Union Budget 2019-20: Salaried people are upset due to the withdrawal of deductions on account of medical and conveyance expenditure.
India Union Budget 2019: Salaried class people, particularly public sector employees, have high hopes from finance minister Nirmala Sitharaman’s maiden budget. Average mid level public sector employee falls in the highest income slab. He is also entitled to avail Rs 40,000 standard deduction in addition to other exemptions and deductions permitted to any other income tax payer. However, unlike their counterpart in private sector, they do not have liberty to structure their salaries that suits their tax saving goals. They complained that the standard deduction was offered by former finance minister Arun Jaitley by withdrawing two other deductions on account of medical expenditure and conveyance expenses.
“At my level, the effective income tax rate works out to be 31.2%, which is very high,” said Vivek Kumar, who is employed with a central PSU in NCR region.
“In addition to paying income tax, I’m required to pay multitude of indirect taxes on my consumption. Applicable GST rate on a large number of items is 18%. I also pay sales tax and excise on purchase of fuel like petrol and diesel, therefore effective tax incidence on my income works out to be around 50% of my total income,” forty-two years old Vivek Kumar told Financial Express Online.
His advice to Modi government is to reintroduce deductions on medical expenditure and conveyance on the basis of actual expenditure incurred on these two counts.
“The deduction of Rs 15,000 on account of medical expenses was withdrawn in 2018 whereas it was actually required to be increased by 10 times. The threshold of Rs 15,000 was set at least 15 years ago when treatment was a lot cheaper, ” explains Vivek Kumar who has spent 15 years of his total 20 year career in a central PSU and mostly handled financial issues.
He also suggests raising the deduction permitted under section 80C for encouraging saving behaviour among tax payers from Rs 1.5 lakh to Rs 3 lakh or more as salaries have gone up significantly in the last decade.
Another public sector employee Abhishek Singh, who is employed with Parliament in New Delhi, concurs with Vivek Kumar on the need to increase relief on savings.
“If the government increases the threshold for saving from Rs 1.5 lakh then it will encourage people to save more,” Abhishek Singh told Financial Express Online.