Nowhere close to the dream Budget the taxpayer had hoped for, but careful tinkering to ensure everyone goes home happy
For individual taxpayers or the salaried class, the finance minister has neither tinkered with the tax slab nor increased the section 80C deduction cap. However, he increased the deduction on health insurance premium from R15,000 to R25,000 and from R20,000 to R30,000 in case of senior citizens, given an additional tax benefit of R50,000 for contribution to the National Pension Scheme (NPS) and even increased monthly transport allowance from R800 to R1,600.
Following these changes, an individual can save up to R6,180 in the lowest tax bracket of 10.3%, R12,360 in the 20.6% bracket and R18,540 in the highest tax bracket of 30.9%. The total deduction that will now be available to an individual is R4,44,200 a year, which works out like this:
Deduction under 80C R1,50,000; deduction under 80CCD R50,000, deduction on account of interest paid for a self-occupied property R2,00,000, deduction under 80D R25,000 and exemption of transport allowance R19,200.
The additional tax deduction of R50,000 for investment in NPS under section 80 CCD will be over and above the R1.5 lakh under 80C. Rakesh Nangia, managing partner, Nangia and Company, says the move will enable India to become a pensioned society instead of a pension-less society. “The proposal will help the investor in saving for his retirement years, or the conservative investor in building up a healthier corpus for achieving his financial goals.”
The government will bring in legislation where the salaried class will have an option to choose between NPS or EPF contribution.
Wealth tax, a low-yield instrument, has been abolished and instead an additional 2% surcharge on the super-rich (annual income of R1 crore) has been introduced.
For the welfare of the girl child, the finance minister has announced Sukanya Samriddhi Account Scheme, which will qualify under Section 80C — even the interest accruing on deposits and withdrawals will be tax-exempt. For unclaimed deposits of R9,000 crore in PPF and EPF, the minister has proposed the creation of a Senior Citizen Welfare Fund. The government has also announced various social security schemes like Atal Pension Yojana, a defined pension for senior citizens.
Says Divya Baweja, Partner, Deloitte Haskins & Sells LLP, “The budget in effect results in an aggregate saving that is likely to be offset by the increased cost of spending arising due to an increase in the service tax rate. For individuals earning over R1 crore, the effective tax rate goes up from 33.99% to 34.61% approximately, which brings it more or less in line with the 35% proposed in DTC.”
Individuals below 60 years and even senior citizens can gain by increasing the yearly premium on health insurance. Sandeep Patel, managing director and chief executive officer of Cigna TTK Health Insurance, says that given high medical inflation, the increase in deduction for premium paid is a step in the right direction. “The increase in the tax deduction limit on the premium clearly indicates the government’s focus on preventive healthcare and building awareness on health and wellness.”
Similarly, V Jagannathan, chairman and managing director, Star Health and Allied Insurance, says there is a clear intention of pushing health insurance coverage by incentivising taxpayers to spend more on health insurance. “There is also an increased focus on providing a safety net for senior citizens by increasing health insurance tax benefit from R15,000 to R25,000 and allocating R30,000 towards the treatment of critical diseases for senior citizens,” he says.