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Budget : Give some and take it back

2/3/2018

Imran Khan MBA, Finance imran.k.06@gmail.com This year’s budget was one of give and take but it was take than give, especially for the common man. On the one hand, finance minister reintroduced standard deduction, gave senior citizens a few reasons to cheer, and increased take home pay of women in the workforce. One the other he took away the medical and travel allowances of the salaried class, introduced long-term capital gains tax equity, and even hiked the cess you pay on income tax. No change in income tax slabs for individuals Stating that the government had made many positive change in the personal income tax rate applicable to individuals in the last three years, Finance Minister left the income tax slabs unchanged this budget. Standard deduction The Union Budget has proposed to reintroduce standard deduction for salaried individuals to the tune of Rs40,000 a year. In his speech, Finance Minister said, “Income tax data analysis suggests that major portion of personal income-tax collection comes from the salaried class. For assessment year 2016-17, 1.89 crore salaried individuals have filed their returns and have paid total tax of Rs1.44 lakh crore, which works out to average tax payment of Rs76,306 per individual salaried taxpayer. As against this, 1.88 crore individual business taxpayers, including professionals, who filed their returns for the same assessment year paid total tax of Rs48,000 crore, which works out to an average tax payment of Rs25,753 per individual business taxpayer. Therefore, in order to provide relief to salaried taxpayers, I propose to allow a standard deduction of Rs40,000 in lieu of the present exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses.” At present an individual can claim tax-free transport allowance of up to Rs1,600 per month and medical reimbursements of up to Rs1,250 per month. Together, these two allowances currently amount to a maximum of Rs34,200 a year. Considering that the proposed standard deduction is in lieu of these two, which are currently available, the net increase in deduction would be a maximum of Rs5,800. This would help an individual in the highest tax bracket to save up to Rs1,810 in terms of tax outgo. Increase in cess There is an increase in the rate of cess charged to both individual and corporate taxpayers. From the current cess of 3% (2% for primary education and 1 % for secondary and higher education), a health and education cess of 4% will be levied on the tax payable from the financial year 2018-19. As a result, if you had a tax liability of Rs1 lakh in the assessment year 2017-18, and paid a cess Rs3,000; then from the assessment year 2019-20—if your taxable incomes remains Rs1 lakh—you would have to pay a cess of Rs4,000. After all, government says that it is firmly on course to achieve high growth of 8% plus as manufacturing, services and exports are back on good growth path. While GDP growth at 6.3% in the second quarter of 2017-18 signalled turnaround of the economy, growth in the second half is likely to remain between 7.2% to 7.5%. The Union Minister for Finance and Corporate Affairs Mr. Arun Jaitley while presenting the General Budget 2018-19 in Parliament today said that Indian society, polity and economy had shown remarkable resilience in adjusting with the structural reforms. IMF, in its latest Update, has forecast that India will grow at 7.4% next year in the backdrop of services resuming high growth rates of 8% plus, exports expected to grow at 15% in 2017-18 and manufacturing back on good growth path. The Union Budget has proposed to reintroduce standard deduction for salaried individuals to the tune of Rs40,000 a year. In his speech, Finance Minister said, “Income tax data analysis suggests that major portion of personal income-tax collection comes from the salaried class. For assessment year 2016-17, 1.89 crore salaried individuals have filed their returns and have paid total tax of Rs1.44 lakh crore, which works out to average tax payment of Rs76,306 per individual salaried taxpayer. As against this, 1.88 crore individual business taxpayers, including professionals, who filed their returns for the same assessment year paid total tax of Rs48,000 crore, which works out to an average tax payment of Rs25,753 per individual business taxpayer. 

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