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Budget 2018: FM Arun Jaitley has done good by meeting some expectations on the income tax front

Budget 2018: Someone said with great power comes great responsibility. Similarly with great mandate comes great expectations. The expectations from this Government was set in 2014 when they won with a majority which no political party had won since 1984. The expectations rose considering the fact that Budget 2018-19 would be the final Budget of this Government. The taxpayer became vocal with their wish list which included lowering of tax rates, introduction of standard deduction, increase in tax-free allowances limits, etc. However, even before the Finance Minister (FM) rose to deliver his Budget speech the tone of the Budget was set by the Prime Minister in a television interview. The Prime Minister preferred a fiscally prudent Budget over a populist one but deferred to the wisdom of the FM.

The FM while announcing his tax proposals stated that many positive changes were made in the personal tax rates applicable to individuals in the last three years and the major portion of personal income tax collection comes from the salaried class. The FM without tweaking the tax rates and slabs chose to reintroduce standard deduction of INR 40,000 for the salaried taxpayer. However, the standard deduction is proposed to be reintroduced in lieu of transport allowance (INR 19,200 per annum) and medical reimbursement (INR 15,000), which are tax free. The FM met the expectations of the taxpayer by introducing standard deduction but limited the tax benefit (on INR 5,800) by providing it in lieu of tax free transport allowance and medical reimbursement.

The happiest taxpayers after today’s Budget proposals are the senior citizens of the country. The FM increased the limits for tax free interest income from INR 10,000 to INR 50,000 and included interest on deposits with banks and post office as well. Further, the limits of deduction for medical insurance premiums and/or medical expenses was enhanced from INR 30,000 to INR 50,000 and for specified critical illness to INR 100,000. This move is cheered by all senior citizens of the country considering the increased medical expenses.

Union Budget 2018: FM Jaitley Announces No Change In Income Tax Slabs, Introduces Standard Deduction

The biggest move which the FM made today was with respect to introduction of tax on long term capital gains on equity shares and equity oriented mutual funds. The FM was considerate to acknowledge the role of equity and mutual funds market and the significant mobilisation of funds post demonetisation and introduced a tax rate of 10% on the gains in excess of INR 100,000. Further, the FM grandfathered all gains up to 31 January 2018. The proposal of the FM to provide exemption of INR 100,000 indicates the FM’s vision to minimize the impact of the new levy in case of small investors.

The FM also proposed few changes to the procedure to processing of returns and tax audit undertaken by the tax authorities. In order to impart greater transparency, accountability and elimination of interface between the tax office and the taxpayer, the FM proposes to introduce e-assessments scheme for tax audits. This will facilitate quicker and personal interaction free assessments. Further, it is proposed that at the time of processing the tax returns, there will be no adjustments made to the tax return filed by the taxpayer if there is discrepancy on the income details furnished by the employer in Form 16 or/ and Form 26A. This proposal will remove the undue hardship with thousands of taxpayers had to face after filing the last year’s tax return.

Union Budget 2018: It Will Focus On Strengthening Agriculture, Rural Economy, Says FM Continuing the reforms on National Pension System front, the FM has made a level playing field between non-employee contributor and employee contributors. Now, non-employee contributors to NPS can also claim exemption in respect of 40% of the total amount payable to the taxpayer on closure or opting out. Lastly, with the FM’s thrust of health and education sector, he has proposed to introduce a new cess Health and Education Cess at a rate of 4% on tax and surcharge instead of the existing Education and Secondary Education cess of 3%.

 

Budget 2018 income tax slabs: Here is what FM Arun Jaitley announced for salaried employees

The FM had his hands full with expectations and a greater responsibility of being fiscally prudent. Given the fiscal space available, it appears that the FM has overall done a good job by meeting some expectations of the people of this country. There will be some hit and some misses always, Mr FM!