Amidst high expectations from the corporate world, economists, salaried classes, farmers and home-makers, all hoping for some favourable changes, finance minister Arun Jaitley had a tough task at hand to balance these expectations and deliver a budget which would put India back on a growth track after a series of major reforms like demonetisation of high value currency and GST.
While making the relevant proposals from personal tax perspective, Mr Jaitley announced that due to the changes already introduced in the previous three budgets, no further changes would be proposed in the structure of the income-tax rates for individuals in the Union Budget 2018. However, education cess of three per cent has been proposed to replace with health and education cess of four per cent to promote health and education standards especially among rural population.
To provide some relief, however, the finance minister enthused the salaried class by re-introducing standard deduction of up to `40,000 but soon gave it away by withdrawing current exemptions on transport allowance (`19,200 per annum) and medical reimbursement (`15,000 per annum). Therefore, the effective reduction in the taxable income is only to the tune of `5,800 (`40,000-`19,200-`15,000).
A much anticipated move taken by the government is with respect to long-term capital gains from equity shares which are currently exempt from tax and now it has been proposed to levy a tax of 10 per cent if such gain exceeds `1 lakh without allowing the benefit of indexation. However, the government will not touch gains made through investments till January 31, 2018.
Further, it is pertinent to note that the finance minister commenced his fifth Budget speech by putting special emphasis on the senior citizen taxpayers. Hence, the Budget 2018 brought some good news for this class of taxpayers as limit of deduction under Section 80D has been proposed to increase from `30,000 to `50,000.
It shows the concern of the Narendra Modi government towards improving the health and safety of the senior citizens of this country.
Another gift given to senior citizens is the introduction of a new Section 80TTB so as to allow a deduction up to `50,000 in respect of interest income from deposits including all kinds of fixed deposits & recurring deposits.
However, the current deduction for `10,000 on savings bank interest under Section 80TTA of the Income-Tax Act will no longer be available to this class of taxpayers.
In a nutshell, with an aim to push up the economic growth and increase the direct tax base, nothing significant has been proposed from personal tax perspective.
However, from an overall perspective and economy as a whole, the Union Budget 2018 is surely rational and a growth oriented budget for the country.
(The writer is a director of Grant Thornton India LLP)