Budget 2018: Govt has focused on building stronger and inclusive economy

With GST having been recently introduced and perceived to have a-not-so-beneficial short term impact, the aam aadmi was fair in expecting several tax breaks to increase his disposable income and subsequently, consumption. Key changes in the Budget that may have an impact on individual taxpayers are highlighted below: Education cess and secondary and higher education cess at 3 percent to be replaced with health and education cess at 4 percent of income tax and surcharge. Standard deduction of Rs 40,000 is re-introduced after a hiatus of more than a decade. This has been introduced in lieu of transport allowance (Rs 19,200) except for differently abled persons and reimbursement of medical expenses (Rs 15,000). This will also ease the compliance burden of employers on verification of bills. In order to bring greater relief to the senior citizens of the country, various deductions and reliefs are introduced: Deduction for health insurance premium or medical treatment increased from Rs 30,000 to Rs 50,000. [caption id=“attachment_4325309” align=“alignleft” width=“380”]  Image courtesy: Reuters[/caption] Deduction towards medical treatment of specified diseases for senior citizens and super senior citizens of Rs 60,000 and Rs 80,000 respectively is now increased to Rs 100,000. Interest income from deposit accounts will be eligible for deduction up to Rs 50,000. However, no additional deduction of Rs 10,000 for interest earned on saving account in such situations will be allowed. To minimize economic distortions and widen the tax net, exemption of long term capital gains on sale of equity shares or equity oriented mutual funds or unit of a business trust stands withdrawn. Concessional tax at 10% will be levied on long term capital gains in excess of Rs 100,000 without allowing indexation benefit. Also, no deduction or rebate shall be allowed. In order to bring greater transparency, reduce corruption and eliminate interface between the tax payer and tax officials, a new scheme would be notified for scrutiny assessments. For returns filed post 1 April, 2018 no additions would be made while processing the return on account of difference in amounts appearing in Form 26AS, Form 16 or Form 16A and amounts reported in the return. This will eliminate administrative and compliance burden. In order to minimize hardships to genuine transactions of sale of immoveable property, no adjustments would be made in case variation between stamp duty value and sale consideration is upto 5 percent. Rate of employee contribution to Provident Fund is reduced to 8 percent for women employees in the first three years of employment. The tax benefits on withdrawal of NPS is now extended to non-salaried subscribers. Exemption under section 54EC is now only available against long-term gains made on sale of land and building or both as against any long term asset and the period of holding of such bonds is enhanced to 5 years. From the above, this Budget seems to be a populist budget with focus on rural/lower income population and hence the expectations of salaried class are not met. The FM has also not made the common man out-of-pocket barring a few modest levies to balance the exchequer’s account. However, this Budget does depict the vision of our government in building a stronger and inclusive economy. Click here for full coverage of Union Budget 2018 (The writer is Tax Partner, EY; this piece has been co-authored with Renita Dsouza, Manager (Tax), EY)