However, the deduction, too, is just optical relief, as it leaves too little in the hands of salaried employees to write home about.
In what most expected, but were still disappointed with, there is no change in the personal income tax slabs in Budget 2018, apart from the reintroduction of the standard deduction of Rs 40,000. However, the deduction, too, is just optical relief, as it leaves too little in the hands of salaried employees to write home about.
The standard deduction of Rs. 40,000 comes at the cost of existing deductions of Rs 15,000 and about Rs 19,200 for medical reimbursements and transport allowance respectively, which works out to a total of Rs 34,200. Effectively, the FM is offering just Rs 5,800 more than the existing deductions. The savings in tax would be between Rs 300-1,800 depending on the tax slabs.
Experts, though, have welcomed the move because in addition to reducing paperwork and compliance, the move would help middle-class employees reduce their tax liability. "Now, employees need not submit false bills to claim deductions,'' says Gaurav Mashruwala, certified financial planner (CFP) and financial advisor.
Besides, the decision to allow standard deduction could significantly benefit pensioners as well. A total number of 2.5 crore salaried employees and pensioners are estimated to benefit from this.
The transport allowance at enhanced rate continues to be available to differently-abled persons. Also, other medical reimbursement benefits in case of hospitalisation etc., for all employees shall continue.
Kuldip Kumar, Leader Personal Tax, PwC India says: "Reintroduced standard deduction will benefit salaried class, but the tax benefit is greatly offset due to increase in cess by 1%."
Maulik Doshi, Partner, transfer pricing and transaction advisory services, SKP Business Consulting LLP said, "Education Cess has been increased to 4%. For a salaried taxpayer, the marginal gains from standard deduction could be taken away through increase in cess."
However, Budget 2018 does contain some news for gold lovers. The Finance Minister announced that the government will formulate a comprehensive Gold Policy to develop gold as an asset class. "The government will also establish a system of consumer-friendly and trade efficient system of regulated gold exchanges. Gold Monetisation Scheme will be revamped to enable people to open a hassle-free Gold Deposit Account," said the FM.
On the debt side, Budget 2018 talked about exchange-traded funds for disinvestment and one focussed on debt. This will give investors some new avenues to get returns if stocks start limping. "The measures of launching Debt ETFs, nudging corporates to move to the debt market and further development of the bond market in India are positive steps" says Rajeev Thakkar, CIO, PPFAS MF.
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