Finance Minister Arun Jaitley on Thursday presented the rural oriented Union Budget 2018. Indian economy is now 2.5 trillion dollar economy in the world and expected to become the fifth largest economy very soon. We are set to achieve high growth," said Jaitley. 


Asia Insurnace Post highlights some of the important features of the Budget-2018 that are having implications for the Insurance and pension Industry


Rs 5 lakh healthcare cover for 10 crore poor families for free

The Budget-2018 announced a flagship National Health Protection Scheme under which Rs 5 lakh cover will be provided a year to 10 crore poor and vulnerable families in the country. 


The flagship health care scheme would be the world's largest government-funded health programme, Ayushman Bharat Programme, Jaitley said.It will be replacing existing Rashtriya Swasthya Bima Yojana (RSBY) which was giving a cover of Rs 30,000 per BPL (below poverty line)  family.  . 


“This effect of the proposed scheme will be studied closely and will be a prelude to the launch of Universal Health Insurance Scheme,'' said Jaitly 

"We are now launching a flagship national health protection scheme to cover 10 crore poor and vulnerable families. This is approximately 50 crore beneficiaries, by providing them up to Rs 5 lakh per family per year for secondary and tertiary care hospitalisation," Jaitley said presenting the 2018-19 Union Budget. 


It will be totally funded by the central and state governments, said Jaitley.


Explaining some of the details of the proposed scheme, Subhas Chandra Garg, Secretary, Economic Affairs said though the Budget-2018 has provided for Rs 2000 crore, the final expenditure which will shared by the centre and state will be around Rs 8-10,00 crore.The centre's share may go upto Rs 4-5000 crore in the scheme.


Hashmukh Adhia, Finance Secretary, said the government is yet to decide in what way the scheme will be implemented.“The premium will be shared between centre and state in 60:40 ratio.We have two models- Trust Model and Insurance Model- and right format will be decided after talking to states. In case of Insurance model, insurers will be chosen through tendering.''    



Allocating Rs 52,000 crore to the health sector, Jaitley said the government will be setting up 24 new government medical colleges and hospitals by upgrading existing district hospitals in the country.He committed Rs 1,200 crore for the National Health Policy, which would go towards building 1.5 lakh health and wellness centres that will provide maternal and child health services, besides free essential drugs and diagnostic services


He also announced Rs 600 crore for nutritional support of Tuberculosis patients in India. Under the initiative, Rs 500 will be provided to each TB patient undergoing treatment. 


Currently, in RSBY the Centre provides 75% of the total premium while states pay the rest. Around 36 million of 59 million below poverty line (BPL) families across 15 states are enrolled in the RSBY scheme. 


Former finance minister P Chidambaram said, "If the insurance companies will foot the bill, the premium at Rs 5,000-15,000 per family will require an outgo of Rs 50,000-150,000 crore per year. Is the FM serious?" " 

Section 80D limit proposed to be hiked to Rs 50,000 for senior citizens

Budget 2018 has proposed to increase the limit of deduction under section 80 D of the Income-Tax Act, 1961 for senior citizens from Rs 30,000 to Rs 50,000. 


The premium paid towards health insurance policies qualifies for deduction under Section 80D of the Income Tax Act. The benefit is available to individuals for health insurance premiums paid for self, spouse, children, and parents. More importantly, it does not matter whether the children or parents are dependent on you or not. 

Currently, on the premium paid, the maximum deduction that can be availed is Rs 25,000 a year, provided the age of the individual as well as that of the other family members insured is not above 60. 


The quantum of tax benefit depends on the age of the individual who is medically insured. 


If the premium paid by an individual is towards a health policy for his or her parent who is a senior citizen above the age of 60, then maximum is capped at Rs 30,000. 


A taxpayer can, therefore, maximise tax benefit under section 80D to a total of Rs 55,000 if his age is below 60, while parents' age is above 60. 


For those tax payers who are above the of age 60 and are also paying health insurance premium for their parents, the maximum tax benefit under section 80D would therefore be a total of Rs 60,000. 


Within the maximum limit of Rs 25,000 or Rs 30,000 (as per age), preventive health check-ups get a benefit of up to Rs 5,000. This means, if you pay a premium of Rs 20,000 towards mediclaim and undergo a health check-up costing Rs 5,000, a total of Rs 25,000 can be availed under section 80D. Most prominent hospitals offer preventive health check-up packages.

Tax, other benefits for senior citizens: Rs 50,000 interest income exempted

Budget 2018 proposes several tax benefits for the senior citizens. These include: increase in tax exemption limit for interest income from banks and post offices from Rs 10,000 to Rs 50,000 and increase in tax break on health insurance and medical expenditure under sections 80D and 80DDB. Both these would give a big relief to this category of tax payers as most senior citizens derive most of their income from bank FDs and post office schemes. 

Relief to Senior Citizens proposed:- 

•    Exemption of interest income on deposits with banks and post offices to be increased from Rs. 10,000 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.
•    Hike in deduction limit for health insurance premium and/ or medical expenditure from Rs. 30,000 to Rs. 50,000 under section 80D.

Increase in deduction limit for medical expenditure for certain critical illness from Rs. 60,000 (in case of senior citizens) and from Rs. 80,000 (in case of very senior citizens) to Rs. 1 lakh for all senior citizens, under section 80DDB.
•    Proposed to extend Pradhan Mantri Vaya Vandana Yojana up to March, 2020. Current investment limit proposed to be increased to Rs. 15 lakh from the existing limit of Rs. 7.5 lakh per senior citizen.


Currently, the interest earned on a savings account, whether held with a bank (nationalised or co-operative) or post office, is allowed as deduction for a maximum of up to Rs 10,000 a year under section

PMVVY limit raised to Rs 15 lakh, seniors to benefit

The finance minister has proposed to extend the Pradhanmantri Vaya Vandana Yojana (PMVVY) scheme till March, 2020. It has also proposed to increase the current investment limit t o Rs 15 lakh from the existing limit of Rs 7.5 lakh per senior citizen. 


The PMVVY is a pension scheme subsidised by the Government of India. The amount of investment made in the scheme is called the 'purchase price'. PMVVY was launched on May 4, 2017, and was initially meant to be available for one year from the launch. 


Depending on the pension option (monthly, quarterly, yearly), the pension begins as an arrear, i.e., starts from the end of the chosen period. 


The scheme is for a period of 10 years and is based on the amount of investment. It carries a fixed and assured pension (return) as mentioned in the policy document till the maturity of the scheme. 


Unlike other pension plans such as Jeevan Akshay, (an immediate annuity scheme of LIC ) the amount of pension in PMVVY is not based on age. The return in PMVVY range from 8 to 8.3 percent depending on the mode of pension that one chooses. Similar to post office monthly income scheme or the senior citizen savings scheme (SCSS), the maximum investment amount (purchase price) and the pension amount that one can get is capped. 

On maturity or on death 
PMVVY has a term of ten years and on surviving the date of maturity, the purchase price along with the final pension installment is refunded to the individual. On death during the policy term of 10 years, only the purchase price is refunded to the beneficiary. 

There is no tax benefit available on the amount invested. Further, the pension received will be fully taxable in the hands of the individual in the year of receipt. The government, however, has exempted PMVVY from service tax 
as interest rates in the country are on the way down, PMVVY locks up the funds for a longer duration and assures a fixed income for the next ten years. The downside is that if the interest rate takes a u-turn anytime during the tenure, the investor will be at a disadvantage as liquidity in PMVVY is highly restrictive. Invest only a portion of your funds which you feel can be parked for a longer tenure. 

GIFT hails Unified Regulator for IFSC in Budget

Gujarat International Finance Tec-City (GIFT City) has hailed Finance Minsiter Arun Jaitley's Budget announcement of setting up of Unified Regulator for IFSC in India. 

"A Unified Regulator for IFSC in India would help India achieve its full potential in the Global Financial markets," said Ajay Pandey-MD & Group CEO, GIFT City.. 

Globally, most of the financial centers host Unified Regulator in the same Centre which helps it to promote the financial center. Govt of India's initiative duly supported by all existing regulators would go a long way in establishing GIFT IFSC as a Global Financial Hub, he said soon after the budget. 

A unified regulator will enable financial services firms to do business and will be on par with the precedence in other financial centres making it easier for firms to set up shop. 


Now women workers take home pay to go up as EPF contribution capped at 8%

The Budget 2018 has proposed that women joining the workforce for the first time will have to contribute only 8 percent instead of 12 percent or 10 percent as the case may be, for the first three years. The move will enhance the take-home pay for such employees. 


Further, for the new employees coming under the ambit of EPFO would be provided 12 percent contribution from the government. This means only new employees getting the EPFO membership for the first time will be eligible for this provision. 


Under EPF scheme, an employee has to pay a certain contribution towards the scheme and an equal contribution is paid by the employer. The employee gets a lump sum amount including self and employer's contribution with interest on both, on retirement.


No changes in income tax rates, but salaried class has a reason to smile

The Union Budget 2018, Finance Minister Arun Jaitley, did not proposed any further change to the structure of the income tax rates for individuals. However, in order to provide relief to salaried taxpayers, the finance minister proposed to allow a standard deduction of Rs 40,000 in lieu of the present exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses. 


There is a general perception that business persons have better income compared with the salaried class. However, income tax data suggests that the major portion of personal income tax collection comes from the salaried class. 


For assessment year 2016-17, 1.89 crore salaried individuals filed their returns and paid total tax of Rs 1.44 lakh crore, which works out to an average tax payment of Rs 76,306 per individual salaried taxpayer. 


Against this, 1.88 crores individual business taxpayers including professionals, who filed their returns for the same assessment year paid total tax of Rs 48,000 crore, which works out to an average tax payment of Rs 25,753 per individual business taxpayer. 


However, the transport allowance at enhanced rate shall continue to be available to differently-abled persons… 


10% Tax Announced On Long-Term Capital Gains From Stocks, Equity Mutual Funds

Under the proposed new tax, profits of more than Rs. 1 lakh from stock and equity mutual fund investments held over one year will be taxed at 10 per cent.



Budget 2018 announced a new tax of 10 per cent on long-term gains from investing in stock markets and equity mutual funds. Under the proposed new tax, profits of more than Rs. 1 lakh from stock and equity mutual fund investments held over one year will be taxed at 10 per cent. At present, profits from stock and equity mutual fund investments held for more than 12 months are tax exempt.



The existing short-term capital gains tax, applicable on profits made on investments below one year, remains the same at 15 per cent.


However, long-terms capital gains made on investments up to January 31, 2018, will not be taxed. The finance minister also introduced a 10 per cent tax on distributed income by equity-oriented mutual funds at the rate of 10 per cent.The proposed change in capital gains tax will bring revenue gain of about Rs. 20,000 crore in the first year.


The total amount of exempted capital gains from listed shares and mutual fund units is around Rs. 3,67,000 crore (as per returns filed for A.Y. 2017-18), the finance minister said. A major part of this gain has accrued to corporates and Limited Liability Partnerships (LLPs), noted Jaitley.



"This has also created a bias against manufacturing, leading to more business surpluses being invested in financial assets," he said.



"Due to attractiveness on return on investment on equity, even without tax exemption, there is a strong case for bringing Long Term Capital Gains from listed equities in the tax net", the finance minister said.

Cess on income tax to 4% from 3%: All tax payers to pay more

Due to this change, the tax liability for highest tax bracket (assuming Rs 15 lakh income) goes up by Rs 2,625. For middle income tax payers (between Rs 5 lakh and Rs 10 lakh) the tax liability increases by Rs 1,125 and for lowest tax brackets (Rs 2.5 lakhs to Rs 5 lakhs) by Rs 125. 



Currently, a cess of 3% of income tax payable is added to the tax liability. This 3 per cent is made up of 2 per cent of education cess and 1 per cent of senior secondary education cess. 



As per the current income tax slabs, taxation of income of resident individuals below 60 years is as follows: Income upto Rs 2.5 lakh is exempt from tax, 5 per cent tax on income between Rs 250,001 to Rs 5 lakh; 10 per cent tax on income between Rs 500,001 and Rs 10 lakh; and 30 per cent tax on income above Rs 10 lakh. 



For senior citizens ( aged 60 years or above but less than 80 years), income up to Rs 3 lakh is exempt from tax. Income from Rs 300,001 to Rs 5 lakh is taxed at 5 per cent, from Rs 500,001 to Rs 10 lakh at 20 per cent and above Rs 10 lakh at 30 per cent. 



For super senior citizens, aged 80 years and above, income up to Rs 5 lakh is exempt from tax. Income from Rs 500,001 to Rs 10 lakh is taxed at 20 per cent and above Rs 10 lakh is taxed at 30 per cent. A surcharge on income above Rs 50 lakh is also payable in all cases. 

If Budget 2018's proposal is passed by the Parliament, then these tax changes would impact the tax-outgo of the taxpayers starting from the financial year 2018-19(Assessment year 2019-2020). 


The last budget had reduced tax rate for the lowest income slab of Rs 2.5 lakh to Rs 5 lakh from 10 per cent to the current rate of 5 per cent. 


Along with reduction in the tax rate, the last budget also reduced the rebate under section 87A to Rs 2,500 from Rs 5,000 for those earning between Rs 2.5 lakh to Rs 3.5 lakh. Surcharge at 10 per cent was also imposed in the last budget on income between Rs 50 lakh and Rs 1 crore. 


Corporate tax rate reduced to 25% for companies with turnover of up to Rs 250 crore

In a major boost to companies, finance minister Arun Jaitley extended the reducedcorporate tax rate for companies with turnover of upto Rs 250 crore in his speech presenting Budget 2018-19 in Lok Sabha. 


"Towards fulfilment of my promise to reduce corporate tax in a phased manner, I now propose to extend benefit of reduced corporate tax rate of 25% to companies which have reported turnover of up to Rs 250 crore in financial year 2016-17," said Jaitley. 


The announcement, said the finance minister, will benefit the entire micro and small and medium enterprises which amounts for 99% of the companies filing their tax returns. 


"The estimates of revenue foregone will be for Rs 7000 crore due to this measure during financial year 2018-19," said Jaitley. 


The government had reduced the corporate tax to 25% from 30% in the Union Budget of 2017-18 for companies with a turnover of Rs 50 crore in the financial year 2016-16. 


"The measure has benefitted 99% of the companies filing tax returns," said the FM. 

The Union Minister reiterated that companies with higher turnover will continue to pay 30% corporate rate tax. 


"Out of these 7 lakh companies filing returns, those 7000 companies which will file return with a turnover above Rs 250 crore will remain in 30% tax slab," said the FM. 


Jaitley said this will leave the 99% companies which will benefit with the measure with "higher investible surplus which will create more jobs." 


Rs 2.04 lakh crore for 99 Smart Cities allocated
As many as 99 cities were selected under the ambitious Smart city mission at an outlay of Rs 2.04 lakh crore. 


Infrastructure is a growth driver for the country. In the Smart City Mission that aims 100 cities, 99 smart cities have been selected and to be allocated Rs 2.04 lakh crore, Jaitley informed the Parliament. 


Smart Cities Mission is one of the ambitious initiatives of the Narendra-Modi led National Democratic Alliance (NDA) government IN June 2015 that aims to develop 100 cities across India that would also harness the Information Communication Technology (ICT) capabilities. 


The Urban Development Ministry, in the first phase selected 20 cities in January 2016.

Currently, there are more than 2,500 projects worth over Rs 1.35 lakh crore underway under the mega program while 189 projects amounting to close to Rs 2,235 crore have already been completed. 


Niti Aayog to establish National Programme on Artificial Intelligence
In what may be the only significant announcement made for the startup industry inBudget 2018, Amitabh Kant-led Niti Aayog will establish a National Programme to direct efforts in the area of Artificial Intelligencetowards national development. 

These will largely go into research & development and its applications. 


"We are not only focusing on 'Ease of Doing Business' but also 'Ease of Living'," Finance Minister had pronounced in his fifth Union Budget speech. The promise of "additional measures" to strengthen the startup ecosystem and the lack of budgetary support for the same seem to have fallen short from the lens of the startup ecosystem. 


With agriculture, health and education receiving a bulk of the Budgetary allocation this year, appeals from the startup industry seems to have fallen by the wayside. 

Govt to explore use of blockchain tech, dubs cryptocurrency as illegal

The government does not consider cryptocurrency as legal and will take all measures against its illegal use, saidFinance Minister Arun Jaitley while presenting the UnionBudget 2018. 


The government, he added, will explore the use ofblockchain technology to add muscle to the digital economy. 


Cryptocurrencies were in limelight last year with multi-fold returns. For instance, the most talked about bitcoin climbed to Rs 6,37,142 on January 31, 2018, from Rs 66,426 on February 1 last year, an 859 per cent growth. 


During the period, it touched a high of Rs 12,59,942 on December 16 last year and low of Rs 61,461 on March 24, 2017, according to data available with 


The country was expecting some clarity on cryptocurrencies from the government. 


"It is right for the citizens of a technological superpower to expect proactive clarity from the government on various aspects of a new technology, such as blockchain and its resulting derivatives, such as bitcoins and other cryptocurrencies. Budget 2018 is a good place to start. It can provide clarity on certain aspects of the technology and related tokens or cryptocurrencies," Vikas V Gupta, CEO & Chief Investment Strategist, OmniScience Capital, wrote in a column prior to the Budget speech. 


Govt aiming to set up 5 lakh hotspots, allocates Rs 10000 crore
Union Budget 2018 has  giving a push to the Digital India initiative he proposed to set up 5 lakh hotspots which will provide broadband to 5 crore Indians. For this, the government has allocated Rs 10,000 crore under the telecom infrastructure. 


"2.50 lakh villages got optical fiber connectivity under Bharat Net program wherein 1 lakh gram panchayats have been connected with high speed optic fibre network in the first phase of BharatNet," FM Jaitley said. The government will work towards connecting 1.5 lakh more villages under BharatNet initiative. 


To accelerate the pace of 5G adoption, the Department of Telecom (DoT) will support the establishment of indigenous test bed for 5G technologies with IIT Chennai. 


In an effort to further enhance digital connectivity, the government will ensure for all trains to have Wi-Fi and CCTVs. Also, NITI Ayog will be establishing a programme to promote research in the field of Artificial Intelligence. 



Government mulls Aadhaar like unique identity for business

The government has mooted the idea of "Aadhaar for business," with an aim to further crackdown on shell companies and ensure easier traceability of public money. 


This comes after the government's ambitiousunique identity scheme Aadhaar has covered over 99% of the adult population of the country with close to 118 crore Indians allotted a unique identity number. 


While announcing the Union Budget 2018-19, finance minister Arun Jaitley said "The Government will now start a scheme where every enterprise will be assigned a unique id," as he outlined measures for increasing the ease of doing business in India. 


The MSME ministry launched the Udyog Aadhaar scheme in September 2015 and according to a report over 3 million enterprises across the country have obtained Udyog Aadhaar number. 


The idea behind the number was to improve the ease of doing business and promoting formalisation of the MSME sector along with helping in creating a more data driven policy environment. 


Agricultural credit target for FY'19 up 10% to Rs 11 lakh crore
In a major bonanza to farmers, Finance Minister Arun Jaitley today announced fixing support price of Kharif crops like paddy at least 50 per cent higher than the cost of production, while raising farm credit target for the next fiscal by 10 per cent to Rs 11 lakh crore. 


Jaitley reiterated the government's commitment to welfare of farmers saying that the emphasis is to generate higher income for farmers. 


Prime Minister Narendra Modi has given a clarion call to double the farmers' income by 2022, he added. 


Jaitley said the government has decided to fix the minimum support price (MSP) of coming Kharif (summer sown) crops, which include maize, soyabean and pulses, at least one-and-half times the cost of production. 


He said the MSPs of most of rabi (winter sown) crops have already been raised. 


He said the government will ensure farmers get MSP even if prices fall, for which Niti Aayog will discuss with state governments the putting in place of an institutional mechanism to ensure that farmers get better prices for their produce.


Jaitley said the NDA had promised that farmers will be offered at least 50 per cent more than the cost of production and the government is sensitive towards this. 

The government will set up fisheries and aqua culture infra fund and animal husbandry infra fund with an outlay of Rs 10,000 crore.