In his last budget before general elections, Finance Minister Arun Jaitley on Thursday unveiled a slew of measures for agriculture as well as the rural sector and announced a new health insurance scheme for the poor, but provided little relief to the middle class.
With chaotic implementation of the Goods and Services Tax and demonetisation causing distress in the economy, Jaitley announced massive spending on rural and urban infrastructure as also lower tax rates for small and medium enterprises.
While continuing the 10-15 per cent surcharge on super-rich, he raised the health and education cess, levied on all taxable income, to 4 per cent from 3 per cent at present.
Keeping the income tax rates and slabs unchanged, he introduced a Rs 40,000 standard deduction for salaried employees and pensioners in lieu of the present exemption in respect of transport and medical expenses.
Currently, no tax is applicable on Rs 19,200 of transport allowance and medical expenditure of up to Rs 15,000. This has now been subsumed into the new standard deduction of Rs 40,000 which may mean very little benefit in tax saving, considering that health and education cess has gone up.
Senior citizens will get higher exemptions on income from interest on bank and post office deposits, health insurance premium and critical illness expense.
Jaitley, however, made the import of a host of products -- from cellphone to perfumes and toiletry, from watches to parts of automobiles, sunglasses to truck and bus tyres, footwear to diamonds and edible oils to fruit juices -- costly by raising customs duty.
Fourteen years after it was scrapped, he brought back tax on gains made from sale of shares to offset revenue losses.
Capital gains exceeding Rs 1 lakh from shares held for more than a year will be taxed at 10 per cent. Currently, gains from equity investments held for more than 12 months are exempt from tax.
In July 2004, the government had abolished long-term capital gains tax on shares and replaced it with the securities transaction tax (STT) -- a same-day tax credit system that continues.
Illustration: Uttam Ghosh/Rediff.com.