- No change in income tax slabs for individuals
Stating that the government had made many positive changes in the personal income tax rate applicable to individuals in the last three years, Mr. Jaitley left the income tax slabs unchanged in this Budget.
- Cess on income tax hiked to 4%
The budget has proposed to hike the cess on income tax from 3% to 4% thereby increasing the tax payable by all categories of taxpayers. Due to this change, the tax liability for highest tax bracket (assuming Rs 15 lakh income) goes up by Rs 2,625.
For middle-income taxpayers (between Rs 5 lakh and Rs 10 lakh) the tax liability increases by Rs 1,125 and for lowest tax brackets (Rs 2.5 lakhs to Rs 5 lakhs) by Rs 125.
- Standard deduction reintroduced
Budget 2018 has proposed to provide a standard deduction of Rs 40,000 from salary income to employees. The standard deduction is essentially a flat amount subtracted from the salary income before calculation of taxable income. The standard deduction was a part of the Income-tax Act until former finance minister, P. Chidambaram, withdrew it in the Union budget of 2005-06.
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- Medical reimbursement and transport allowance knocked out of your salary
While the Budget 2018 proposes to provide a standard deduction of Rs 40,000 from salary income to employees, it also proposes to take away existing annual transport allowance of Rs 19,200 and Rs 15,000 medical reimbursement. Prima facie income exempted from tax after setting off the gain and loss is Rs 5,800 only. The tax saved for each employee on this income would depend on the tax slab that income falls into. Consequently, individuals with income above Rs 5 lakh would end up shelling out more tax after taking into account the standard deduction, the removal of the allowances and the increase in cess.
- EPF contribution of new women workers capped at 8%
Women joining the workforce for the first time will have to contribute only 8% instead of 12% or 10% as the case may be, for the first three years. The proposed move will enhance their take-home pay. Further, for new employees coming under the ambit of EPFO would be provided 12 percent contribution from the government.
- Section 80D limit proposed to be hiked to Rs 50,000 for senior citizens & Less than 60 Years categories Max Rs. 25,000/-
The limit of deduction under section 80 D for senior citizens has been proposed to be hiked Rs 30,000 to Rs 50,000. This is good news for senior citizens.
- Exemption of interest income on deposits to be hiked for senior citizens
It has been proposed to hike the exemption on the interest income on bank and post office deposits for senior citizens from Rs. 10,000 to Rs. 50,000. This is for all FDs and RDs.