Budget 2018 has been a balancing act of sorts. On the one hand there is an increase in customs duty surcharge from 3% to 10%, which will impact bottom-line to some extent; on the other the corporate tax for companies with a turnover of up to Rs 250 crore (FY2016-17) stands reduced from 30% to 25%. Consequently, the increase in customs duty may impact the demand for appliances, given that costs will rise somewhat. Nevertheless, reduction in corporate tax will benefit companies that were impacted due to subdued consumer demand.
There were expectations that the Budget would offer more relief for companies, given the impact of GST and demonetisation in slowing consumer demand. The focus on the rural economy and the poor is, however, understandable since this is the last full budget before the 2019 general elections and the government has to do much for creating jobs.
Some key issues have been addressed, since the government’s focus has been on increasing employment, improving ease of doing business, and providing a level-playing field for the industry. Moreover, the measures to benefit senior citizens and the poor are commendable. Tax exemption on interest income from bank deposits being raised to Rs 50,000 (from Rs 10,000) is a good move. Raising the deduction for health insurance premium under Section 80D of the Income Tax Act to Rs 50,000 (from Rs 30,000 currently) should reduce the burden that senior citizens have felt in recent years, and enable them to live a better life.
But the Budget hasn’t focussed on salaried employees. The proposal to offer standard deduction of Rs 40,000 to salaried employees in lieu of the earlier transport allowance and medical reimbursement is somewhat beneficial. This decision will reduce the taxable income of salaried individuals by at least `5,800. Nonetheless, since consumer sentiment across India has been muted during the past year, more direct benefits for individuals and corporate entities would have given a greater boost the economy.