Budget 2018: The much-awaited Union Budget 2018 was finally unveiled by Finance Minister Arun Jaitley on 1st February 2018, which has put to rest all the speculations, anticipations and guess works around it. In his speech, FM Jaitley mentioned about the rewarding economic reforms, increase in foreign direct investment, ease of doing business in India, digitization of the economy and widened tax payer base, giving credit to demonetization.
The Budget 2018 has focused primarily on incentivizing the agricultural sector and bringing in reforms for benefiting farmers. There has been certain relief to salaried employees and micro, small and medium enterprises as well.
Regarding the salaried class employees, the most expected change was with respect to increase in the income tax slab rates for individuals from Rs 250,000 to Rs 350,000 or a reasonable reduction by 10% in the income slab of Rs 500,000 to Rs 10,00,000 from 20%. However, the Union Budget ended up with a “NO change” in the tax rates of individuals, but with a marginal increase in the education cess from 3% to 4%.
The surprising element was bringing back of the Standard Deduction for the salaried class of an amount up to Rs 40,000 as a relief to the tax payer. However, in lieu of this, the Budget 2018 has taken away the exemption on transport allowance which was available up to Rs 19,200 per annum and the medical reimbursement benefit that was up to Rs 15,000, thereby providing a relief of income up to Rs 5,800.
Also Read: Budget 2018 standard deduction: Now taxpayers, pensioners need no bills, but how big is the benefit?
In contrary, the expectation of salaried employee was to see an increase in transport allowance and medical reimbursement benefit to bring in sync with the ground reality of expenses incurred on the same. However, the withdrawal of the benefit per se was a real shocker.
Further, there was an expectation that limit for deductions in respect to 80C contributions (life insurance premium, deferred annuity, public provident fund etc..) would be increased from Rs 150,000 to Rs 200,00, but the Budget 2018 had no intentions to consider this amendment.
On a positive note, the Budget 2018 has extended better medical and health facilities to senior citizens by providing enhanced deductions for medical and health premium up to Rs 50,000 and medical expenditures on specifies diseases to up to Rs 100,000. Also, enhancing the limit for tax deduction on their interest income from savings and term deposit from Rs 10,000 to Rs 50,000.
The highly-obsessed Budget 2018, which could have been a progressive and populous Budget, has proved to be a tax-neutral Budget for the salaried class individuals, but has definitely a lot for senior citizens.
(By Akhil Chandna, Director, Grant Thornton India LLP, with inputs from CA Ridhi Sanghvi)