In what will be the last full budget of this government, the FM has focussed on agriculture, health, education, social protection, infrastructure and financial sector development. While there was a general expectation that he would increase the threshold limit for taxation in the case of individuals, he has not walked the path. He has, however, provided some relief to all strata of society which, however, comes with some heartburn too.

Long-term capital gain (LTCG) tax on sale of equity shares is one such example. From April 1, LTCG (in excess of ₹1 lakh) is proposed to be taxed at 10 per cent (without indexation) if the Securities Transaction Tax is paid both at the time of acquisition as well as transfer of equity share.

The Government has provided a specific method of calculating the cost of acquisition, which will be the higher of actual purchase price; the lower of the fair market value of such an asset on January 31, 2018; and the full value of consideration received or accruing as a result of transfer of the asset.

Standard deduction

Standard deduction at ₹40,000 for salaried individuals has been reintroduced. It, however, comes with the discontinuance of benefits provided for transport allowance (₹19,200 per year) and medical reimbursement (₹15,000 per year). The change would lead to an increase in saving by up to ₹5,800 per year. Keeping in mind the Government’s vision of “inclusive growth”, differently-abled persons will continue to have the current tax benefit towards transport allowance.

The education cess on income-tax and secondary and higher education cess on income-tax are to be replaced by health and education cess at 4 per cent (currently 3 per cent). This would result in a minor increase in effective tax rates.

Other proposals for individuals

Senior citizens have the following reasons for cheer: Increase in deduction to ₹50,000 (from ₹30,000) for payments towards health insurance policy, preventive health check-up, and so on. Expenses incurred for the treatment for specified diseases to have an enhanced deduction of ₹1,00,000 (from ₹60,000). There is also an enhanced deduction up to ₹50,000 (currently ₹10,000) on interest income, which will now include interest from fixed deposits and recurring deposits.

The Government has extended the benefit of tax-free withdrawal from NPS to non-employee subscribers, to put them on par with employee subscribers.

Now let’s take a look at the key amendments to corporate taxation. Corporate tax rate is proposed to be reduced to 25 per cent (from 30 per cent) for companies that had a turnover of up to ₹250 crore during 2016-17. The FM expects this to benefit the entire class of MSEs, which account for almost 99 per cent of companies filing tax returns. Also, this should eventually result in continuing the good run of the small- and mid-caps.

The definition of “business connection” is proposed to be widened from 2018-19 to cover situations where entities in India habitually conclude contracts for foreign principals. A concept of “significant economic presence” is proposed to cover emerging digital business models.

To minimise hardships in the case of genuine transactions in the real estate sector, no adjustments shall be made in cases where the variation between stamp duty value and the sale consideration of the immovable property is not more than 5 per cent of the sale consideration.

A new scheme will be formulated to conduct assessment proceedings using technology, to the extent possible, to enhance ease of administration and improve transparency. Also, certain provisions relating to the country-by-country report (CbCR) will be relaxed to improve effectiveness and reduce compliance burden.

The writer is Partner, People Advisory Services, EY. With inputs from Gautam Dalvi, Rahul Agarwalla and Rankit Gupta