Top three tax benefits for individuals from Budget 2018

By CA. Sudarshan Pukale

Contact Number: 9822119637.

 

 

On 1st February 2018, our honorable finance minister Mr. Arun Jaitley presented the Union Budget 2018 in the parliament.

Although, there were many expectations from the citizens that there will be more tax incentives in the form of an increase in the basic exemption limit, increase in exemptions and increase in deductions.

But, immediately when all heard about there is no proposal to make any changes in the tax slabs most of us might have said, “O No”. At least, there should have been a little bit of increase in the basic exemption limit. Isn’t it?

Now, nevertheless that there is no change in the tax slabs, we will see top three tax benefits the finance bill proposes for each taxpayer.

 

Here’s the first tax benefit.

A Standard Deduction for Salaried individuals U/S. 16 (ia).

It was criticized by the salaried class that businessmen and professionals get more benefits in the form of claiming of expenditures while calculating their taxable income and we, the salaried class don’t have any incentive and tax is deducted directly from our salary.

Here’s the good news for you. If you are a salaried employee then you will get a benefit of Rs. 40,000 or amount of salary whichever is lower as a standard deduction from your salary and the balance salary will be taxable.

So, if you are in 5 % tax net then you will save tax of Rs. 40,000 x 5.15 % i.e. Rs. 2,060, if you are in 20 % tax net then you will save tax of Rs. 40,000 x 20.6 % i.e. Rs. 8,240, and if you are in 30 % tax net then you will save tax of Rs. 40,000 x 30.9 % i.e. Rs. 12,360.

A word of caution.

If you are not a physically disabled person then remember the following:

It is proposed to withdraw exemption of Transport Allowance U/S. 10 (14) which is presently Rs. 1,600 p.m. i.e. Rs. 19,200 p.a.

And, it is also proposed to withdraw reimbursement of medical expenses U/S. 17 from a list of perquisites which is presently Rs. 15,000 p.a.

So, if you are already getting the benefit of Transport allowance and reimbursement of medical expenses then you will have a net benefit of Rs. 40,000 – 19,200 – 15,000 = Rs. 5,800.

So, in this case, you get a marginal benefit. If you are in 5 % tax net then you will save tax of Rs. 5,800 x 5.15 % i.e. Rs. 299, if you are in 20 % tax net then you will save tax of Rs. 5,800 x 20.6% i.e. Rs. 1,195 and if you are in 30 % tax net then you will save Rs. 5,800 x 30.9 % i.e. Rs. 1,792.

However, if, presently you are not getting the benefit of transport allowance and reimbursement of medical expenses then you will have the full benefit of Rs. 40,000 standard deduction.

 

Here’s the second tax benefit.

Deduction in respect of interest on deposits for senior citizens U/S. 80 TTB.

Presently, interest on savings bank deposits is deductible U/S. 80 TTA up to Rs.10,000. However, interest on fixed deposits and recurring deposits are not deductible. Here is the good news if you are a senior citizen and earn interest on your fixed deposits and recurring deposits made with the banks then you will get a deduction of Rs. 50,000 p.a. towards such interest.

Also, no tax will be deducted on such interest income.

So, if you are in 5 % tax net then you will save tax of Rs. 50,000 x 5.15 % i.e. Rs. 2,575, if you are in 20 % tax net then you will save tax of Rs. 50,000 x 20.6 % i.e. Rs. 10,300 and if you are in 30 % tax net then you will save tax of Rs. 50,000 x 30.9 % i.e. Rs. 15,450.

 

 

Here’s the third tax benefit.

Increase in deduction U/S. 80 D for senior citizens.

Presently, the maximum deduction U/S. 80 D towards health insurance premium or medical expenditure is Rs. 30,000.

But, If you are a senior citizen then you can claim deduction up to a maximum of Rs. 50,000 instead of Rs. 30,000. So, you are getting an extra benefit of Rs. 20,000.

Consequently, if you are in 5 % tax net then you will save tax of Rs. 20,000 x 5.15 % i.e. Rs. 1,030, if you are in 20 % tax net then you will save tax of Rs.20,000 x 20.6 % i.e. 4,120 and if you are in 30 % tax net then you will save Rs. 20,000 x 30.9 % i.e. Rs. 6,180.

 

In a nutshell, it can be said that you get a marginal benefit in the form of deductions proposed in the budget.