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Last Updated : Feb 05, 2018 09:14 AM IST | Source:

Budget 2018: Positive for senior citizens but disappointing for home loan borrowers, equity investors

While this Budget has hit the right chords for reducing rural distress and increasing government expenditure in infrastructure, healthcare and education, it has been disappointing on other fronts.

Naveen Kukreja

Being the last budget of the present government before the 2019 elections, expectations from the public and industry had built up. While this Budget has hit the right chords for reducing rural distress and increasing government expenditure in infrastructure, healthcare and education, it has been disappointing on other fronts.

Here is my take on some of the major hits and misses of this year’s budget.

Major Hits

Healthcare: Initiates the world’s biggest public funded healthcare system

The budget proposal to set up National Health Protection Scheme would be the boldest announcement of this year’s budget. By providing 10 crore poor families with a health cover Rs 5 lakh per annum, India can now proudly claim the title of having the largest public health care program in the world. Currently, the central government provides a health cover of Rs 30,000 for poor families under Rashtriya Swasthya Bima Yojana (RSBY), which is grossly insufficient to cover most medical procedures. By the scaling up this cover to Rs 5 lakh, Finance Minister has taken a big step towards providing Universal Health Coverage.

MSMEs: Lower corporate taxes and higher credit outlay

The Budget 2018 announcement of extending 25% corporate tax slab to firms having annual turnover of up to Rs 250 crore will provide the much needed relief to the micro small and medium enterprises (MSME) sector. Till now, the 25% tax slab was available to firms with annual turnover of Rs 50 crore. The reduction in tax slab will help increase their investible surpluses, which then would be available for capacity expansion and job creation. The allocation of Rs 3 trillion under the Mudra Scheme for FY 2018-19 will also address the issue of insufficient disbursal of institutional credit to MSMEs.

Senior Citizens: Higher deductions for healthcare and interest income

Among all tax payers, senior citizens will benefit the most from Union Budget 2018. The steady decline in bank and post office fixed deposit rates has hit them hard as most of them park their retirement savings in bank and post office deposits to generate regular income for their expenses. This budget has tried to address this issue by raising the deduction of interest income on senior citizen bank and post office deposits from Rs. 10,000 to Rs. 50,000. The increase in Section 80D deduction for health insurance premium and/or medical expenditure from Rs 30,000 to Rs 50,000 will also help them to buy old-age health covers and cope with rising health costs. The Budget has also merged the existing separate deduction limits available under Section 80 BB for treating certain critical illness and increased the upper limit to Rs 1 lakh for all senior citizens. This would certainly prove as a helping hand for senior citizens copping with various critical illnesses.

Major Misses:

Equities: Return of LTCG will discourage retail investor participation

Long Term Capital Gains (LTCG) tax exemption on equities has played a major role in increasing retail investor participation in equity markets. Despite this, the proportion of retail investor segment remains dismally low when compared to advanced economies. With the reintroduction of this tax, equity investing will become less attractive to the retail investors, thereby slowing down the shift of household savings towards equities. Instead, increasing the holding period for claiming LTCG exemption from one year to threee years would have yielded better results. This would have promoted long term equity investing and generated higher revenues through short-term capital gains tax. Currently, short term capital gains on equities attracts a higher taxation rate of 15%.

Housing: No relief for home loan borrowers

Urban housing shortage for low income groups (LIG) and economically weaker sections (EWS) contribute about 95% of the total housing shortage in India. While setting up a dedicated affordable housing fund in the NHB is certainly commendable, making Section 80EE a permanent feature would have boosted the demand in this segment. Under this Section, first time home buyers of properties below Rs 50 lakh and loan amount within Rs 35 lakh can claim an additional deduction of Rs 50000 for home loan interest payment over and above the Section 24b deductions. Similarly, extending tax deductions available under Sections 80C and 24b to pre-construction period would have allowed borrowers to claim higher deductions, thereby increasing their disposable income for investment and consumption.

Digital transactions: No fiscal incentives to promote digital platforms

Promoting digital transactions was one of the major aims of demonetisation. Since then, both the government and the RBI has taken several initiatives to incentivise digital transactions. Budget 2018 was a perfect opportunity to announce more incentives for digital payments, such as waiving off MDR on transactions of up to Rs 2,000 on credit cards or waiving off 2 Factor Authentication (2fa) for digital transactions of up to Rs 5,000 for increased ‘ease of use’. It could have also implemented the proposal of 1-3% waiver in GST rates for digital transactions to nullify the higher cost of digital transactions for smaller merchants and informal sectors.

(The writer is CEO & Co-founder of
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First Published on Feb 5, 2018 09:07 am
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