The budget 2018 is of acute significance as it is the final budget before the Lok Sabha elections 2019. This budget exemplifies Modi’s achievements during his regime. In addition, it is the most eagerly anticipated witness to the impact of GST and demonetization, the two groundbreaking, yet unsettling decisions in the history of India. Thus, it is evident that this budget offered the PM one last chance before the elections next year to justify his actions. Actions that the opponent parties blame for the sluggish economic growth in 2016-17.
The NRI expectation from the budget was high. Here are a few that can be noted:
– NRI’s expected that the legal reforms could trigger higher investment in agricultural property, exclusion of dividend distribution tax
– NRI’s expected relaxation of customs duty exemption for gold mostly, and hope for a substantial reduction of a minimum 10% on the same
– NRI’s expected reduced GST rate for transaction in property, from the current 12% to 5%
– NRI’s also expected individual retirement account in lieu of pension plans
A close look at the budget presented by Arun Jaitley discloses that there is nothing remarkable for the NRI’s in it. None of the expectations have been considered or even taken into account. The budget instead is completely pro-agricultural and pro-rural, keeping the 2019 General Elections in mind.It also focuses on women and health.
Upside: NRI Taxable Presence
The budget 2018-19 has definitely broadened the scope of taxable presence of NRI’s. It has moved from physical to ‘substantial economic presence’ nexus approach. Nevertheless, this approach will be effective if the tax treaties encourage such business models too. If not, the taxpayers will be forced to take refuge under a more promising tax treaty in comparison to the domestic one.
The recommended 10% Long-term capital gain (currently tax-exempt)tax is one of the biggest talking points of the budget 2018. This move is only fair for the buoyant and volatile stock markets. From the government perspective, this move can bring in more gains. However, it is an upsetting proposition for both domestic and foreign investors in the short run.