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How Budget 2018 impacted Individuals – Post Budget Analysis by Tax2win

Updated on: 09 Aug, 2023 12:29 PM

The most awaited last full-fledged Union Budget of Modi Government has been announced on 1 Feb 2018, by the Finance Minister Arun Jaitley. It was the first post GST budget so it was unique in its own ways. Now after the Budget speech of FM, everybody from every sector is keen to know the impact of the budget 2018 specifically on them. Apart from the benefits given to various other sectors, it seems that this budget was mainly focused on agriculture, health sector, and senior citizens.

Tax2win, in this post, will let you know the reality of this year's budget through the lens of its experts. This issue will stress upon the good and bad of the Budget 2018 from an individual's point of view. So, let begin the Budget 2018 journey.

1. No sweet surprises for a common man:

The budget 2018 has been slightly disappointing in this respect. The fact is to be accepted that there has been no change proposed in Personal Income Tax slabs and tax rates in the budget 2018.

2. Relief to Salaried Persons:

  • A. Introduction Of Standard Deduction:
    Budget 2018 has introduced standard deduction for the salaried persons. The present exemption in respect of Transport Allowance (except in case of differently abled persons) and Reimbursement of Medical Expenses is withdrawn. Now, it is proposed to allow a standard deduction of Rs 40,000/- without submission of any proofs to the employer.
  • B. EPF Contribution:
    Presently, both the employer and employee contribute @ 12 percent of basic salary towards EPF. Now, in order to promote employment, the government will contribute 12 percent under EPF for new employees for all sectors for the next three years [subject to certain conditions].
  • C. Reduction in EPF Contribution of women:
    To encourage employment amongst women in the formal sector the Employees Provident Fund (EPF) and Miscellaneous Provisions Act, 1952 has been amended. The contribution of women employees has been reduced to 8% for the first three years of their employment against the existing rate of 12% with no change in employer's contribution [subject to certain conditions].

3. More Outgo from your pocket:

The earlier cesses (Primary Education Cess and the Secondary and Higher Education Cess) has been withdrawn and a new Cess @ 4% in the name of Health & Education cess has been introduced. This hike in the cess is applicable to all categories of assessees.

The effect of this change can be understood with the help of below table:

Tax slab Pre Budget Cess Post Budget Cess Increase in Liability
If income is more than Rs.10 lakhs (Say Rs. 20 Lakhs) 12375 16500 4125
If income is more than Rs.5 lakhs but limited to Rs. 10 lakhs (Say Rs.10 lakhs) 3375 4500 1125
If income is more than Rs. 2.5 lakhs but limited to Rs. 5 lakhs (Say Rs.5 lakhs) 375 500 125

4. Long-Term Capital Gains brought under Tax Net:

For the first time, Long Term Capital Gain on listed equity shares and equity-oriented funds exceeding Rs. 1,00,000 will be taxed @ 10% without indexation. However, this provision shall apply post 31st Jan 2018. Further, Short-term capital gains will continue to be taxed at 15 percent for a one-year holding period. Let's understand this aspect of Section 112A with the help of an example.

Example: If an equity share is purchased six months before 31st January 2018 at Rs.1000/- and the highest price quoted on 31st January 2018 in respect of this share is Rs.1200/-, as per the existing provisions on LTCG there will be no tax on the gain of Rs.200/- Further, now if this share is sold after one year from the date of purchase then any gain in excess of Rs.200 earned after 31st January, 2018 will be taxed at 10%.

5. Various Benefits to the Senior Citizens:

  • A. No tax on interest income up to Rs.50000/-:
    A new section 80TTB has been inserted so as to allow a deduction up to Rs 50,000/- in respect of interest income from deposits held by senior citizens. However, no deduction under section 80TTA shall be allowed in these cases.
    Further, under Section 80TTA (Deduction on Interest from Savings Bank A/c) , no change for individual below the age of 60 years has been done but for the senior citizens the cumulative maximum benefit of section 80TTA and 80TTB shall not exceed Rs.50,000
  • B. Increase in 80D limit:
    Under section 80D (Deduction for payment of health insurance premium) the limit for senior citizen has been increased to Rs. 50,000 from Rs. 30,000.
  • C. Increase in limit under section 80DDB:
    Under section 80DDB (Expenses incurred for medical treatment on specified diseases), the class of super senior citizen has been submerged into senior citizen raising the limit of Rs.60,000/80,000 to Rs. 100,000 or the amount incurred whichever is lower.
  • D. No TDS:
    In case of Senior Citizen, TDS u/s 194A (Deduction of TDS on interest other than interest on securities) shall not be deducted, if interest does not exceeds Rs. 50,000. Earlier this limit was Rs. 10,000.

Conclusion :

We hope that after this analysis, you must be able to get the brief insight of the proposed amendments from the Budget 2018.

CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.