91. My Ministry will leverage the India Infrastructure Finance Corporation Limited (IIFCL) to help finance major infrastructure projects, including investments in educational and health infrastructure, on strategic and larger societal benefit considerations.
92. Our Government has scaled new heights in development of Road Infrastructure sector. We are confident to complete National Highways exceeding 9000 kilometers length during 2017-18. Ambitious Bharatmala Pariyojana has been approved for providing seamless connectivity of interior and backward areas and borders of the country to develop about 35000 kms in Phase-I at an estimated cost of ‘5,35,000 crore. To raise equity from the market for its mature road assets, NHAI will consider organizing its road assets into Special Purpose Vehicles and use innovative monetizing structures like Toll, Operate and Transfer (TOT) and Infrastructure Investment Funds (InvITs).
93. Strengthening the railway network and enhancing Railways’ carrying capacity has been a major focus of the Government. Railways’ Capex for the year 2018-19 has been pegged at ‘1,48,528 crore. A large part of the Capex is devoted to capacity creation. 18,000 kilometers of doubling, third and fourth line works and 5000 kilometers of gauge conversion would eliminate capacity constraints and transform almost entire network into Broad Gauge.
94. There has also been significant improvement in the achievement of physical targets by Railways as well. We are moving fast towards optimal electrification of railway network. 4000 kilometers are targeted for commissioning during 2017-18.
95. Work on Eastern and Western dedicated Freight Corridors is in full swing. Adequate number of rolling stock – 12000 wagons, 5160 coaches and approximately 700 locomotives are being procured during 2018-19. A major programme has been initiated to strengthen infrastructure at the Goods sheds and fast track commissioning of private sidings.
96. A ‘Safety First’ policy, with allocation of adequate funds under Rashtriya Rail Sanraksha Kosh is cornerstone of Railways’ focus on safety. Maintenance of track infrastructure is being given special attention. Over 3600 kms of track renewal is targeted during the current fiscal. Other major steps include increasing use of technology like ‘‘Fog Safe’’ and ‘‘Train Protection and Warning System’’. A decision has been taken to eliminate 4267 unmanned level crossings in the broad gauge network in the next two years.
97. Redevelopment of 600 major railway stations is being taken up by Indian Railway Station Development Co. Ltd. All stations with more than 25000 footfalls will have escalators. All railway stations and trains will be progressively provided with wi-fi. CCTVs will be provided at all stations and on trains to enhance security of passengers. Modern trainsets with state-of-the-art amenities and features are being designed at Integrated Coach Factory, Perambur. First such train-set will be commissioned during 2018-19.
98. Mumbai’s transport system, the lifeline of the City, is being expanded and augmented to add 90 kilometers of double line tracks at a cost of over ‘11,000 crore. 150 kilometers of additional suburban network is being planned at a cost of over ‘40,000 crore, including elevated corridors on some sections. A suburban network of approximately 160 kilometers at an estimated cost of ‘17,000 crore is being planned to cater to the growth of the Bengaluru metropolis.
99. Foundation for the Mumbai-Ahmedabad bullet train project, India’s first high speed rail project was laid on September 14, 2017. An Institute is coming up at Vadodara to train manpower required for high speed rail projects.
100. In the last three years, the domestic air passenger traffic grew at 18% per annum and our airline companies placed orders for more than 900 aircrafts. Regional connectivity scheme of UDAN (Ude Desh ka Aam Nagrik) initiated by the Government last year shall connect 56 unserved airports and 31 unserved helipads across the country. Operations have already started at 16 such airports. Airport Authority of India (AAI) has 124 airports. We propose to expand our airport capacity more than five times to handle a billion trips a year under a new initiative - NABH Nirman. Balance sheet of AAI shall be leveraged to raise more resources for funding this expansion.
101. Our efforts to set up a Coalition on Disaster Resilient Infrastructure for developing international good practices, appropriate standards and regulatory mechanism for resilient infrastructure development are moving well. I propose to allocate ‘60 crores to kick start this initiative in 2018-19.
102. The Government and market regulators have taken necessary measures for development of monetizing vehicles like Infrastructure Investment Trust (InvIT) and Real Investment Trust (ReITs) in India. The Government would initiate monetizing select CPSE assets using InvITs from next year.
103. In the current year, we included, in the scope of harmonized list of infrastructure, ropeways to promote tourism, logistics parks and expanded the scope of railways infrastructure to include development of commercial land around railway stations.
104. Reserve Bank of India has issued guidelines to nudge Corporates access bond market. SEBI will also consider mandating, beginning with large Corporates, to meet about one-fourth of their financing needs from the bond market.
105. Corporate bonds rated ‘BBB’ or equivalent are investment grade.
In India, most regulators permit bonds with the ‘AA’ rating only as eligible for investment. It is now time to move from ‘AA’ to ‘A’ grade ratings. The government and concerned regulators will take necessary action.
106. We will take reform measures with respect to stamp duty regime on financial securities transactions in consultation with the States and make necessary amendments the Indian Stamp Act.
107. International Financial Service Centre (IFSC) at Gift City, which has become operational, needs a coherent and integrated regulatory framework to fully develop and to compete with other offshore financial centres. The Government will establish a unified authority for regulating all financial services in IFSCs in India.
108. Global economy is transforming into a digital economy thanks to development of cutting edge technologies in digital space – machine
20 learning, artificial intelligence, internet of things, 3D printing and the like. Initiatives such as Digital India, Start Up India, Make in India would help India establish itself as a knowledge and digital society. NITI Aayog will initiate a national program to direct our efforts in the area of artificial intelligence, including research and development of its applications.
109. Combining cyber and physical systems have great potential to transform not only innovation ecosystem but also our economies and the way we live. To invest in research, training and skilling in robotics, artificial intelligence, digital manufacturing, big data analysis, quantum communication and internet of things, Department of Science & Technology will launch a Mission on Cyber Physical Systems to support establishment of centres of excellence. I have doubled the allocation on Digital India programme to ‘ 3073 crore in 2018-19.
110. Task of connecting one lakh gram panchayat through high speed optical fiber network has been completed under phase I of the Bharatnet project. This has enabled broadband access to over 20 crore rural Indians in about two lakh fifty thousand villages. The Government also proposes to setup five lakh wi-fi hotspots which will provide broadband access to five crore rural citizens. I have provided ‘10000 crore in 2018-19 for creation and augmentation of Telecom infrastructure.
111. To harness the benefit of emerging new technologies, particularly the ‘Fifth Generation’ (5G) technologies and its adoption, the Department of Telecom will support establishment of an indigenous 5G Test Bed at IIT, Chennai.
112. Distributed ledger system or the block chain technology allows organization of any chain of records or transactions without the need of intermediaries. The Government does not consider crypto-currencies legal tender or coin and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system. The Government will explore use of block chain technology proactively for ushering in digital economy.
113. The system of toll payments physically by cash at road toll plazas is being fast replaced with Fastags and other electronic payment systems to make road travel seamless. Number of Fastags has gone up from about 60,000 in December, 2016 to more than 10 lakh now. From December, 2017 all class ‘‘M’’ and ‘‘N’’ vehicles are being sold only with the Fastags. The Government will come out with a policy to introduce toll system on ‘‘pay as you use’’ basis.
114. In order to create employment and aid growth, Government’s estimated budgetary and extra budgetary expenditure on infrastructure for 2018-19 is being increased to ‘5.97 lakh crore against estimated expenditure of ‘4.94 lakh crore in 2017-18. Details are in Annexure III.
Building Institutions and Improving Public Service Delivery
115. Our armed forces have played a stellar role in meeting the challenges we have been facing on our borders as well as in managing the internal security environment both in Jammu and Kashmir and the North East. I would like to place on record our appreciation for the efforts and the sacrifices made by the three services in defending the interests of the Nation.
116. Ever since the NDA Government has assumed office in 2014, lot of emphasis has been given to modernizing and enhancing the operational capability of the Defence Forces. A number of initiatives have been taken to develop and nurture intrinsic defence production capability to make the Nation self-reliant for meeting our defence needs. Ensuring adequate budgetary support will be our priority.
117. We have opened up private investment in defence production including liberalizing foreign direct investment. We will take measures to develop two defence industrial production corridors in the country. The Government will also bring out an industry friendly Defence Production Policy 2018 to promote domestic production by public sector, private sector and MSMEs.
118. Aadhar has provided an identity to every Indian. Aadhar has eased delivery of so many public services to our people. Every enterprise, major or small, also needs a unique ID. The Government will evolve a Scheme to assign every individual enterprise in India a unique ID.
119. To carry the business reforms for ease of doing business deeper and in every State of India, the Government of India has identified 372 specific business reform actions. All States have taken up these reforms and simplifications in a mission mode constructively competing with each other. Evaluation of performance under this Programme will now be based on user feedback.
120. Capital of the Food Corporation of India will be restructured to enhance equity and to raise long-term debt for meeting its standing working capital requirement.
121. Budgeting of Government of India’s contribution in equity and debt of the metro ventures floated by the State Governments will be streamlined.
122. Department of Commerce will be developing a National Logistics Portal as a single window online market place to link all stakeholders.
123. The Government has approved listing of 14 CPSEs, including two insurance companies, on the stock exchanges. The Government has also initiated the process of strategic disinvestment in 24 CPSEs. This includes strategic privatization of Air India.
124. Process of acquisition of Hindustan Petroleum Corporation by the ONGC has been successfully completed. Three public sector general insurance companies National Insurance Company Ltd., United India Assurance Company Limited and Oriental India Insurance Company Limited will be merged into a single insurance entity and will be subsequently listed.
125. The Government introduced Exchange Traded Fund Bharat-22 to raise ‘14,500 crore, which was over-subscribed in all segments. DIPAM will come up with more ETF offers including debt ETF.
126. 2017-18 Budget Estimates for disinvestment were pegged at the highest ever level of ‘72,500 crore. I am happy to inform the House that we have already exceeded the budget estimates. I am assuming receipts of ‘1,00,000 crore in 2017-18. I am setting the disinvestment target of ‘80,000 crore for 2018-19.
127. Bank recapitalization program has been launched with bonds of ‘80,000 crore being issued this year. The programme has been integrated with an ambitious reform agenda, under the rubric of an Enhanced Access and Service Excellence (EASE) programme. This recapitalization will pave the way for the public sector banks to lend additional credit of ‘5 lakh crore.
128. It is proposed to allow strong Regional Rural Banks to raise capital from the market to enable them increase their credit to rural economy.
129. National Housing Bank Act is being amended to transfer its equity from the Reserve Bank of India to the Government. Indian Post Offices Act, Provident Fund Act and National Saving Certificate Act are being amalgamated and certain additional people friendly measures are being introduced. To provide the Reserve Bank of India an instrument to manage excess liquidity, Reserve Bank of India Act is being amended to institutionalize an Uncollateralized Deposit Facility. Securities and Exchange Board of India, Act 1992, Securities Contracts (Regulation) Act 1956, and Depositories Act 1996, are being amended to streamline adjudication procedures and to provide for penalties for certain infractions. These proposals are in the Finance Bill.
130. For easier access, links to all Detailed Demand for Grants will be provided at india.gov.in. The Government will also consider feasibility of providing disclosed fiscal information in a machine readable form.
131. The Government is transforming method of disposal of its business by introduction of e-office and other e-governance initiatives in central Ministries and Departments. These initiatives are listed in Annexure IV.
132. The Government will formulate a comprehensive Gold Policy to develop gold as an asset class. The Government will also establish a system of consumer friendly and trade efficient system of regulated gold exchanges in the country. Gold Monetization Scheme will be revamped to enable people to open a hassle-free Gold Deposit Account.
133. Outward Direct Investment (ODI) from India has grown to US$15 billion per annum. The Government will review existing guidelines and processes and bring out a coherent and integrated Outward Direct Investment (ODI) policy.
134. Hybrid instruments are suitable for attracting foreign investments in several niche areas, especially for the startups and venture capital firms. The Government will evolve a separate policy for the hybrid instruments.
135. The emoluments of the President, the Vice President and the Governors were last revised with effect from 1st January, 2006. These emoluments are proposed to be revised to ‘5 lakh for the President, ‘4 lakhs for the Vice President and to ‘3.5 lakh per month for the Governors.
136. There has been a public debate with regard to the emoluments paid to the Members of Parliament. Present practice allows the recipients to fix their own emoluments which invites criticism. I am, therefore, proposing necessary changes to refix the salary, constituency allowance, office expenses and meeting allowance payable to Members of Parliament with effect from April 1, 2018. The law will also provide for automatic revision of emoluments every five years indexed to inflation. I am sure Hon’ble Members will welcome this initiative and will not suffer such criticism in future.
137. Our country will commemorate 150th birth anniversary of Mahatma Gandhi, Father of the Nation, from 2nd October, 2019 to 2nd October 2020. The Government and the People of India will rededicate them, through their actions, to the ideals that the Mahatma taught and lived by. A National Committee, chaired by the Prime Minister, which includes Chief Ministers of all the States, representatives from across the political spectrum, Gandhians, thinkers and eminent persons from all walks of life, has been constituted to formulate a Commemoration Programme. My Government has earmarked ‘150 crore for the year 2018-19 for the activities leading to the Commemoration.
Section III - Fiscal Management
138. I now turn to the fiscal situation for 2017-18 and fiscal estimates for 2018-19.
139. In 2017-18, Central Government will be receiving GST revenues only for 11 months, instead of 12 months. This will have fiscal effect. There has also been some shortfall in Non-Tax revenues on account of certain developments, including deferment of spectrum auction. A part of this shortfall has been made up through higher direct tax revenues and bigger disinvestment receipts.
140. Total Revised Estimates for expenditure in 2017-18 are ‘21.57 lakh crore (net of GST compensation transfers to the States) as against the Budget Estimates of ‘21.47 lakh crore.
141. Our Government assumed office in May, 2014 when fiscal deficit was running at very high levels. Fiscal Deficit for 2013-14 was 4.4% of GDP. The Prime Minister and the Government have always attached utmost priority to prudent fiscal management and controlling fiscal deficit. As Hon’ble Members would recall, we embarked on the path of consistent fiscal reduction and consolidation in 2014. Fiscal Deficit was brought down to 4.1% in 2014-15 to 3.9% in 2015-16, and to 3.5% in 2016-17. Revised Fiscal Deficit estimates for 2017-18 are ‘5.95 lakh crore at 3.5% of GDP. I am projecting a Fiscal Deficit of 3.3% of GDP for the year 2018-19.
142. In order to impart unquestionable credibility to the Government’s commitment for the revised fiscal glide path, I am proposing to accept key recommendations of the Fiscal Reform and Budget Management Committee relating to adoption of the Debt Rule and to bring down Central Government’s Debt to GDP ratio to 40%. Government has also accepted the recommendation to use Fiscal Deficit target as the key operational parameter. Necessary amendment proposals are included in the Finance Bill.
143. I shall now present my tax proposals.
144. The attempts made by our Government for reducing the cash economy and for increasing the tax net have paid rich dividends. The growth rate of direct taxes in the financial years 2016-17 and 2017-18 has been significant. We ended the last year with a growth of 12.6% in direct taxes and in the current year, the growth in direct taxes up to 15th January, 2018 is 18.7%. The average buoyancy in personal income tax of seven years preceding these two years comes to 1.1. In simple terms tax buoyancy of 1.1 means that if nominal GDP growth rate of the country is 10%, the growth rate of personal income tax is 11%. However, the buoyancy in personal income tax for financial years 2016-17 and 2017-18 (RE) is 1.95 and 2.11 respectively.
This indicates that the excess revenue collected in the last two financial years from personal income tax compared to the average buoyancy pre 2016-17 amounts to a total of about ‘90,000 crores and the same can be attributed to the strong anti-evasion measures taken by the Government.
145. Similarly, there has been huge increase in the number of returns filed by taxpayers. In financial year 2016-17, 85.51 lakhs new taxpayers filed their returns of income as against 66.26 lakhs in the immediately preceding year. By including all filers as well as persons who did not file returns but paid tax by way of advance tax or TDS, we can derive the figure of Effective Taxpayer Base. This number of effective tax payer base increased from 6.47 crores at the beginning of F.Y.14-15 to 8.27 crores at the end of F.Y.16-17. We are enthused by this success of our measures and we pledge to continue to take all such measures in future by which the black money is contained and the honest taxpayers are rewarded. Demonetization was received well by honest taxpayers as “imandari ka utsav” only for this reason.
146. Madam Speaker, recognising the need for facilitating compliance, Government had liberalized the presumptive income scheme for small traders and entrepreneurs with annual turnover of less than ‘2 crores and introduced a similar scheme for professionals with annual turnover of less than ‘50 lakhs with the hope that there would be significant increase in compliance. Under this scheme, 41% more returns were filed during this year which shows that many more persons are joining the tax net under simplified scheme. However, the turnover shown is still not encouraging. The Department has received 44.72 lakh returns for assessment year 26 2017-18 from individual, HUF and firms with a meagre average turnover of ‘17.97 lakhs and an average tax payment of ‘7,000/- only. The tax compliance behaviour of professionals is no better; the department has received 5.68 lakh returns under the presumptive income scheme for assessment year 2017-18 with average gross receipts of ‘5.73 lakhs only. Average tax paid by them is only ‘35,000/-.
Tax incentive for promoting post-harvest activities of agriculture
147. Madam Speaker, at present, hundred per cent deduction is allowed in respect of profit of co-operative societies which provide assistance to its members engaged in primary agricultural activities. Over the last few years, a number of Farmer Producer Companies have been set up along the lines of co-operative societies which also provide similar assistance to their members. In order to encourage professionalism in post-harvest value addition in agriculture, I propose to allow hundred per cent deduction to these companies registered as Farmer Producer Companies and having annual turnover up to ‘100 crores in respect of their profit derived from such activities for a period of five years from financial year 2018-19. This measure will encourage “Operation Greens” mission announced by me earlier and it will give a boost to Sampada Yojana.
148. Currently, a deduction of 30% is allowed in addition to normal deduction of 100 % in respect of emoluments paid to eligible new employees who have been employed for a minimum period of 240 days during the year under section 80-JJAA of the Income-tax Act. However, the minimum period of employment is relaxed to 150 days in the case of apparel industry. In order to encourage creation of new employment, I propose to extend this relaxation to footwear and leather industry. Further, I also propose to rationalise this deduction of 30% by allowing the benefit for a new employee who is employed for less than the minimum period during the first year but continues to remain employed for the minimum period in subsequent year.
Incentive for real estate
149. Currently, while taxing income from capital gains, business profits and other sources in respect of transactions in immovable property, the consideration or circle rate value, whichever is higher, is adopted and the difference is counted as income both in the hands of the purchaser and seller. Sometimes, this variation can occur in respect of different properties in the same area because of a variety of factors including shape of the plot and location. In order to minimize hardship in real estate transaction, I propose to provide that no adjustment shall be made in a case where the circle rate value does not exceed 5% of the consideration.
Incentivising micro, small and medium entrepreneurs
150. In the Union Budget, 2017, I had announced the reduction of corporate tax rate to 25% for companies whose turnover was less than ‘50 crore in financial year 2015-16. This benefitted 96% of the total companies filing tax returns. Towards fulfilment of my promise to reduce corporate tax rate in a phased manner, I now propose to extend the benefit of this reduced rate of 25% also to companies who have reported turnover up to ‘250 crore in the financial year 2016-17. This will benefit the entire class of micro, small and medium enterprises which accounts for almost 99% of companies filing their tax returns. The estimate of revenue forgone due to this measure is ‘7,000 crores during the financial year 2018-19. After this, out of about 7 lakh companies filing returns, about 7,000 companies which file returns of income and whose turnover is above ‘250 crores will remain in 30% slab. The lower corporate income tax rate for 99% of the companies will leave them with higher investible surplus which in turn will create more jobs.
Relief to salaried taxpayers
151. The Government had made many positive changes in the personal income-tax rate applicable to individuals in the last three years. Therefore, I do not propose to make any further change in the structure of the income tax rates for individuals. There is a general perception in the society that individual business persons have better income as compared to salaried class. However, income tax data analysis suggests that major portion of personal income-tax collection comes from the salaried class. For assessment year 2016-17, 1.89 crore salaried individuals have filed their returns and have paid total tax of ‘1.44 lakh crores which works out to average tax payment of ‘76,306/- per individual salaried taxpayer.
As against this, 1.88 crores individual business taxpayers including professionals, who filed their returns for the same assessment year paid total tax of ‘48,000 crores which works out to an average tax payment of ‘25,753/- per individual business taxpayer. In order to provide relief to salaried taxpayers, I propose to allow a standard deduction of ‘40,000/- in lieu of the present exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses. However, the transport allowance at enhanced rate shall continue to be available to differentlyabled persons. Also other medical reimbursement benefits in case of hospitalization etc., for all employees shall continue. Apart from reducing paper work and compliance, this will help middle class employees even more in terms of reduction in their tax liability. This decision to allow standard deduction shall significantly benefit the pensioners also, who normally do not enjoy any allowance on account of transport and medical expenses. The revenue cost of this decision is approximately ‘8,000 crores. The total number of salaried employees and pensioners who will benefit from this decision is around 2.5 crores.
Relief to senior citizen
152. A life with dignity is a right of every individual in general, more so for the senior citizens. To care of those who cared for us is one of the highest honours. To further the objective of providing a dignified life, I propose to announce the following incentives for senior citizens:
Exemption of interest income on deposits with banks and post offices to be increased from ‘10,000/- to ‘50,000/- and TDS shall not be required to be deducted on such income, under section 194A. This benefit shall be available also for interest from all fixed deposits schemes and recurring deposit schemes.
Raising the limit of deduction for health insurance premium and/ or medical expenditure from ‘30,000/- to ‘50,000/-, under section 80D. All senior citizens will now be able to claim benefit of deduction up to ‘50,000/- per annum in respect of any health insurance premium and/or any general medical expenditure incurred.
Raising the limit of deduction for medical expenditure in respect of certain critical illness from, ‘60,000/- in case of senior citizens and from ‘80,000/- in case of very senior citizens, to ‘1 lakh in respect of all senior citizens, under section 80DDB.
These concessions will give extra tax benefit of ‘4,000 crores to senior citizens. In addition to tax concessions, I propose to extend the Pradhan Mantri Vaya Vandana Yojana up to March, 2020 under which an assured return of 8% is given by Life Insurance Corporation of India. The existing limit on investment of ‘7.5 lakh per senior citizen under this scheme is also being enhanced to ‘15 lakh.
Tax incentive for International Financial Services Centre (IFSC)
153. The Government had endeavoured to develop a world class international financial services centre in India. In recent years, various measures including tax incentives have been provided in order to fulfil this objective. To further this objective, I propose to provide two more concessions for IFSC. In order to promote trade in stock exchanges located in IFSC, I propose to exempt transfer of derivatives and certain securities by
29 non-residents from capital gains tax. Further, non-corporate taxpayers operating in IFSC shall be charged Alternate Minimum Tax (AMT) at concessional rate of 9% at par with Minimum Alternate Tax (MAT) applicable for corporates.
Further Measures to control cash economy:
154. Currently, the income of trusts and institutions is exempt if they utilise their income towards their objects in accordance with the relevant provisions of the Income-tax Act. However, there is no restriction on these entities for incurring expenditure in cash. In order to have audit trail of the expenses incurred by these entities, it is proposed that payments exceeding ‘10,000/- in cash made by such entities shall be disallowed and the same shall be subject to tax. Further, in order to improve TDS compliance by these entities, I propose to provide that in case of non-deduction of tax, 30% of the amount shall be disallowed and the same shall be taxed. Rationalisation of Long Term Capital Gains (LTCG)
155. Madam Speaker, currently, long term capital gains arising from transfer of listed equity shares, units of equity oriented fund and unit of a business trust are exempt from tax. With the reforms introduced by the Government and incentives given so far, the equity market has become buoyant. The total amount of exempted capital gains from listed shares and units is around ‘3,67,000 crores as per returns filed for A.Y.17-18. Major part of this gain has accrued to corporates and LLPs. This has also created a bias against manufacturing, leading to more business surpluses being invested in financial assets. The return on investment in equity is already quite attractive even without tax exemption. There is therefore a strong case for bringing long term capital gains from listed equities in the tax net.
However, recognising the fact that vibrant equity market is essential for economic growth, I propose only a modest change in the present regime. I propose to tax such long term capital gains exceeding ‘1 lakh at the rate of 10% without allowing the benefit of any indexation. However, all gains up to 31st January, 2018 will be grandfathered. For example, if an equity share is purchased six months before 31st January, 2018 at ‘100/- and the highest price quoted on 31st January, 2018 in respect of this share is ‘120/-, there will be no tax on the gain of ‘20/- if this share is sold after one year from the date of purchase. However, any gain in excess of ‘20 earned after 31st January, 2018 will be taxed at 10% if this share is sold after 31st July, 2018. The gains from equity share held up to one year will remain short term capital gain and will continue to be taxed at the rate of 15%. Further, I also propose to introduce a tax on distributed income by equity oriented mutual fund at the rate of 10%. This will provide level playing field across 30 growth oriented funds and dividend distributing funds. In view of grandfathering, this change in capital gain tax will bring marginal revenue gain of about ‘20,000 crores in the first year. The revenues in subsequent years may be more.
Health and Education Cess
156. Madam Speaker, at present there is a three per cent cess on personal income tax and corporation tax consisting of two per cent cess for primary education and one per cent cess for secondary and higher education. In order to take care of the needs of education and health of BPL and rural families, I have announced programs in Part A of my speech. To fund this, I propose to increase the cess by one per cent. The existing three per cent education cess will be replaced by a four per cent “Health and Education Cess” to be levied on the tax payable. This will enable us to collect an estimated additional amount of ‘11,000 crores.
157. We had introduced e-assessment in 2016 on a pilot basis and in 2017, extended it to 102 cities with the objective of reducing the interface between the department and the taxpayers. With the experience gained so far, we are now ready to roll out the E-assessment across the country, which will transform the age-old assessment procedure of the income tax department and the manner in which they interact with taxpayers and other stakeholders. Accordingly, I propose to amend the Income-tax Act to notify a new scheme for assessment where the assessment will be done in electronic mode which will almost eliminate person to person contact leading to greater efficiency and transparency.
158. My other tax proposals on direct tax are listed in Annexure 5 of my speech. Indirect Tax.
159. On the Indirect Taxes side, this is the first budget after the roll out of the Goods and Service Tax. Excise duties to a large extent and service tax have been subsumed in GST, along with corresponding duties on imports. Hence, my budget proposals are mainly on the customs side.
160. In this budget, I am making a calibrated departure from the underlying policy in the last two decades, wherein the trend largely was to reduce the customs duty. There is substantial potential for domestic value addition in certain sectors, like food processing, electronics, auto components, footwear and furniture. To further incentivise the domestic value addition and Make in India in some such sectors, I propose to increase customs duty on certain items. I propose to increase customs duty on mobile phones from 15% to 20%, on some of their parts and accessories to 15% and on certain parts of TVs to 15%. This measure will promote creation of more jobs in the country. Details of changes made in rates of customs duty as well as certain changes made in the excise duty structure are given in Annexure 6 to my speech.
161. To help the cashew processing industry, I propose to reduce customs duty on raw cashew from 5% to 2.5%.
162. I propose to abolish the Education Cess and Secondary and Higher Education Cess on imported goods, and in its place impose a Social Welfare Surcharge, at the rate of 10% of the aggregate duties of Customs, on imported goods, to provide for social welfare schemes of the Government. Goods which were hitherto exempt from Education Cesses on imported goods will, however, be exempt from this Surcharge. In addition, certain specified goods, mentioned in the Annexure 6 to my speech will attract the proposed Surcharge at the rate of 3% of the aggregate duties of customs only.
163. I also propose to make certain changes to the Customs Act, 1962, to further improve ease of doing business in cross border trade, and to align certain provisions with the commitments under the Trade Facilitation Agreement. To smoothen dispute resolution processes and to reduce litigation, certain amendments are being made, to provide for pre-notice consultation, definite timelines for adjudication and deemed closure of cases if those timelines are not adhered to.
164. With the roll out of GST, I propose to change the name of Central Board of Excise and Customs [CBEC] to Central Board of Indirect Taxes and Customs (CBIC). The necessary changes in law for this are proposed in the Finance Bill.
165. Madam, while making the proposals in this year’s Budget, we have been guided by our mission to especially strengthen agriculture, rural development, health, education, employment, MSME and infrastructure sectors of Indian economy. I am sure the New India which we aspire to create now will emerge. Swami Vivekanand had also envisioned decades ago in his Memoirs of European Travel, ‘‘You merge yourselves in the void and disappear, and let new India arise in your place. Let her arise – out of the peasants’ cottage, grasping the plough; out of the huts of the fisherman. Let her spring from the grocer’s shop, from beside the oven of the fritterseller.
Let her emanate from the factory, from marts, and from markets.
Let her emerge from groves and forests, from hills and mountains’’.
166. With these words, Madam Speaker, I commend the Budget to the House.
Watch the full budget speech by Finance Minister Arun Jaitley here: