of the foreign principals to test the existence of PE.  In the event a PE exists, (which would be the case under the expanded definition) it would be important to work out the attribution of profits applying transfer pricing principles.  In appropriate cases the existing business models may be required to be reviewed and modified.

Introduction of digital PE:

Finance Bill 2018 introduces the concept of digital PE to the domestic law for taxing new business models operating remotely through digital medium relying on one of the options under the BEPS Action Plan 1 of nexus rule based on “‘significant economic presence’ on the basis of factors that have purposeful and sustained interactions by the head of technology and other automated tools.

For this purpose the ‘significant economic presence’ is defined to mean –

1.  Any transaction in respect of any goods, services or property carried out by a non-resident in India, including provision of download of data or software in India if the aggregate of payments arising from such transactions during the previous year exceeds the amount as may be prescribed; or
2. Systematic and continuous soliciting of its business activities or engaging in interaction with such number of users as may be prescribed, in India though digital means.

While unless corresponding modifications to the PE rules are made in the India tax treaties, the above amendment in the domestic lax cannot be applied. However, the proposed amendment in the domestic law will enable India to negotiate on inclusion of such nexus rule in its tax treaties going forward.  One has also to study the interplay of equalization levy introduced by India earlier with the proposed amendment. 

"This being the last budget of the NDA government, understandably it is a more balanced and fiscally prudent budget.

Following are some significant tax proposals the Hon’ble FM announced in his budget speech.

Very significant positive amendment for capital gains tax on property transactions. No additional capital gains tax will be payable if the difference between actual ‘sale price of a property’ and its ‘stamp duty value’ (circle rate) is not more than  5%. This is a great relief for people transacting in properties and will avoid litigation with tax authorities under section 50C and 56 of the Income-tax Act.

Introduction of LTCG tax on equity gain exceeding Rs 1 Lac @ 10% without indexation will impact equity market and the corpus which people need to create for meeting their financial and life goals. One catch is there: this change is, in effect, is a retrospective amendment since only capital gains made till 31 January 2018 will not attract this new tax. This is against the stated policy decision of NDA govt not to make retrospective amendment in tax laws.  

Government has delivered on its promise to reduce corporate tax rate to 25% which will apply to all Companies with Turnover upto Rs 250 crores.

No announcement has been made on introduction of Estate duty/inheritance tax as was rumored in some section.

Surprisingly, the Hon’ble FM in his budget speech did not make any announcement on the tax clarity needed for Insolvency and Bankruptcy Code Regime (IBC). May be one will have to wait for the fine print of the Finance Bill to see if there are any tax proposals covered therein.

Overall, a decent budget focusing more on general welfare of the larger section of the society, quality healthcare and minimum tax changes."

"Honourable Finance Minister Shri Arun Jaitley announced Union Budget 2018-19 in Parliament today ie February 1, 2018. The Budget has provided major allocation to various sectors like rural and farm sector, health, Infrastructure including rail and roads. Introduction of Universal health scheme is world's largest Heath scheme. Also it has focused a lot on empowering women and helping senior citizens with tax incentives.

This is a bold and growth oriented Budget and continues implementation of various reforms like GST, IBC, etc in the recent past. The base corporate tax rate for MSME is reduced from 30% to 25% if the turnover of the relevant company is less than Rs.2500 million during the FY 2016-17. This is a major tax rate cut for MSMEs and will help them increase their post tax profits. This is in line with promise and path given by the FM in his Budget speech of February 2015. There is no change in personal tax rate but the introduction of standard deduction of Rs.40,000 is a welcome stale for salaried class. This will put them at par with businesses who get expense deduction. For eligible women, against EPF contribution of 8%, the Govt will contribute 12% which is a welcome step. Introduction of long term capital gains tax@10% will assist in generating tax revenues for the Govt which is based on the theory that one who earns should pay tax but should not have any major adverse effect on capital market as Govt has given increase in cost base for sale till 31st July, 2018.

Overall, the Budget is a welcome Budget and provides a path towards growth, certainty and stability as well as steps towards implementation of key reforms undertaken by the Govt. Finally, it is a 'popular Budget' and not 'populist Budget' as it contains benefits for all people of India."

“The background expectation of an election budget is reflected in various initiatives directed towards agriculture, healthcare, common man and the SME sector. However, the fine balancing act that the FM has been able to achieve is commendable. He has provided reliefs for senior citizens and individuals at the lower spectrum of income-tax and has funded these costs with imposition of Long Term Capital Gains Tax. This may create some knee-jerk reaction in the market, but overall, a 10 per cent levy with grandfathering up to 31st January should be digested by the market reasonably well. However, there is a concern, that the securities transaction tax in the new scenario may not be justified.”

“Modi Government’s final Union Budget before the next General Elections is a mixed bag, avowedly aimed at catering to each sector of the economy including MSMEs, infrastructure, agriculture and rural economy while contemporaneously focusing on social reforms such as poverty alleviation and employment generation. As the Government closes the loop on the key structural reforms introduced during its term, it relies on economic metrics to emphasise that its policies have yielded a lower fiscal deficit, GDP growth pegged at 7.2% to 7.5% in FY 2018, ease of doing business in India and a more transparent and honest Indian society. Several of the income tax proposals have been pressed into service to sub-serve Governments greater macroeconomic objectives including reduced corporate tax rates for MSMEs, focus on transparency for charitable institutions, tax incentives for farmer producer companies and greater employment generation, new health cess and relief for salaried class and senior citizens. 

As we await the fine print of  Finance Bill, 2018, there are two key income tax proposals that stand out from  the Hon’ble Finance Minister’s budget speech. First, the cut in the corporate tax rate to 25% for MSMEs with a turnover of INR 250 crores is a significant jump from the erstwhile turnover cap of INR 50 crores. This will benefit a large number of mid-size companies, who can use the surplus for reinvestment and growth of their businesses. The second significant move is the withdrawal of the long term capital gains tax exemption to listed equity shares. The Government has displayed its confidence in the Indian equity markets as it no longer needs tax incentives to provide a fillip to this sector.  Nonetheless, it has ensured grandfathering of capital gains relatable to accretions in value up until January 31, 2018 so as to not dampen investor sentiment."

Co-authored by Gouri Puri

“Overall, Budget 2018 is very aligned to the macro global direction -  reduction in Corporate Tax rate, protecting domestic industry by increasing Customs Duty, and supporting all major Government schemes including Digital India, Doubling Farmer’s Income by 2022, Make In India, Clean Ganga, etc. Health and Social security to take care of our weakest and tackling our toxic air pollution will truly transform India into a Vibrant Economy.“

"A fine balance between the urban and rural economies

The Budget announcement is very well structured to cater to the interest of the urban and rural population.

On the one hand, giving full deduction for farmer producing companies is a win-win  announcement and will certainly lead to an overall increase in the standard of living of the farmers as well as all the common man. This will have a cascading impact on retail of perishable goods.

On the other hand, announcing various measures for consumers for gold exchanges, transport and travel infrastructure, relief to salaried persons, increase in disposable income in the hands of the salaried class as well as senior citizens will lead to increase in their consumption pattern leading to being a catalyst to growth in the retail sector.

Special tax benefits to enterprises in the footwear and leather industry will act as a helping hand to these enterprises to increase their resources by reducing their tax outflow.

Measures for the Small and Medium enterprises will help these budding enterprises to increase their performance and if they are able to take full advantage they will become a key contributory to the growth of the consumer related sectors."

“Barring a few tax proposals, the budget seems to be a populist one. Contribution of wages upto 12% for all new members of EPFO for next 3 years is a welcome move and will stimulate job creation. Efforts have been made to push agricultural sector like increase of Minimum Support prices to 1.5 times of production cost, deduction of 100% of profits to farmer produce companies having turnover upto Rs. 100 Crores and pumping of Rs. 11 lac crore into the farming sector. For poor people, FM has announced 'National Health Protection Scheme' to cover over 10 Cr poor & vulnerable families to provide universal access.

On the tax front, 10% capital Gains on Long term Capital Gains on Equity Shares and Mutual funds is a certain dampener and is expected to put a brake on the movement of savings from non financial to financial assets. Grandfathering of the deemed capital gains till 31st January, 2018 is expected to provide relief but is not a full fledged granfathering like we had in the case of the India Mauritius and the India SingporeTreaty. For the salaried taxpayers there is not much relief other than the Standard Deduction which itself is in lieu of other allowances. In another welcome move, the Finance Minster has clearly stated the policy of Indian to discourage and heavlily regulate crypto currencies. In fact they are not expected to be used a form of currency in India at all. Companies with a turonver less than Rs. 250 crore can now enjoy the concessional tax rate of 25% which is expected to make India competitive compared to the US economy for mid sized US captive after the recent federal tax cut in the US. Senior citizens have adequately been taken care like their interest income upto Rs. 50,000 for savings in all kinds of deposit have has been made exempt besides allowing higher deduction upto Rs. 50,000 for their health insurance and Rs. 1,00,000 for their medical expenditure.”

"Budget proposals announced by the Finance Minister largely delivers on the populist agenda, with increased focus on strengthening the agricultural and rural economy, health care, infrastructure and education in the country.  Reduction in the corporate tax rate on all companies with turnover of upto INR 250 crores in FY 2016-17 partially delivers on the promise made in 2015 and the impact of revenue forgone through the proposed tax rate reduction seems to be primarily balanced through 1% increase in the cess and introduction of long tax capital gain tax of 10% from sale of listed securities.  Clarification regarding grandfathering of capital gains as per the highest price quoted on 31st January 2018 will lead investors to book profits made during the recent bull run without any levy of Long Term Capital Gain Tax.  Digitization and greater transparency also continues to be the under tone of this budget, with Finance Minister introducing the new scheme for e-assessments across the country.  While there may be some teething issues with this tectonic shift in the conventional tax assessment proceedings, this does come as a welcome move towards reduced tax administration cost and increased tax payer satisfaction with income tax administration.”