Advertisement
trendingNowenglish2078037https://zeenews.india.com/personal-finance/budget-2018-salaried-class-gets-standard-deduction-of-rs-40k-heres-what-it-means-2078037.html

Budget 2018: Salaried class gets standard deduction of Rs 40K. Here's what it means

Finance Minister Arun Jaitley did not provide any relief in the income tax rates for 2018-19. He however proposed 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.

Budget 2018: Salaried class gets standard deduction of Rs 40K. Here's what it means

New Delhi: Finance Minister Arun Jaitley did not provide any relief in the income tax rates in the Union Budget 2018-19. He however proposed 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.

It is to be noted that the transport allowance at enhanced rate shall continue to be available to differently-abled persons. Also, other medical reimbursement benefits in case of hospitalisation etc., for all employees shall continue.

Jaitley has said that the total number of salaried employees and pensioners who will benefit from this decision is around 2.5 crore.

Experts believe that the move to announce standard deduction of Rs 40,000 apart from reducing paper work and compliance, will help middle class employees even more in terms of reduction in their tax liability. This decision to allow standard deduction shall significantly benefit the pensioners also, who normally do not enjoy any allowance on account of transport and medical expenses.

The current tax-free limit for medical expense reimbursement is set at 15,000 per annum and transport allowance exemption of Rs 1,600 per month.

Manish Gupta, CA and Partner at Kanchan & Associates has explained the tax benefit on standard deduction of Rs 40,000 under these categories:

a) Assuming the standard deduction amount is inclusive of  medical expense reimbursement and transport allowance

b) Exclusive of  medical expense reimbursement and transport allowance and

c) Benefit for pensioners

Before understanding the break-up, check out the income tax slab (unchanged this year) under which you fall

Individual Tax Payers

-Up to Rs 2,50,000: NIL

-Rs 2,50,001 to Rs 5,00,000: 5 percent

-Rs  5,00,000 to 10,00,000: 20 percent

-Above Rs 10,00,000: 30 percent

Senior Citizens 60 years but less than 80 years

-Up to Rs 3,00,000: NIL  

-Rs 3,00,001 to Rs 5,00,000: 5 percent

-Rs 5,00,001 to Rs 10,00,000: 20 percent

Assuming that the standard deduction amount is inclusive of  medical expense reimbursement and transport allowance here is how much it will impact you.

Tax-free limit for medical expense reimbursement = Rs 15,000 per annum

Transport allowance exemption = Rs 1,600 per month (Rs 19,200 per annum)

Total = 34,200 p.a

After the deduction, the calculation and subsequent tax benefit will be as follows:

Proposed: Rs 40,000

Deducted: Rs 34,200 (on medical and transport combined)

Effective change: Rs 5,800

How much you save?

Tax threshold Tax payable Effective change after the new decision
Up to Rs 2,50,000 Nill NA
Rs 2,50,001 to Rs 5,00,000 5 percent Rs 290
Rs 5,00,001 to Rs 10,00,000 20 percent Rs 1160
Rs 5,00,001 to Rs 10,00,000 30 percent Rs 1740

Assuming Rs 40,000 if it is over and above Medical and transport, how much you save?

Tax threshold Tax payable Effective change after the new decision
Up to Rs 2,50,000 Nill NA
Rs 2,50,001 to Rs 5,00,000 5 percent Rs 2,000
Rs 5,00,001 to Rs 10,00,000 20 percent Rs 8,000
Rs 5,00,001 to Rs 10,00,000 30 percent Rs 12,000

How much will pensioners save?

Same as above.

Stay informed on all the latest news, real-time breaking news updates, and follow all the important headlines in india news and world News on Zee News.

NEWS ON ONE CLICK