Important Points of the 2018 Budget India

1. BUDGET 2018 HIGHLIGHTS
A PRESENTATION BY
VIKRAM SINGH SANKHALA
1ST FEB 2018

2. HOW IS GOVERNMENT ACCOUNT DIFFERENT
FROM BUSINESS ACCOUNTING
1. Government Budget is an Receipt and Expenditure Statement.
2. All receipts including Capital Receipts like Loans and Disinvestments Receipts will go the
Receipt account and all Expenditures including Capital Expenditures like Fixed Assets will go
the Expenditure Account.
3. There is no concept of Depreciation.
4. Many Countries do not maintain a Balance Sheet.
5. Those who do even they first include the Loans and Debt in the Budget (Receipt and
Expenditure Account) and subtract it later in order to create a Balance Sheet.
6. Natural Resources should be included in the Balance Sheet but that is the plan for the future
accounting changes of most countries.

3. EXPENDITURE STATEMENT
• The most important component of the Expenditure Budget is Salaries and
Pensions.
• These are not normally mentioned in the Budget Speech.
• Besides this there are ongoing Projects. These are also not mentioned in the
Budget Speech.
• What is normally mentioned is the economic initiatives and reforms

4. RECEIPTS
• Revenues are normally 80% Tax Revenues and 20% Non Tax Revenues.
• Besides these are the Capital Receipts like loans and aid.

5. FISCAL DEFICIT
• Fiscal deficit is the difference between the government’s total expenditures and
its Total revenues excluding its borrowings. A country's fiscal deficit is usually
communicated as a percentage of its gross domestic product (GDP).

6. BUDGET 2018
• New Expenditure Initiatives by way of Schemes, Missions, Projects etc
• Economic and Administrative Reforms initiatives.

7. MAJOR NEW EXPENDITURE INITIATIVES
• Agriculture
• Agricultural market and infra fund of Rs 2000 crore fund will be set up to
strengthen the market connectivity.
• Additional Allocation for Animal Husbandry and Fisheries.
• Increase supply of Credit to boost Agricultural Production and Income.

8. MAJOR NEW EXPENDITURE INITIATIVES
• Welfare
• Schemes launched to provide LPG and Power to the Poor.
• Plan to construct 2 Crore Toilets, 1 Crore houses.

9. MAJOR NEW EXPENDITURE INITIATIVES
• Employment
• National livelihood scheme gets Rs 5,750 crore .
• Ministries will be able to spend Rs 14.34 lakh crores for creation of livelihood in
rural areas.
• Rs 9,975 crore for social security schemes

10. MAJOR NEW EXPENDITURE INITIATIVES
• Education
• Rs. 1 lakh crore allocated to revitalisation and upgradation of education sector.
• Ekalvya schools
• Move from black board to digital board schools by 2022.
• Research Fellowships

11. MAJOR NEW EXPENDITURE INITIATIVES
• Health
• 1.5 lakh centres will be set up to provide health facilities
• National Healthcare protection scheme, with approximately 50 crore beneficiaries.
Up to Rs 5 lakh per family per year

12. OTHER MAJOR NEW EXPENDITURE INITIATIVES
• Social Security Schemes
• Schemes for MSMEs
• Govt will contribute 12% of the wages of new employees in EPF in all sectors for
next 3 years
• Infrastructure needs investment of Rs 50 lakh crore
• Smart Cities
• Bharatmala Project

13. OTHER MAJOR NEW EXPENDITURE INITIATIVES
• Railways
• Allocates Rs 11,000 crore Mumbai rail network and Rs 17,000 crore for the
Bengaluru metro
• Govt to eliminate 4267 unmanned rail crossing in broad gauge in 2 years
• All stations with footfall of greater than 25,000 will have escalators.

14. OTHER MAJOR NEW EXPENDITURE INITIATIVES
• Markets
• Govt to take additional measures to strengthen environment for venture capitalists
and angel investors as well as work toward Development of Bond Markets.
• Technology
• Expand Digital Infrastructure with 5 Lakh WIFI hotspots for Rural Areas.
• Block Cryptocurrency
• Encourage Block Chain.
• Aadhar for Companies

15. OTHER MAJOR NEW EXPENDITURE INITIATIVES
• Banking
• Recapitalisation will pave the way for public banks to lend an additional Rs 5 lakh
crore

16. REVENUES
• Indirect Taxes
• No change in GST

17. DIRECT TAXES
• No change in Personal Income Tax Slabs or Rates
• Standard Deduction of Rs 40,000 allowed for Salaried classes.
• Corporate Tax of 25% extended to companies with turnover up to Rs 250 cr in
financial year 2016-17
• Electronic IT assessment will be rolled out across the country
• Health and education cess has been increased to 4 per cent

18. DIRECT TAXES
• Long Term Capital Gains arising from the transfer of listed equity shares exceeding Rs
1 Lakh will be Taxed at 10% without Indexation.
• Currently, there is no dividend distribution tax or DDT on equity-oriented mutual fund
schemes. The mutual fund schemes which invest at least 65 per cent of their assets in
equities were out of the DDT ambit till now. However, debt mutual funds pay dividend
distribution tax of 28.84 per cent (25 per cent tax + 12 per cent surcharge + 3 per cent
cess ) .
• Budget 2018 proposes to introduce a tax on distributed income by equity oriented
mutual fund at the rate of 10 per cent. This will provide level playing field across
growth oriented funds and dividend distributing funds

19. SENIOR CITIZENS
• Senior citizens to get Rs 50,000 per annum exemption for medical insurance
under Sec 80D
• Rs 7.5 lakh per senior citizen limit for investment in interest-bearing LIC schemes
doubled to Rs 15 lakh
• Increased Exemptions in interest income from Banks FD and post offices up to Rs
50,000. TDS not required to be deducted under section 194A. Benefit also
available for interest from all fixed deposit schemes and recurring deposit
schemes.

20. ANALYSIS

21. ANALYSIS CONTINUED
• Fiscal Deficit is pegged to be @3.5% of the GDP
• That Revenue and Expenditures are will see a continuing Trend
• Tax Buoyancy is 1.9 which means that an increase in GDP by 1% will lever
revenues by 1.9%.
• Therefore it is wise to go for Fiscal Expansion.
• Recapitalization of Banks will see an increase in Investment and Money Supply.
• This should generate additional Employment and Demand in the Economy.

22. ANALYSIS CONTINUED
• The increased money supply can translate into Total disposable Income which will
go into Consumption or Savings.
• Increased Consumption can lever the Economy towards a growth in Demands
• Savings will be converted into Investment and ultimately to Consumption which
will lead to a healthy round of Growth.
• Economic and Administrative Reforms and better Infrastructure will attract FII and
FDI leading to an increase investment in both Financial and Productive Assets.
• Overall, it is likely to up the GDP Growth leading to all round gains without major
Risks.

23. SUGGESTIONS
• A step toward outcome based Budgeting should be taken.
• A Comprehensive Risk Analysis should be included in the Budget Documents.
• A Normalized Statement of Revenues and Expenditures (As a Percentage of
Revenues) should be presented so as to compare it with those of Other Countries
as also a Presentation of Ratios along with Benchmark Ratios.