Opinion: How does the Union Budget affect YOU?

Written By: Prashant Agarwal
New Delhi, Delhi, India Published: Feb 02, 2018, 10:13 AM(IST)

The Union Budget and the Indians Photograph:( Zee News Network )

Different people look at the budget differently. Politicians give their views based on their party’s stand and market participants try to discuss it based on the industry they belong to. This causes a lot of information overload for the common man. 

Therefore, here are the five aspects of the budget 2018 which could have an impact on your finances in this year:

Corporate Tax Rate

Finance Minister Arun Jaitley on Thursday proposed to cut the corporate income tax rate to 25 per cent for companies with a turnover of up to Rs 250 crore, meeting a key demand of the corporate world that has been seeking lower tax payouts to enable greater investment and jobs creation.

“This will benefit 99 percent of the companies that file taxes”, Jaitley said, “adding that mini, micro, small and medium enterprises will gain the most”.

How it affects you: If you are running an enterprise or planning to start one, then it would be a great news for you because now you will pay 25% instead of 30%.

A lot of things will turn costlier, and few will become cheaper

Finance Minister has reduced the basic excise duty on the Petrol and Diesel by Rs 2 and abolished the additional excise duty of Rs 6, however, he introduced a new road cess of Rs 8 per litre, which means prices of petrol and diesel will remain unchanged. 

In this budget, they have also increased the customs duty on the imported cars, bikes, mobile phones, TVs, perfumes, watches and wearables, thus, making all these items expensive to buy. Cigarettes, too, will become costlier.

But tiles, cashew nuts, solar-tempered glass and solar cells will become cheaper.

How it affects you: If you had been planning on buying some electronic item or some accessories to gift to your loved ones, then it would be wiser to buy a product which is ‘Made in India’. 

LTCG

This move again surprised most of the analyst, including me, as we were expecting either a change of the definition of "Long Term" to 2 or 3 years or else securities transaction tax (STT) to be abolished if LTCG is introduced again.

However, Jaitley introduced the LTCG of 10 percent if the gains exceed Rs 100,000 without allowing the benefit of indexation. He also said that “All the gains till the 31st January 2018 will be grandfathered and short-term capital gains remain unchanged at 15 percent”.

How it affects you: If you are an investor, you now have to stipulate the LTCG before calculating your returns on the investment. This means, until Jan 2018, if you had kept a stock for a time period longer than one year then there was no tax payable on it.

However, from now onwards whatever gain you have over the 1 lakh for the financial year 2018-2019 you have to pay 10% LTCG on it.

In long run, it can also impediment the entry of new investors, as now their returns would also need to adjust the 10% LTCG before calculating their final returns.

Standard Deduction & Education Cess

Budget 2018 proposes to provide a standard deduction of Rs 40,000 from salary income to employees but also proposes to take away transport allowance, medical reimbursement and other allowances. 

Considering the above factors, the net income exempted from tax after setting off the gain and loss is Rs 5800 only. 

Moreover, it would also depend upon your tax bracket. The saving in tax would be Rs 290 for those currently paying 5% tax on this income; Rs 1160 for those paying 20% tax on this income; and Rs 1740 for those paying 30% tax on this income. 

However, these savings would be nullified in most cases, except in the case of income up to Rs 5 lakh, due to increase in the cess payable from current 3% to 4% on the rest of the income tax payable by the individual. Therefore, individuals with income above Rs 5 lakh would end up shelling out more tax after taking into account the standard deduction, the removal of the allowances and the increase in cess. 

However, it would be a big relief for pension people as they were not given the exemptions like the salaried employees.

How it affects you: The impact would be neutral in most cases if you are a salaried employee because while you are not going to get any relief if you earn above 5 lakhs, however, the ‘increase in tax amount’ is not steep after all. However, it’s good news for you if you are a pensioner, as now you will benefit from higher deduction against health insurance premium.

Cryptocurrency

Arun Jaitley clearly stated in the budget speech that this government doesn’t consider Bitcoin a legal tender and it will discourage its use. However, he mentioned that the government will look at the utilisation of the blockchain technology.

Therefore, we would suggest staying away from investing in cryptocurrency else invest only with the money which you are ready to lose.

How it affects you: The announcement can have negative impacts as it will become difficult to trade in cryptocurrency, thus, bringing down the prices of them and your investment if you have invested in the same.

 

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)  

 

Prashant Agarwal

Prashant Agarwal is a business analyst. He writes on Finance, Social Entrepreneurship, Education and health-related Initiatives.
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