Today, on the 1st of February, 2018 Union Finance Minister Arun Jaitley presented before the nation, the much-awaited union budget for the year 2018-2019.
This budget was eagerly awaited with high expectations from the entire country in the context of being the last budget presented by the current BJP government, before the general assembly elections of 2019. For this reason, the common man had his expectations (and fears) from the budget.
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Taxation reforms are one of the key focus areas in the budget for millions of middle income and large income individuals in the country.
Key Tax Reforms – Budget of 2018-2019
- Personal income tax slab remains unchanged this year. The government had made major changes to the income tax slab last year.
- Medical and transport allowance which is currently allowed as deduction has been discontinued from this year. In lieu of these deductions, a standard deduction of Rs 40,000 has been introduced for the salaried class.
- Long-term capital Gains (LTCG) of 10% has been re-introduced on gains from the sale of equity shares, exceeding the amount of ₹1,00,000.
Long-term for capital gains tax purpose remains unchanged at 1 year. Previously, Long-term Capital Gains on gains from the sale of equity shares was totally exempt.
- Short-term Capital gains (STCG) on the sale of equity shares remains unchanged at 15%. Short-term is a period less than one year.
- Education cess (comprised of Secondary and Higher Secondary Education Cess) has been increased from 3% previously to 4%. The government is expecting to collect an additional ₹11,000 crore from this increase in cess.
Cess is added to the final taxable income.
- Senior citizens:
- Deduction for medical expenses which falls under section 80D has been increased from ₹30,000 to ₹50,000.
- For certain specified illness under section 80DDB, the limit has been raised to ₹1, 00,000. Earlier this limit was ₹60,000 for senior citizen (60 years) and ₹80,000 for very senior citizens (80 years).
- Interest income on deposits with Banks and Post Offices which were exempted up to ₹10,000 under section 80TTA shall now be exempted up to ₹50,000.
- TDS u/s 194A is not required to be deducted.
- Limit for investing in interest-bearing LIC schemes has been doubled from ₹750,000 per senior citizen to ₹1500,000 per senior citizen.
- The corporate tax rate has been decreased from existing 30% to 25% for those companies whose annual turnover is up to ₹250 crore (last year this 25% corporate tax rate was for companies with a turnover not exceeding ₹50 crore). Mr. Jaitley that the ₹250 crore limit will effectively benefit 99% of the companies which file tax returns. On the other hand, he also mentioned that the government is expecting to forego revenue amounting to ₹7,000 crore due to this reduction in the corporate tax rate.
- A tax on distribution income @10% has been levied this year on.
- Any entity entering into a transaction of ₹2.5 lakh or more must necessarily furnish PAN henceforth.
- Custom Duties:
- Customs duties on mobile phones and televisions has been increased from 15% to 20%
- A new surcharge by the name of ‘Social Welfare Surcharge’ has been introduced @10% on imported goods
- Import of solar tempered glass for the manufacture of solar cells exempted from customs duty.
- Customs duty on imitation jewelry hiked from 15% to 20%
- The government will contribute 12% of the wages of new employees in EPF in all sectors for next 3 years.
- Women contribution to EPF reduced to 8% for first 3 years.
To read the major highlights from the Union Budget of 2018 – 2019, click here.
Disclaimer: the views expressed here are those of the author and do not reflect those of Groww.