Every month when you receive salary, a list of expenses is already on your head. Be it children’s school fee, wife’s favorite saree or a smartphone you wanted to purchase since long.
Managing these expenses is already a headache, on top of that every year budget gives you negative surprises. No extra relief in deductions, no change in tax slab rates etc.
While presenting Budget 2018, our dear finance minister brought back standard deduction for salaried class individuals from F.Y 18-19 onward.
Now, you must we wondering, How this new change will impact my savings when it is already difficult to save from the salary every month?
Get ready for a surprise, because this change will increase your income saving by further ? 5800/-. (Net tax saving will be ? 1740 assuming you fall into 30% slab rate).
Bet this brought a big SMILE to your face! And we will even prove it to you. Before that, let us dig into some basics of the standard deduction.
Standard deduction means a flat deduction which would be provided from the salary income of an individual. It simply means that you can remove the standard amount directly from your net salary without actually incurring any expense.
Amazing isn’t it?
As per Budget 2018, Rs 40,000 can be claimed by any person having income from salary. But there is a catch here.
From now on, i.e. after budget 2018, you will no longer be able to claim Transport Allowance & Medical Reimbursement.
Before budget 2018: Salaried persons could claim tax benefit on Transport Allowance of ? 1,600 p.m. (19,200 p.a) and Medical Reimbursement of ? 15,000 p.a.
These amendments will take effect from 1st April 2019 and will accordingly apply from A.Y 2019-20 onward.
As you can see above, how this new change increases your saving by Rs 5,800 [40,000 – (19200+15000)].
This has come as a huge advantage for pensioners & people who did not have components of transport & medical allowance in their salary. Reason being, now both these categories of person can straight away claim an income saving of ?40,000. (Net tax saving will be ? 12,000 assuming you fall in 30% slab rate).
The employees are required to submit proof to their employers to claim their Allowances.
With the introduction of the standard deduction, you can claim this deduction of Rs 40,000 without any proof! But from now onward, no benefit can be availed under medical & transport allowance as they have been abolished w.e.f budget 2018.
In simple words, whether you incur any expense on transport, medical or any allowance, you can reduce Rs 40,000 straight-away.
We told you how standard deduction gave you an income saving of Rs 5,800/-.
But our dear finance minister, side by side increased the amount of Cess from 3% to 4%. This further reduced the net benefit received by you from standard deduction.
Yes, it can be said that with the introduction of the standard deduction for salaried persons, some benefit has incurred in the form of savings in income.
But it would have been more beneficial if the cess amount would not have been increased.
You do not need to worry about it! We will plan your taxes to ensure that you get maximum deduction & maximum refund within the shortest time.
Get in touch with our eCAs now! Happy Filing ????
Complete guide covering all the basic tax related terms.So, that tax terms will not work as a road-stopper in your way!!
Comprehensive Guide containing all Information that you must know while filing of your ITR for FY 2018-19 (AY 2019-20).
Free Income Tax Calculator for Assessment Year (AY) 2018-2019 and AY 2017-2018 with new budget changes.
Calculate HRA exemption based on your salary for AY 2018-19. Make accurate calculations of HRA for employees.
Hire smartest eCA's toFile Your Income Tax Return. CA Assisted Filing of ITR. File your Income Tax Return with confidence and ease.
Tax2win is an efiling portal to prepare and efile income tax return Online. Tax2win helps individuals to file their income tax return.