By Anchal Jain
WHAT BENEFIT DOES THE SALARIED EMPLOYEE GET FROM THE BUDGET 2018?
Mr Arun Jaitely, the Finance Minister of India on February 1, 2018 introduced the Union Budget 2018.
From the viewpoint of salaried employee, the focus has been on the following:
The Union Budget 2018 came as a slight relief to the salaried employees as the erstwhile standard deduction of INR 40,000/- is introduced again. However, this benefit of standard deduction does come with a cost which is, the employees will no longer be allowed the exemption under Transport Allowance of INR 19,200/- and Medical Reimbursement of INR 15,000/-. If we look at it carefully, we can interpret that before the standard deduction was introduced, a salaried employee was getting a total benefit of INR 19,000 + INR 15,200 = INR 34,200/- as compared to the now available deduction of INR 40,000/-.
Further, in order to avail the exemption under the category of transport allowance and medical reimbursement, the employee was required to submit the bills as a proof to avail the deduction. But, with the introduction of standard deduction, the requirement of proof is done away with, as all the employees are allowed to avail a flat deduction of INR 40,000/- on the income earned by them.
The Union Budget 2018 has made the long term investments taxable which were exempt earlier, making it difficult for the individuals to save tax on their long term investments. With the introduction of tax on Long Term Capital Gain (LTCG) on selling of equity, equity oriented mutual funds or even the business units, in case the value of LTCG is above INR 1,00,000/-. The long term capital gain will be taxed at the rate of 10% and no indexation benefit shall be availed by the seller. The short-term capital gains tax of 15% remains unchanged.
However, there are 2 escape windows from being taxed which are:
In case the instruments are sold post 31st March 2018, the cost of acquisition (COA) can be determined as follows:
The COA of the instrument bought before 1st Feb 2018 shall be higher of:
Let's say, you had invested INR 100,000/- in equity mutual funds a year ago.
You sell these funds after 31st March 2018 for INR 1,30,000/- after holding them for 1 year (from your actual date of purchase).
To compute your long term capital gains, you need to look at the value of your holdings on 31st Jan 2018. If, let's say, that value was INR 1,20,000/-, then your long-term capital gains will be INR 10,000/- (i.e. 1,30,000 – 1,20,000). To re-emphasise, you will calculate your taxable gains by subtracting the value on 31st Jan 2018, rather than the original purchase price. If original purchase price was higher than the value of holdings as on 31st Jan 2018, then the original purchase price will be subtracted to compute LTCG.
EXEMPTION TO SENIOR CITIZEN
Much to our surprise, The Union Budget 2018 has proven to be really kind towards the senior citizen, as it allows them to live a more dignified and relaxed life by proposing numerous exemptions to them, which are as follows:
It can be inferred from the above points that a lot of amendments have been undertaken wherein some proved to be a benefit and others did not.
Consequent to the relief, an important change occurred with respect to the increase in value of education cess from 3% to 4%, along with altering the name to education and health cess. Though It is important to note that, there has been no change in the income tax slab rates.
Note: The proposals are subject to amendment as the Finance Bill is yet to be passed by the Parliament.
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