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India Union Budget 2018 Key Highlights: No change in income tax slabs, new standard deduction introduced

Presenting the Union Budget 2018-19, the finance minister however proposed a marginal releif to tax payers by introducing new standard deduction of Rs 40,000 cr for salaried taxpayers.

Edited by: India TV Business Desk, New Delhi [ Updated: February 01, 2018 16:52 IST ]
India Union Budget 2018 Key Highlights: No change in income
Image Source : PTI India Union Budget 2018 Key Highlights: No change in income tax slabs, new standard deduction introduced

Giving a relief to salaried class, Finance Minister Arun Jaitley on Thursday proposed a standard deduction of Rs 40,000 in lieu of transport allowance and medical reimbursement entailing a revenue sacrifice of Rs 8,000 crore. 

The minister, however, did not propose any change in the tax slabs or rates for individual taxpayers.  “In order to provide relief to salaried taxpayers, I propose to allow a standard deduction of Rs 40,000/- in lieu of the present exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses,” Jaitley said while presenting the Budget 2018-19 in Parliament today.  The standard deduction, which is provided to salary earners, was discontinued from the assessment year 2006-07.  Experts, however, said that it is a very nominal benefit to the salaried class. 

“Standard deduction of Rs 40,000 p.a. for salaried individuals seems to be a very nominal benefit as the current tax-free limit for medical expense reimbursement of 15,000 p.a. and transport allowance exemption of Rs 1,600 p.m. is anyway leading to a total tax-free salary of Rs 34,200 p.a.,” Alok Agrawal, Senior Director, Deloitte India said.  The finance minister said the government had made many positive changes in the personal income-tax rate applicable to individuals in the last three years. 

“Therefore, I do not propose to make any further change in the structure of the income tax rates for individuals,” he said. 

Jaitley also noted that there is a general perception in the society that individual business persons have better income as compared to salaried class.  However, income tax data analysis suggests that major portion of personal income-tax collection comes from the salaried class, he observed. 

According to Jaitley, for assessment year 2016-17, 1.89 crore salaried individuals have filed their returns and have paid total tax of Rs 1.44 lakh crore which works out to average tax payment of Rs 76,306/individual salaried taxpayer.  As against this, he said that 1.88 crore individual business taxpayers including professionals, who filed their returns for the same assessment year paid total tax of Rs 48,000 crore which works out to an average tax payment of Rs 25,753/individual business taxpayer.

 
Jaitley said apart from reducing paper work and compliance, this will help middle class employees even more in terms of reduction in their tax liability.  “The revenue cost of this decision is approximately Rs 8,000 crores,” he said. 

The total number of salaried employees and pensioners who will benefit from this decision is around 2.5 crores.

Announcing a series of benefits for senior citizens, Jaitley said the exemption limit on income from interest for them has been raised five times to Rs 50,000 per year.  

At the same time, the Finance Minister raised limit of deduction for health insurance premium and medical expenditure to Rs 50,000 from Rs 30,000 under section 80D.  

“All senior citizens will now be able to claim benefit of deduction up to Rs 50,000 per annum in respect of any health insurance premium and/or any general medical expenditure incurred,” he said while presenting the Budget for 2018-19.  Besides, the Budget has increased the limit of deduction for medical expenditure in respect of certain critical illness to Rs 1 lakh in respect of all senior citizens, under section 80DDB. 

“In addition to tax concessions, I propose to extend the Pradhan Mantri Vaya Vandana Yojana up to March, 2020 under which an assured return of 8 per cent is given by Life Insurance Corporation of India,” he said.  The existing limit on investment of Rs 7.5 lakh per senior citizen under this scheme is also being doubled to Rs 15 lakh, he added. 

Noting that a life with dignity is a right of every individual in general, more so for the senior citizens, he said, “to care of those who cared for us is one of the highest honours...these concessions will give extra tax benefit of Rs 4,000 crore to senior citizens.”

Watch the full budget speech by Finance Minister Arun Jaitley here:

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