New Delhi, Feb 2: Finance Minister Arun Jaitley, while presenting the Union Budget 2018, announced the National Health Protection Scheme, the world’s largest government-funded healthcare programme, on Wednesday. The one question which is being asked by all is ‘where will the money come from?’ to fund the National Health Protection Scheme. However, the Finance Minister believes the reintroduction of long term capital gains tax can alone support the health scheme.
Arun Jaitley said taxing long-term capital gains will not only provide money for the National Health Protection Scheme but also foot the bill for minimum support price (MSP) payment to farmers that is 1.5 times the production cost. “I think both MSP and healthcare can be supported only out of the long term capital gains taxation,” he reportedly said in response to a question on the need to tax capital gains at a time when the government is trying to attract more investments.
Jaitley said the government has been considering the proposal for re-introduction of tax on long-term capital gains for a long time. “Rs 3.67 lakh crore was the exempted income on long-term capital gains in the last assessment year alone. A bulk of this came from large investors, be it corporates, limited liability partnerships or foreign institutional investors,” he said. “Earlier we needed this money to enter the market and so there was no capital gains tax. Now, the market has matured. So, we took a conscious decision that capital gains up to Rs 1 lakh will be exempt to protect the small investors. If you gain more than that, you pay 10 per cent tax,” he added.
Jaitley also believes that the levy would not add to the burden of the middle class. “Most of the beneficiaries of there being no tax on long-term capital gains were the wealthiest. This was a subsidy for the richest,” he said. According to senior Congress leader and former finance minister P Chidambaram, the government would need Rs 5 lakh crore annually if an average payout of Rs 50,000 for all 10 crore families is considered. However, Jaitley refused to speculate how much money will be required to fund the scheme.
In his response to criticism that the budget was anti-middle class, he pointed out the steps his government had taken to lower the tax burden. “Take the last four years in totality. In the first year, I increased the exemption limit from Rs 2 lakh to Rs 2.5 lakh. Two years ago, we introduced a step so that those with an income of Rs 3 lakh don’t have to pay any tax. Last year, we brought down the tax rate to 5 per cent for income between Rs 2.5 lakh and Rs 5 lakh to nudge people into the tax net,” he said.