Mixed bag for salary earners

Dr Suresh Surana, Founder, RSM Astute Consulting Group

The Budget has provided certain relief on account of personal taxes particularly for those falling in lower income slabs, salaried employees and senior citizens.

• Restoration of Standard Deduction for salaried employees: The standard deduction of Rs.40,000 is proposed to be allowed for salaried employees. However, the tax deduction available for medical reimbursement (Rs15,000) and Transport Allowance (Rs19,200),cumulatively Rs34,200 has been taken away.
• Exemption on Long Term Capital Gains on sale of listed shares and equity-oriented mutual funds withdrawn:  As present, long-term capital gains exemption under Section 10(38) of the Income-tax Act is available on sale of listed shares or equity-oriented mutual funds or a unit of a business trust (held for more than 12 months and on which STT has been paid).

From FY 2018-19 onwards, such long-term capital gains exceeding Rs100,000 will be taxed at 10 per cent and distributed income by equity-oriented mutual funds will be taxed at the rate of 10 per cent. This would remove the disparity between growth and dividend plans.

It may be noted that  relief is provided in respect of grandfathering of long term capital gains upto 31 January 2018 and gains after that period shall be taxable under the new rate of 10 per cent.

The gains from equity shares held up to one year will remain short-term capital gain and will continue to be taxed at the rate of 15 per cent. However, the period of holding will be considered from the date of original investment and not from 31 January 2018. It may be also be noted that the long-term capital gains arising in the financial year 2017-18 (even arising between 1 February 2018 to 31 March 2018) will continue to be exempt.

• Tax-exemption on partial withdrawal from National Pension System (NPS) has been extended to non-employees subscribers. It is proposed to extend the exemption to partial withdrawal not exceeding 40 per cent of the total amount payable to subscribers on closure of their accounts or on their opting out. This exemption was earlier available only for employee subscribers 
• Rationalisation of deduction for Senior Citizens: At present, payments towards annual premium on health insurance policy, or preventive health check-up, of a senior citizen, or medical expenditure, a deduction under Section 80D earlier allowed upto Rs30,000, is proposed to be raised to Rs50,000. Similarly, a deduction between Rs60,000 and Rs80,000 is available to an individual and Hindu Undivided Family with regard to the amount paid for medical treatment of specified diseases for senior citizens, which is now proposed to be raised to Rs1,00,000 for both senior citizens and very senior citizens.
• Deduction upto Rs. 50,000 of Interest earned from bank deposits for senior citizens: At present, a deduction upto Rs 10,000/- is allowed under section 80TTA to an assessee in respect of interest income from savings account.  It is proposed to insert a new section 80TTB so as to allow a deduction upto Rs 50,000/- in respect of interest income from bank deposits or deposits with post office held by senior citizens. Further, there would be no TDS deduction for senior citizens upto interest income of Rs 50,000/-.

One of the widespread apprehensions High Net Worth Individuals (HNIs) regarding the Union Budget 2018 was the introduction of Inheritance Tax or Estate Duty. HNIs can now heave a sigh of relief as the Budget does not contain any such proposals. This reflects the pragmatic approach of the government which is focused on growth, revival of investment cycle and employment generation