NewDelhi: Finance Minister Arun Jaitley did not provide any relief in the income tax rates in the Union Budget 2018-19. He however proposed to allow a standard deduction of Rs 40,000 in lieu of the present exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses.
It is to be noted that the transport allowance at enhanced rate shall continue to be available to differently-abled persons. Also, other medical reimbursement benefits in case of hospitalisation etc., for all employees shall continue.
Jaitley has said that the total number of salaried employees and pensioners who will benefit from this decision is around 2.5 crore.
Experts believe that the move to announce standard deduction of Rs 40,000 apart from reducing paper work and compliance, will help middle class employees even more in terms of reduction in their tax liability. This decision to allow standard deduction shall significantly benefit the pensioners also, who normally do not enjoy any allowance on account of transport and medical expenses.
The current tax-free limit for medical expense reimbursement is set at 15,000 per annum and transport allowance exemption of Rs 1,600 per month.
Manish Gupta, CA and Partner at Kanchan & Associates has explained the tax benefit on standard deduction of Rs 40,000 under these categories:
a) Assuming the standard deduction amount is inclusive of medical expense reimbursement and transport allowance
b) Exclusive of medical expense reimbursement and transport allowance and
c) Benefit for pensioners
Before understanding the break-up, check out the income tax slab (unchanged this year) under which you fall
Individual Tax Payers
-Up to Rs 2,50,000: NIL
-Rs 2,50,001 to Rs 5,00,000: 5 percent
-Rs 5,00,000 to 10,00,000: 20 percent
-Above Rs 10,00,000: 30 percent
Senior Citizens 60 years but less than 80 years
-Up to Rs 3,00,000: NIL
-Rs 3,00,001 to Rs 5,00,000: 5 percent
-Rs 5,00,001 to Rs 10,00,000: 20 percent
Assuming that the standard deduction amount is inclusive of medical expense reimbursement and transport allowance here is how much it will impact you.
Tax-free limit for medical expense reimbursement = Rs 15,000 per annum
Transport allowance exemption = Rs 1,600 per month (Rs 19,200 per annum)
Total = 34,200 p.a
After the deduction, the calculation and subsequent tax benefit will be as follows:
Proposed: Rs 40,000
Deducted: Rs 34,200 (on medical and transport combined)
Effective change: Rs 5,800
How much you save?
| Tax threshold | Tax payable | Effective change after the new decision |
| Up to Rs 2,50,000 | Nill | NA |
| Rs 2,50,001 to Rs 5,00,000 | 5 percent | Rs 290 |
| Rs 5,00,001 to Rs 10,00,000 | 20 percent | Rs 1160 |
| Rs 5,00,001 to Rs 10,00,000 | 30 percent | Rs 1740 |
Assuming Rs 40,000 if it is over and above Medical and transport, how much you save?
| Tax threshold | Tax payable | Effective change after the new decision |
| Up to Rs 2,50,000 | Nill | NA |
| Rs 2,50,001 to Rs 5,00,000 | 5 percent | Rs 2,000 |
| Rs 5,00,001 to Rs 10,00,000 | 20 percent | Rs 8,000 |
| Rs 5,00,001 to Rs 10,00,000 | 30 percent | Rs 12,000 |
How much will pensioners save?
Same as above.
Bureau Report
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