Published with permission Neeraj Bhagat & Co in Mumbai.
The Hon’ble Finance Minister of India presented the Union Budget 2018 on 1 February 2018. This year’s Budget was in line with the Government’s mission to transform India by strengthening agriculture, rural development, health, education, employment, Micro, Small and Medium Enterprises (MSME) and infrastructure.
Government says a series of structural reforms will propel India among the fastest growing economies of the world. IMF in its latest Update has forecast that India will grow at 7.4% next year in the backdrop of services resuming high growth rates of 8% plus, exports expected to grow at 15% in 2017-18 and manufacturing back on good growth path.
- Proposal to extend reduced rate of 25 percent currently available for companies with turnover of less than 50 crore (in Financial Year 2015-16), to companies reporting turnover up to Rs. 250 crore in Financial Year 2016-17, to benefit micro, small and medium enterprises.
- Increase in cess on personal income tax and corporation tax to 4 percent from the present 3 percent. The new cess will be called the “Health and Education Cess”
Taxation of Start-ups
The Finance Bill extends the benefit of section 80-IAC to start-ups incorporated on or after April 1, 2019 but before April 1, 2021. Under section 80-IAC, a startup engaged in an eligible business can elect to exempt its income from income tax for any three successive years within a block of seven years commencing from the date of its incorporation.
Government will contribute 12% of the wages of the new employees in the EPF for all the sectors for next three years. He proposed to make amendments in the Employees Provident Fund and Miscellaneous Provisions Act, 1952 to reduce women employees’ contribution to 8% for first three years of their employment against existing rate of 12% or 10% with no change in employers’ contribution.
The Budget has given a big thrust to Medium, Small and Micro Enterprises (MSMEs) to boost employment and economic growth. A sum of Rs. 3794 crore has been provided for giving credit support, capital and interest subsidy and for innovations. MUDRA Yojana launched in April, 2015 has led to sanction of Rs.4.6 lakh crore in credit from 10.38 crore MUDRA loans. Finance:Government will establish a unified authority for regulating all financial services in International Finance Service Centre (IFSCs) in India.
- Doubling the budget of Digital India to INR 30 billion in FY 2018-19 shows the Government’s vision and commitment towards digital economy.
- NITI Aayog will initiate a national program to direct efforts in artificial intelligence.
Read a more comprehensive analysis and further insights on the 2018 Budget proposals here.
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Neeraj Bhagat & Company is a team of chartered accountants, corporate financial advisors and tax consultants in India. The firm represents a coalition of specialized skills geared to offer sound financial solutions and advice committed to add value and optimize the benefits accruing to clients.
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