Dose of populism retaining fiscal discipline. Union Budget Fiscal Deficit to drop to 3.3%

Transcription

1

2 Union Budget Dose of populism retaining fiscal discipline As expected, this year s budget had all the hallmarks of being populist. Rural largesse, infra push, impetus to health care, standard deductions for the salaried class, and several sops to the senior citizens and lower tax rates for the MSME segment. This effort by the Modi regime is laudable given that the path to fiscal prudence has not been altered. Albeit a small revision to account for the slowdown and farm distress. Fiscal deficit is expected to be maintained at 3.5% of GDP while FY19 provided for further lowering to 3.3%. GDP growth is expected to be maintained at % and augurs well for market buoyancy. We remain bullish on the consumption economy which includes consumer staples and discretionary spends along with infrastructure, healthcare and metal stocks. Insurance sector is also expected to get a thumbs up given the impending merger of the general insurance PSUs and status quo on taxation rates for this sector. Though several cuts in taxation have been built in a balancing act, the much feared 10% LTCG was introduced on listed equity investments % of GDP 5.41 Fiscal Deficit to drop to 3.3% 4.51 Higher MSP (1.5X cost of production) would mean more money in the hands of rural India. However, this coupled with the threat of higher crude oil prices has all the headwinds of being inflationary and could lead to higher interest rates BE RE E

3 Union Budget Dose of populism retaining fiscal discipline Key takeaways from the FM s speech Higher MSP of 1.5X cost of production coupled with all time high allocation of 11 trillion to boost the flagging rural economy and remedy the farm distress. In addition, several initiatives have been undertaken to support the above (outlined elsewhere in the report). Infrastructure thrust continues with highest ever allocation of 5.9 trillion with Specific outlays to Road, Rail, Airport and Smart Cities. Health care initiative was a big bang announcement aimed at providing benefit to over 10 crore households of up to 5 lac per household p.a. Further announcements of setting up of 1 hospital for every three constituencies is a massive out reach program to be ever undertaken. This coupled with setting up of Government medical colleges, at least 1 in each state, is a step in the right direction. Roadmap of fiscal discipline trajectory continues to be contractionary. Despite economic slow down and farm stress, maintaining fiscal discipline for FY18 at 3.5% of GDP is salutary. Guidance for lowering it to 3.3% for FY19 sends the right signals to the global investment community. GDP growth to return to % augurs well after considering the twin shocks of demonetisation and GST implementation. Divestment target of 80,000 crores is a credible number given its success in FY18 to raise 1+ trillion exceeding previous budget estimates of trillion. Salaried employees and senior citizens have been provided with a relief of standard deduction (of 40,000) and enhancement of section 80D deductions to 50,000 (up from 30,000) respectively.

4 Union Budget Dose of populism retaining fiscal discipline Despite apprehensions over the introduction of a 10% LTCG tax, government has managed to prevent spooking the market by grandfathering erstwhile capital gains and levying it prospectively from February 1, Non abolition of STT inpsite of introduction of LTCG tax coupled with a higher Health and Education Cess will pave the way for higher tax collections In Rs. crore Nominal GDP growth at 11.3% FY19E 14% 12% 10% 8% 6% Government revenues are budgeted to grow at a 14.6% a tad ahead of nominal GDP growth of 11.3% This is supported by better tax administration, pan India role out of DBT BE RE E GDP Growth 4% 2% 0% In Rs. Crore GOI revenue growth at 14.6% FY19E BE RE E Corporation tax Income tax Wealth Tax Customs Union Excise Duties Service Tax Taxes of the Union Territories Goods and Services Tax

5 Financial Summary of Budgetary Estimates (Rs Crore) RE BE BE Revenue Receipts 1,374,203 1,505,428 1,515,771 1,725,738 Net Tax Revenue 1,101,372 1,269,454 1,227,014 1,480,649 Non tax Revenue 272, , , ,089 Capital Receipts 609, , , ,409 Recoveries of receipts 17,630 17,473 11,933 12,199 Other Reciepts (Disinvestments) 47, ,000 72,500 80,000 Debt Reciepts 544, , , ,210 Total Receipts 1,984,089 2,257,130 2,133,891 2,399,147 Scheme Expenditure 830, , ,096 1,014,451 Expenditure on Other than Schemes 1,144,428 1,297,850 1,204,639 1,427,762 Total Expenditure 1,975,194 2,217,750 2,146,735 2,442,213 Of which, Grants in Aid for Creation of Capital Assets 165, , , ,345 GDP Nominal 15,303,371 16,995,686 17,079,094 18,917,455 Gross Fiscal Deficit 535, , , ,276 Fiscal deficit as a % of GDP 3.5% 3.5% 3.2% 3.3% Revenue Deficit 316, , , ,034 Revenue deficit as a % of GDP 2.3% 2.4% 2.1% 2.0% Primary Deficit 54,904 64,006 23,453 48,481 Primary deficit as a % of GDP 0.4% 0.3% 0.2% 0.2% Union Budget

6 Expenditure of Major Items RE BE BE Pension Defence Subsidy Fertiliser Food Petroleum Agriculture and Allied Activities Commerce and Industry Development of North East Education Energy External Affairs Finance Health Home Affairs Interest IT and Telecom Others Planning and Statistics Rural Development Scientific Departments Social Welfare Tax Administration Transfer to States Transport Union Territories Urban Development Grand Total Union Budget

7 Union Budget In Rs. crore Subsidies (% of GDP) 2.5% 2.0% In Rs. Crore Tax Revenues set to rise post GST % % % BE RE E Food Fertilizers Petroleum Interest and Others Subsidies as a % of GDP (RHS) 0.0% BE RE E Corporation tax Income tax Wealth Tax Customs Union Excise Duties Service Tax Taxes of the Union Territories Goods and Services Tax In Rs. crore Interest Payment ability is comfortable 3.4% 3.3% In Rs. lakh crore Net Receipts of the centre set to grow % 3.2% % 3.1% 3.1% % BE RE E 3.0% BE RE E Int. Payment and Debt Servicing (LHS) Interest Payment as a %of GDP (RHS) Tax Revenue Non Tax Revenue Non Debt Capital Receipts Debt Receipts

8 Financial Summary of Budgetary Estimates (Rs Crore) RE BE BE Revenue Receipts 1,374,203 1,505,428 1,515,771 1,725,738 Net Tax Revenue 1,101,372 1,269,454 1,227,014 1,480,649 Non tax Revenue 272, , , ,089 Capital Receipts 609, , , ,409 Recoveries of receipts 17,630 17,473 11,933 12,199 Other Reciepts (Disinvestments) 47, ,000 72,500 80,000 Debt Reciepts 544, , , ,210 Total Receipts 1,984,089 2,257,130 2,133,891 2,399,147 Scheme Expenditure 830, , ,096 1,014,451 Expenditure on Other than Schemes 1,144,428 1,297,850 1,204,639 1,427,762 Total Expenditure 1,975,194 2,217,750 2,146,735 2,442,213 Of which, Grants in Aid for Creation of Capital Assets 165, , , ,345 GDP Nominal 15,303,371 16,995,686 17,079,094 18,917,455 Gross Fiscal Deficit 535, , , ,276 Fiscal deficit as a % of GDP 3.5% 3.5% 3.2% 3.3% Revenue Deficit 316, , , ,034 Revenue deficit as a % of GDP 2.3% 2.4% 2.1% 2.0% Primary Deficit 54,904 64,006 23,453 48,481 Primary deficit as a % of GDP 0.4% 0.3% 0.2% 0.2%

9 Budgetary Allocations Union Budget

10 Agricultural and Rural Farmers to the fore In , for creation of livelihood and infrastructure in rural areas, total amount to be spent by the Ministries will be lakh crore, including extra-budgetary and non-budgetary resources of lakh crore. Apart from employment due to farming activities and selfemployment, this expenditure will create employment of 321 crore person days, 3.17 lakh kilometres of rural roads, 51 lakh new rural houses, 1.88 crore toilets, and provide 1.75 crore new household electric connections besides boosting agricultural growth. Area, Production and Yield of Kharif Crops for % change in production over Area % change in area Commodity Production Yield (Million HA) over Foodgrains Rice Wheat Jowar Maize Bajra Pulses Gram Tur Oilseeds Groundnut Rapeseed & Mustard Cotton Sugarcane Big bang reform to keep MSP at 1.5X cost of produce for kharif crops. This is extension of the scheme applied to rabi crops. This will help government in achieving the target of doubling the income of Kharif crop farmers. % change in yield over MSP= 1.5X Cost for Kharif Crops

11 Agricultural and Rural 470 APMCs have been connected to e-nam network and 115 will be connected by March Strengthening of e-nam and expanding coverage of e-nam to 585 APMCs. e-nam connected to 585 APMCs Development and upgradation of existing rural haats into Gramin Agricultural Markets (GrAMs). Physical infrastructure will be strengthened using MGNREGA and other Government Schemes. These GrAMs are to be electronically linked to e- NAM and exempted from regulations of APMCs. This will help provide farmers with a ready facility to make direct sales to consumers and bulk purchasers. It will be particularly beneficial to small and marginal farmers who are not able to directly transact at APMCs and other wholesale markets. Farmers to the fore An Agri-Market Infrastructure Fund with a corpus of 2000 crore will be set up for the Grameen Agricultural Markets (GrAMs) and 585 APMCs. This will be used to develop and upgrade the overall agricultural marketing infrastructure. 2,000 cr to Agri Market Infra Fund Prime Minister Gram Sadak Yojana Phase III has been initiated to include major link routes which connect habitations to agricultural and rural markets (GrAMs), higher secondary schools and hospitals by all weather roads. It will enable to connect all eligible habitations with an allweather road. The target date for the same has been brought forward to March 2019 from March 2022.

12 Agricultural and Rural Farmers to the fore Government is developing cluster-based model for identified agriculture produces in every district same as developed for industrial sector. Ministry of Agriculture & Farmers Welfare will reorient its ongoing Schemes in partnership with the Ministries of Food Processing, Commerce and Other allied Ministries. Indian Agricultural Productivity Growth Each district of India specialises in different agricultural produce. Such model will help to develop scale of operation and can spur establishment of entire chain from production to marketing, besides giving recognition to the districts for specific crops. An institutional mechanism will be created, with participation of all concerned Ministries, to develop appropriate policies and practices for price and demand forecast, use of futures and options market, expansion of warehouse depository system and to take decisions about specific exports and imports related measures. Better Price discovery for farmers along with better storage facilities.

13 Agricultural and Rural Organic farming by Farmer Producers Organizations (FPOs) and Village Producers Organizations (VPOs) in large clusters of 1000 hectares each, will be encouraged. Women Self Help Groups (SHGs) will also be encouraged to take up organic agriculture in clusters under National Rural Livelihood Programme. Farmers to the fore All India use of inputs by agricultural holdings by size group This will help to develop organic farming in a big way along with promotion of women employment in the sector. Below chart shows how % of holding under women increased over the years. % of operational holdings owned by women Size Group Marginal (Below 1 ha.) Small ( ha.) Semi-Medium ( ha.) Medium ( ha.) Large (Above10.00 ha.) All Size Groups

14 Agricultural and Rural Farmers to the fore Government has allocated a sum of 200 crores for organised cultivation of specialized medicinal and aromatic plants. Focus will be on small cottage industries that manufacture perfumes, essential oils and other associated products. Prime Minister Krishi Sampada Yojana will be aiding the Food Processing sector. Allocation for Ministry of Food Processing will be doubled from 715 crore in RE to 1400 crore in BE Government will be actively promoting establishment of specialized agro-processing financial institutions in this sector. A sum of 500 crore has been allocated for Operation Green, which will promote Farmer Producers Organizations (FPOs), agri-logistics, processing facilities and professional management. Connecting farmers and consumers will become easier and basic perishable commodities like tomato, onion and potato will be better managed. To capitalise on India s agricultural export potential of US $100, the export of agricultural commodities will be liberalized and state-of-the-art testing facilities will be setup in all the 42 Mega Food Parks. To help meet fisheries and animal husbandry farmers working capital needs, Kisan Credit Cards facility will be extended to them. This will be beneficial to small and marginal farmers. Bamboo, also termed as Green Gold is in spotlight as a restructured National Bamboo Mission with an outlay of 1,290 crore will be encouraging the bamboo sector in a rounded manner. Traversing the trendline of Long-Term Irrigation Fund (LTIF) in NABARD and Micro Irrigation Fund (MIF), this budget earmarks 10,000 crores for setting up a Fisheries and Aquaculture Infrastructure Development Fund (FAIDF) for fisheries sector and an Animal Husbandry Infrastructure Development Fund (AHIDF).

15 Agricultural and Rural Proposed to raise Institutional credit to 11 lakh crore for the year for agriculture sector from 10 lakh crore in Prime Minister s Ujjwala Scheme extended to 8 crore poor women, up from 5 crore earlier. Farmers to the fore 16,000 crore to be spent on Prime Minister Saubhagya Yojana for providing electricity to 4 crore households of the country. Percentage of rural households electrified Ujjwala connections issued

16 Agricultural and Rural Farmers to the fore Additional 2 crore toilets, to be constructed under Swachh Bharat Yojna. Under Prime Minister Awas Scheme Rural, 51 lakh houses will be constructed during This takes the total to more than one crore houses that will be constructed exclusively in rural areas. In urban areas the assistance has been sanctioned to construct 37 lakh houses. Loans to Self Help Groups of women will increase to 75,000 crore by March, 2019 and the budget has proposed to substantially increase the allocation of National Rural Livelihood Mission to 5750 crore in Ground water irrigation scheme under Prime Minister Krishi Sinchai Yojna, will be taken up in 96 deprived irrigation districts crores have been allocated for this purpose. Key beneficiaries ITC JK Agri Genetics Kaveri Seeds Avanti Feeds PI Industries Monsanto India Excel Crop Care

17 Infrastructure & Rail Union Budget More of roads and rail. Government has made an all-time high allocation to rail and road sectors of 5.9 lakh crore from 4.9 lakh crore in FY Under smart city programme, 99 Cities have been selected with an outlay of 2.04 lakh crore. Projects worth 2350 crore have been completed and works of 20,852 crore are already under progress under smart city mission. Undertook project HRIDAY (National Heritage City Development and Augmentation Yojana) to preserve heritage cities in India. Under AMRUT programme, State level plans of 77,640 crore for 500 cities have been approved. Water supply contracts for 494 projects worth 19,428 crore and sewerage work contract for 272 projects costing 12,429 crore has been awarded. 482 cities have started credit rating of which 144 cities have got investment grade rating. To expand airport capacity by more than 5x under a new initiative NABH-Nirman and its existing UDAN scheme. Capital Outlay on Infrastructure Sector Ministry/Deptt. Ministry of Coal Ministry of Development of North Eastern Region Ministry of New and Renewable Energy Ministry of Petroleum and Natural Gas Ministry of Power Ministry of Civil Aviation Department of Telecommunicati on Ministry of Defence Ministry of Railways Department of Atomic Energy Ministry of Road Transport and Highways Ministry of Shipping Ministry of Steel Department of Higher Education Ministry of Electronics & IT RE BE

18 Infrastructure & Rail More of roads and rail. Railways capex for the year has been pegged at 1,48,528 crore. A large part of the Capex is devoted to capacity creation. 18,000 kilometers of doubling, third and fourth line works and 5000 kilometers of gauge conversion would eliminate capacity constraints and transform almost entire network into Broad Gauge kms of rail electrification is expected for commissioning in FY Allocation to infra increased to 5.9 lakh crores from 4.9 lakh crores in FY The Railways will purchase wagons, 5160 coaches and approximately 700 locomotives in Will eliminate 4267 unmanned level crossings in the broad gauge network in the next two years. Redevelopment of 600 major railway stations is being taken up by Indian Railway Station Development Co. Ltd. Mumbai s Rail system to be expanded to add 90 kilometers of double line tracks at a cost of over 11,000 crore. Also on cards is 150 km additional suburban network for Mumbai at cost of 40,000 crore and 160 km for Bengaluru Metropolis for 17,000 crore. Key beneficiaries Siemens Titagarh Wagons CMI Ltd JSPL SAIL

19 Finance Disinvestment pegged at 80,000 crore Union Budget Approved listing of 14 CPSEs, including two insurance companies, on the stock exchanges. The Government has also initiated the process of strategic disinvestment in 24 CPSEs including strategic privatization of Air India. Certain select CPSE assets to be monetized using InvITs from next year. SEBI will also consider mandating, beginning with large Corporates, to meet about one-fourth of their financing needs from the bond market. Ban on crypto-currencies. Three public sector general insurance companies National Insurance Company Ltd., United India Assurance Company Limited and Oriental India Insurance Company Limited to be merged into a single insurance entity and will be subsequently listed. DIPAM (Department of Investment and public Asset Management) will come up with more ETF offers including debt ETF after initial success of Bharat -22. Although, corporate bonds rated BBB or equivalent are investment grade but most regulators permit bonds with the AA rating only as eligible for investment. The FM also urged Indian regulators to allow A rated bonds for investment purpose going forward. Another important announcement was to take reform measures with respect to stamp duty regime on financial securities transactions in consultation with the States and make necessary amendments in the Indian Stamp Act Budget Estimates for disinvestment were pegged at the highest ever level of 72,500 crore and the government has already exceeded the budget estimates with receipts of ~ 1,00,000 crore. The disinvestment target of FY has been set at 80,000 crore.

20 Education Quality not just quantity Government is allocating 9,975 crores towards National Social Assistance Programme for comprehensive social security and protection programme to reach every household of old, widows, orphaned children, divyaang and deprived as per the Socio-Economic Caste Census. In addition to quantitative indicators, the quality of education also needs to be monitored and assessed and thereby finance minister has emphasized on above requirement in budget speech and has roled out initiatives to achieve the same National Survey of more than 20 lakh children will be conducted to assess the learning outcomes at ground level. They will devise a district wise strategy for improving quality of education. Technology will be used to upgrade the skills of teachers through the recently launched digital portal DIKSHA. The digital intensity in education will increase and move gradually from black board to digital board. Government has amended Right to Education Act to enable more than 13 lakh untrained teachers to get trained and will initiate an integrated B.Ed. Programme for teachers. By the year 2022, every block with more than 50% ST population and at least 20,000 tribal persons, will have an Ekalavya Model Residential School. Ekalavya schools will be on par with Navodaya Vidyalayas and will have special facilities for preserving local art and culture besides providing training in sports and skill development. Finance Minister has proposed to launch a major initiative named Revitalising Infrastructure and Systems in Education (RISE) by Higher Education Financing Agency (HEFA) would be suitably structured for investments in research and related infrastructure in premier educational institutions, including health institutions through this initiative with a total investment of 1,00,000 crore in next four years. Key beneficiaries NIIT Aptech Ltd Aptech Ltd Navneet Education

21 Health Universal health coverage Government has launched two major initiatives under Ayushman Bharat namely National Health protection scheme and establishing Health and wellness centre as envisaged by the National Health Policy Government has decided to allocate additional 600 crore to provide nutritional support to all TB patients at the rate of 500 per month for the duration of their treatment. The wellness centres will provide comprehensive health care, including for noncommunicable diseases and maternal and child health services. These centres will also provide free essential drugs and diagnostic services. FM has committed 1200 crore in this budget for this flagship programme. Further, he has even urged private sector to adopt such centres through CSR and philanthropic institutions. Government will launch world s largest government funded health care programme. National Health Protection Scheme to cover over 10 crore poor and vulnerable families (approximately 50 crore beneficiaries) providing coverage upto 5 lakh rupees per family per year for secondary and tertiary care hospitalization. Key beneficiaries ICICI Lombard GIC Ltd General Insurance Corp of India Ltd Apollo Hospitals Ltd Government is steadily but surely progressing towards the goal of Universal Health Coverage. These Schemes will also generate lakhs of jobs, particularly for women.

22 MSME Better credit opportunities The MSME sector faces a major problem in terms of getting adequate credit for expansion of business activities. Latest data on credit disbursed by banks shows that out of a total outstanding credit of billion as in November 2017, 82.6 per cent of the amount was lent to large enterprises. The MSME received only 17.4 per cent of the total credit outstanding. Government has provided 3794 crore to MSME Sector for giving credit support, capital and interest subsidy and innovations. Thereby FM in budget has proposed to set a target of 3 lakh crore for lending under MUDRA for after having successfully exceeded the targets in all previous years. Further, Government will onboard public sector banks and corporates on Trade Electronic Receivable Discounting System (TReDS) platform and link this with GSTN. Key beneficiaries State Bank of India Axis Bank ICICI Bank Online loan sanctioning facility for MSMEs will be revamped for prompt decision making by the banks. Government will soon announce measures for effectively addressing non-performing assets and stressed accounts of MSMEs. This will enable larger financing of MSMEs and also considerably ease cash flow challenges faced by them.

23 Tax Introduction of tax on LTCG Current tax regime till AY 17-18: Currently LTCG arising from transfer of listed equity shares, units of equity oriented fund and unit of a business trust are exempt from tax u/s 10(38) of the Income Tax Act, 1961 on payment of Securities Transaction Tax (STT). Consequently, this regime is inherently biased against manufacturing and has encouraged a diversion of investment in financial assets. This has also lead to a significant erosion in the tax base resulting in revenue loss. The problem has been further compounded by abusive use of tax arbitrage opportunities created by these exemptions. The total amount of exempted capital gains from listed shares and units is around 3,67,000 crores as per the returns filed from AY in which the major part of the gain has accrued to Corporates and LLPs Proposed new tax regime In order to minimize economic distortions and curb erosion of tax base, it is proposed to withdraw the exemption under clause 38 of section 10 of the Income Tax Act, 1961 and to introduce a new section 112A in the Act to provide that LTCG arising from transfer from a long term capital asset being an equity share in a Company or a unit of an equity oriented fund or a unit of a business trust shall be of such capital gains exceeding 1 lakh rupees Further, sub-section (4) of the new section 112A empowers the Central Government to specify by notification the nature of acquisitions in respect of which the requirement of payment of securities transaction tax shall not apply in the case of equity share in a company. Further, the new provision of section 112A also proposes to provide the following: The long term capital gains will be computed without giving effect to the first and second provisos to section 48, i.e. inflation indexation in respect of cost of acquisitions and cost of improvement, if any, and the benefit of computation of capital gains in foreign currency in the case of a non-resident, will not be allowed.

24 Tax Introduction of tax on LTCG The cost of acquisitions in respect of the long term capital asset acquired by the assessee before the 1st day of February,2018, shall be deemed to be the higher of: The actual cost of acquisition of such asset; and The lower of: I. The fair market value of such asset; and II. The full value of consideration received or accruing as a result of the transfer of the capital asset. Fair market value has been defined to mean: In a case where the capital asset is listed on any recognized stock exchange, the highest price of the capital asset quoted on such exchange on the 31st day of January, However, where there is no trading in such asset on such exchange on the 31st day of January, 2018, the highest price of such asset on such exchange on a date immediately preceding the 31st day of January, 2018 when such asset was traded on such exchange shall be the fair market value; and In a case where the capital asset is a unit and is not listed on recognized stock exchange, the net asset value of such asset as on the 31st day of January, Example: Particulars Share purchased on 1 September, 2017 Highest price on 31 January, 2018 Share sold on 30 September, 2018 Calculation of LTCG tax u/s 112A Profit in excess of highest price on 1 January, 2018 Less: Exempted to the extent of Rs. 1 lakh Taxable profit Tax u/s 112A (@10%) Price (Rs. In lakhs)

25 Tax Other tax amendments Introduction of Health and Education Cess Education Cess on income-tax and Secondary and higher Education Cess on income-tax shall be discontinued. However, a new cess, by the name of Health and Education Cess shall be levied at the rate of four per cent. of income tax including surcharge wherever applicable. Tax incentive for promoting post-harvesting activities In order to encourage professionalism in post harvest value addition in agriculture, hundred percent deduction to companies registered as Farmer Producer Companies having an annual turnover upto 100 crores in respect of their profit derived from such activities for a period of five years from FY Corporate upto Turnover of 250 crore In case of domestic company, the rate of income-tax shall be twenty five per cent of the total income if the total turnover or gross receipts of the previous year does not exceed two hundred and fifty crore rupees and in all other cases the rate of Income-tax shall be thirty per cent of the total income. Relief from liability of Minimum Alternate Tax (MAT) Section 115JB of the Act, provides for levy of a minimum alternate tax (MAT) on the book profits of a company. In computing the book profit, it provides for a deduction in respect of the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. It is proposed to amend section 115JB to provide that the aggregate amount of unabsorbed depreciation and loss brought forward (excluding unabsorbed depreciation) shall be allowed to be reduced from the book profit, if a company s application for corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 has been admitted by the Adjudicating Authority. Consequently, a company whose application has been admitted would henceforth be entitled to reduce the loss brought forward (excluding unabsorbed depreciation) and unabsorbed depreciation for the purposes of computing book profit under section 115JB.

26 Tax Other tax amendments Deductions available to senior citizens in respect of health insurance premium and medical treatment Earlier Section 80D provided that a deduction up to 30,000 shall be allowed to an assessee, being an individual or a Hindu undivided family, in respect of payments towards annual premium on health insurance policy, or preventive health check-up, of a senior citizen, or medical expenditure in respect of very senior citizen. It is proposed to amend section 80D so as to raise this monetary limit of deduction from 30,000 to 50,000 for every senior citizen. Earlier Section 80DDB of the Act provided that a deduction is available to an individual and Hindu undivided family with regard to amount paid for medical treatment of specified diseases in respect of very senior citizen up to 80,000 and in case of senior citizens up to 60,000 subject to specified conditions. It is proposed to amend the provisions of section 80DDB of the Act so as to raise this monetary limit of deduction to 1,00,000 for both senior citizens and very senior citizens. Deduction in respect of interest income to senior citizen At present, a deduction up to 10,000 is allowed under section 80TTA to an assessee in respect of interest income from savings account. It is proposed to insert a new section 80TTB so as to allow a deduction up to 50,000 in respect of interest income from deposits held by senior citizens. However, no deduction under section 80TTA shall be allowed in these cases. Standard Deduction on Salary Income Section 16 provides for certain deduction in computing income chargeable under the head Salaries. It is proposed to allow a standard deduction up to 40,000 or the amount of salary received, whichever is less. Consequently the present 11 exemption in respect of Transport Allowance (except in case of differently abled persons) and reimbursement of medical expenses is proposed to be withdrawn.

27 Tax Other tax amendments Incentive for employment generation Under section 80-JJAA of the Act, a deduction of 30% is allowed in addition to normal deduction of 100% in respect of emoluments paid to eligible new employees who have been employed for a minimum period of 240 days during the year. However, the minimum period of employment is relaxed to 150 days in the case of apparel industry. In order to encourage creation of new employment, it is proposed to extend this relaxation to footwear and leather industry. Further, it is also proposed to rationalize this deduction of 30% by allowing the benefit for a new employee who is employed for less than the minimum period during the first year but continues to remain employed for the minimum period in subsequent year. Rationalization of the provisions of section 54EC Section 54EC of the Act provides that capital gain, arising from the transfer of a long-term capital asset, invested in the long-term specified asset at any time within a period of six months after the date of such transfer, shall not be charged to tax subject to certain conditions specified in the said section. Now the provision is restricted only to capital gains arising from long-term capital assets, being land or building or both. It is also proposed to provide that long-term specified asset, for making any investment under the section on or after the 1st day of April, 2018, shall mean any bond, redeemable after five years and issued on or after 1st day of April, 2018 by the National Highways Authority of India or by the Rural Electrification Corporation Limited or any other bond notified by the Central Government in this behalf.

28 Tax Other tax amendments Rationalization of section 43CA, section 50C and section 56. At present, while taxing income from capital gains (section 50C), business profits (section 43CA) and other sources (section 56) arising out of transactions in immovable property, the sale consideration or stamp duty value, whichever is higher is adopted. It has been pointed out that this variation can occur in respect of similar properties in the same area because of a variety of factors, including shape of the plot or location. In order to minimize hardship in case of genuine transactions in the real estate sector, it is proposed to provide that no adjustments shall be made in a case where the variation between stamp duty value and the sale consideration is not more than five percent of the sale consideration. E-assessment E-assessment was introduced in 2016 on a pilot basis and was later extended to 102 cities in 2017 with an objective of reducing the interface between the department and the taxpayer. Henceforth, it has been proposed to introduce E-assessment across the country Rationalization of Custom Duty There is substantial potential for domestic value addition in certain sectors, like food processing, electronics, auto components, footwear and furniture. To further incentivise the domestic value addition and Make in India in some such sectors, it is proposed to increase customs duty on mobile phones from 15% to 20%, on some of their parts and accessories to 15% and on certain parts of TVs to 15%. This measure will promote creation of more jobs in the country. To help the cashew processing industry, it is proposed to reduce customs duty on raw cashew from 5% to 2.5%. Introduction of Social Welfare Surcharge It has been proposed to abolish the Education Cess and Secondary and Higher Education Cess on specified imported goods, and in its place impose a Social Welfare Surcharge, at the rate of 10% of the aggregate duties of Customs, on imported goods, to provide for social welfare schemes of the Government. Goods which were hitherto exempt from Education Cess on imported goods will, however, be exempt from this Surcharge.

29 Disclosures and Disclaimer Ventura Securities Limited (VSL) is a SEBI registered intermediary offering broking, depository and portfolio management services to clients. VSL is a member of BSE and NSE. VSL is a depository participant of NSDL. VSL states that no disciplinary action whatsoever has been taken by SEBI against it in last five years except administrative warning issued in connection with technical and venial lapses observed while inspection of books of accounts and records. Ventura Guaranty Limited is the holding Company of VSL; Ventura Commodities Limited and Ventura Allied Services Private Limited are subsidiaries of VSL. Research Analyst (RA) involved in the preparation of this research report and VSL, disclose that neither RA nor VSL nor its associates (i) have any financial interest in the company which is the subject matter of this research report (ii) holds ownership of one percent or more in the securities of subject company (iii) have any material conflict of interest at the time of publication of this research report (iv) have received any compensation from the subject company in the past twelve months (v) have managed or co-managed public offering of securities for the subject company in past twelve months (vi) have received any compensation for investment banking, merchant banking or brokerage services from the subject company in the past twelve months (vii) have received any compensation for products or services from the subject company in the past twelve months (viii) have received any compensation or other benefits from the subject company or third party in connection with the research report. RA involved in the preparation of this research report discloses that he / she has not served as an officer, director or employee of the subject company. RA involved in the preparation of this research report and VSL discloses that they have not been engaged in the market making activity for the subject company. Our sales people, dealers, traders and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein. We may have earlier issued or may issue in future, reports on the companies covered herein with recommendations/ information inconsistent or different than those made in this report. In reviewing this document, you should be aware that any or all of the foregoing, among other things, may give rise to or potential conflicts of interest. We may rely on information barriers, such as "Chinese Walls" to control the flow of information contained in one or more areas within us, or other areas, units, groups or affiliates of VSL. This report is for information purposes only and this document/material should not be construed as an offer to sell or the solicitation of an offer to buy, purchase or subscribe to any securities, and neither this document nor anything contained herein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. This document does not solicit any action based on the material contained herein. It is for the general information of the clients / prospective clients of VSL. VSL will not treat recipients as clients by virtue of their receiving this report. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of clients / prospective clients. Similarly, this document does not have regard to the specific investment objectives, financial situation/circumstances and the particular needs of any specific person who may receive this document. The securities discussed in this report may not be suitable for all investors. The appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives. Persons who may receive this document should consider and independently evaluate whether it is suitable for his/ her/their particular circumstances and, if necessary, seek professional/financial advice. And such person shall be responsible for conducting his/her/their own investigation and analysis of the information contained or referred to in this document and of evaluating the merits and risks involved in the securities forming the subject matter of this document. The projections and forecasts described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. Projections and forecasts are necessarily speculative in nature, and it can be expected that one or more of the estimates on which the projections and forecasts were based will not materialize or will vary significantly from actual results, and such variances will likely increase over time. All projections and forecasts described in this report have been prepared solely by the authors of this report independently for the Company. These projections and forecasts were not prepared with a view toward compliance with published guidelines or generally accepted accounting principles. No independent accountants have expressed an opinion or any other form of assurance on these projections or forecasts. You should not regard the inclusion of the projections and forecasts described herein as a representation or warranty by VSL, its associates, the authors of this report or any other person that these projections or forecasts or their underlying assumptions will be achieved. For these reasons, you should only consider the projections and forecasts described in this report after carefully evaluating all of the information in this report, including the assumptions underlying such projections and forecasts. The price and value of the investments referred to in this document/material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance. Future returns are not guaranteed and a loss of original capital may occur. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. We do not provide tax advice to our clients, and all investors are strongly advised to consult regarding any potential investment. VSL and the RA involved in the preparation of this research report and its associates accept no liabilities for any loss or damage of any kind arising out of the use of this report. This report/document has been prepared by VSL, based upon information available to the public and sources believed to be reliable. No representation or warranty, express or implied is made that it is accurate or complete. VSL has reviewed the report and, in so far as it includes current or historical information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed. The opinions expressed in this document/material are subject to change without notice and have no obligation to tell you when opinions or information in this report change. This report or recommendations or information contained herein do/does not constitute or purport to constitute investment advice in publicly accessible media and should not be reproduced, transmitted or published by the recipient. The report is for the use and consumption of the recipient only. This publication may not be distributed to the public /used by the public media without the express written consent of VSL. This report or any portion hereof may not be printed, sold or distributed without the written consent of VSL. This document does not constitute an offer or invitation to subscribe for or purchase or deal in any securities and neither this document nor anything contained herein shall form the basis of any contract or commitment whatsoever. This document is strictly confidential and is being furnished to you solely for your information, may not be distributed to the press or other media and may not be reproduced or redistributed to any other person. The opinions and projections expressed herein are entirely those of the author and are given as a part of the normal research activity of VSL and are given as of this date and are subject to change without notice. Any opinion, estimate or projection herein constitutes a view as of the date of this report and there can be no assurance that future results or events will be consistent with any such opinions, estimates or projection. This document has not been prepared by or in conjunction with or on behalf of or at the instigation of, or by arrangement with the company or any of its directors or any other person. Information in this document must not be relied upon as having been authorized or approved by the company or its directors or any other person. Any opinions and projections contained herein are entirely those of the authors. Neither the company nor its directors or any other person accepts any liability whatsoever for any loss arising from any use of this document or its contents or otherwise arising in connection therewith. The information contained herein is not intended for publication or distribution or circulation in any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is prohibited unless otherwise expressly authorized. Please ensure that you have read Risk Disclosure Document for Capital Market and Derivatives Segments as prescribed by Securities and Exchange Board of India before investing in Securities Market. Ventura Securities Limited Corporate Office: 8th Floor, B Wing, I Think Techno Campus, Pokhran Road no. 02, Off Eastern Express Highway, Thane (West) SEBI Registration No.: INH