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Budget 2018 Reactions: Long Term Capital Gain Was Expected, But Along Came STT, That Has Been Retained, Krishan Malhotra

"For senior citizens it is very good as they have got exemptions on health, on TDS, interest rates have been substantially increased, and that increase is very appreciable," Krishan Malhotra, Senior Partner at Dhruva Advisors LLP

In an exclusive interview with BW Businessworld, Krishan Malhotra, Senior Partner at Dhruva Advisors LLP shares his views on the Budget introduced on February 1st. Edited excerpts:

There will be a BW Report Card – On a scale of 1 to 10, how do you rate the budget?

It’s very difficult to say out of 1 to 10. When we see it in fine print, then only can I allocate my rating. As it was expected, more focus on agriculture, health, employment, infrastructure, there’s a focus on all sectors. When it comes to taxes, the common man wants the rates to be lowered, but we didn’t see anything of that sort. But it gave a standard direction, and there was no major relief, as you are not saving so much on an individual perspective, but for salaried people, there is an exemption for Rs 40,000 bracket. So some things are better. For senior citizens it is very good as they have got exemptions on health, on TDS, interest rates have been substantially increased, and that increase is very appreciable. Because then there are lesser problems for senior citizens, they haven’t meddled with the tax much. Long term capital gain was expected, but along came STT, that has been retained. That was a bit of an issue, and for long term some tweaking was required. The good part is that what was not deceived, I would really appreciate what was not retrospective. The old shares you have would have been thought as long term, and then all of a sudden you have to give on that. Only after seeing fine print can we analyse it further, but old shares have now been grand-fathered. So the market has been taken as per 31st January, which is really appreciable.

Do you feel this is an election budget?

Look, election budget was expected as it was the last budget. But if you look at the budget progression for the last few years, the things they are focusing on, it’s not like it’s an election budget out of the way. The area schemes are the same, it was expected. Year after year, new schemes came. This time it’s more concentrated on agriculture and poor people. In the beginning it was required to accelerate growth rate in the industry, but this time there is not much stress on industry, it’s been joined by infrastructure. So obviously, for infrastructure there are different schemes which have begun, and there is spending, after the spending it will feel like there are new projects for infrastructure, new employment and new opportunities. So overall there will be a benefit but as such, there is a bit of an election element, as they have focused on agriculture, but saying that for the past 5 years this is the first election budget, it’s not that. Every year’s budget, the development schemes which are there, make it seem like there is a flow and there’s more emphasis this time, as it is the last year. But purely a populism is not what I would call it, as it is a bit balanced. But as the last budget, to an extent it was made with the election kept in mind.  

Is the jobs / employment issue adequately addressed in the Union Budget?

Yes, there has been some allocation, but it’s counted with infrastructure, in income tax they would first hire people, they would get an additional 30% deduction, but the number of days to retain it has been reduced. So there is an incentive for people to hire more people. So if there is a benefit for growth and industry, funding for infrastructure, new projects are started, obviously all companies will benefit and there will be job creation. Especially for SME, the commitment of 25%, the turnover of 50 crore becoming 250 crore is a major step. Because very big listed companies with large turnovers, on the SME level, the 50 crore to 250 crore , the 25% tax is quite competitive. And as it was committed to be finished in 4 or 5 years, with higher turnover is appreciable. It was expected that it would 25% as committed, but making the 50 crore limit to 250 crore was really appreciable.

Is the rural distress / agriculture crisis adequately addressed in the Budget?

Yes, I think there are different schemes. The way they have focussed on people from agriculture and poverty, the other benefits they are providing on health insurance, the rise in insurance limit. So there is an indirect tax benefit, and when we look at the fine print of different schemes, and if it is seen on the fine print that there are benefits, then it looks like as per the schemes and the focus, that the farmer sector and agriculture sector will definitely get some relief.

How do you summarise the Union Budget, in a few hundred words?

I would look at the fine print first, but as I said, it is good and balanced budget. Not purely populism. The only thing to be seen is that they have allocated huge funds, and how would they do the balancing, and from where they will generate funds for these schemes. So when its seen in fine print, then it will come forward where the expected revenue growth will be, so that they will be able to meet all the allocations which they have already identified.


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