Union Budget 2018 – Union Budget 2018 Direct Taxes Highlights

Union Budget 2018 – Union Budget 2018 Direct Taxes Highlights. No change in tax rates and basic exemption limit Tax rates continue to be same for A.Y. 2019-20 as applicable for A.Y. 2018-19. Further, there is no change in the basic exemption limits.

Health and Education Cess

  • “Education Cess on income-tax” @2% and “Secondary and Higher Education Cess on income-tax” @1% is levied.
  • Proposed amendment: A new cess named “Health and Education Cess is proposed to be levied @ 4% of income-tax including surcharge, if applicable, in place of existing cess of “Education Cess and “Secondary and Higher Education Cess on income-tax”.

Relief to Salaried employees

At present an employee is entitled for exemption of Rs. 19,200 (Rs. 38,400 for physically handicapped or blind or deaf and dump employees) towards transport allowance and exemption of Rs. 15,000 in respect of reimbursement of medical expenses. No Standard deduction is allowed.

Proposed amendment: A standard deduction of maximum of Rs. 40,000 is proposed to be allowed to salaried employees in lieu of present exemption in respect of transport allowance and reimbursement of medical expenses. The net benefit is only Rs. 5,800 which would be further reduced due to increase in cess by 1%. However, benefit of enhanced transport allowance to differently able persons shall be allowed.

Deduction in respect of interest income to senior citizen

A deduction upto Rs 10,000 is allowed under section 80TTA to an assessee in respect of interest income from savings account.

Proposed amendment: A new section 80TTB proposed to be inserted to enhance such deduction to Rs. 50,000 from the existing limit of Rs. 10,000 for senior citizens. Moreover, the benefit of such deduction is proposed to exteneded to interest on fixed deposits and recurring deposits.

Deductions available to senior citizens in respect of health insurance premium and medical treatment

Section 80D, inter-alia, provides that a deduction upto Rs 30,000 to an assessee, being an individual or a Hindu undivided family, in respect of payments towards annual premium on health insurance policy, or preventive health check-up, of a senior citizen, or medical expenditure in respect of very senior citizen.

Proposed amendment: Section 80D proposed to be amended to increase such limit of deduction from Rs. 30,000 to Rs. 50,000 for resident senior citizens, who is of the age of 60 years or more during the previous year.

Senior citizens not covered by insurance can claim reimbursement of medical expenditure upto Rs. 50,000. Earlier this benefit was available only for very senior citizens.

Further, in case of single premium health insurance policies to effect or to keep in force an insurance on the health for more than a year, it is proposed that the deduction shall be allowed on proportionate basis for the number of years for which health insurance cover is provided, subject to the specified monetary limit.

Enhanced deduction to senior citizens for medical treatment of specified diseases

Section 80DDB, inter-alia, provide that a deduction shall be available to an individual and Hindu undivided family in respect of an amount paid for medical treatment of specified diseases upto Rs 80,000 in case of very senior citizen and upto Rs 60,000 in case of senior citizens.

Proposed amendment: It is proposed to increase such deduction upto Rs. 1,00,000 for both senior citizens and very senior citizens in place of existing deduction upto Rs 80,000 and Rs. 60,000 in respect of very senior citizen and senior citizens, respectively.

Extending the benefit of exemption of withdrawal from NPS to non-employee subscribers

The existing provisions of the clause (12A) of section 10 of the Act provides an exemption of 40% of the total amount payable to an employee contributing to the NPS on closure of his account or on his opting out. This exemption is 17 not available to non-employee subscribers.

Proposed amendment: It is proposed to amend this section to extend the benefit of such exemption to all assessees. However, benefit of exemption under clause (12B) for partial withdrawal continues to be restricted to employees alone.

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