Union Budget of India 2018 was released by the Finance Mnister Mr. Arun Jaitely in Lok Sabha today. Relief to salaried taxpayers was highly expected. But will salaried employees benefit with standard deduction and other measures?
This budget had a lot of expectations as this was the last full budget for the Modi government. Modi as per his track record has kept the road of fiscal consolidation and economic reforms. Major focus in the budget was on Farmers, MSME, Employment and Health of Poor.
Relief to salaried employees in Budget 2018
Income Tax Benefit
Standard Deduction of Rs. 40,000 per annum has been allowed to the salaried employees in their tax returns in place of transport and medical allowance. Earlier salaried employees use to get a benefit of Rs. 19,200 per annum on account of transport allowance and Rs. 15000 on account of medical bill reimbursement. In order to save paper work, not every employer use to give salary under these heads to any employee therefore, resulting in loss of tax benefit to the employees.
What is Standard Deduction?
Standard deduction is a flat amount of deduction allowable on the taxable salary of any employee. The biggest benefit of such a deduction is that it is not based on actual expenditure therefore, no paper work is involved and every salaried employee/pensioner can claim it.
Benefits of Standard Deduction
Therefore, Pensioners and employees who did not had transport allowance and medical allowance in their salary structure will save Rs. 2000- Rs. 6000 per annum on income tax depending on the tax slab after standard deduction. Incremental benefit to employees already availing the said allowances would be Rs. 500 approximately. As per the Finance minister, around 2.5 crore individuals to get this benefit.
Provident Fund Contribution Relief
In order to increase the take home salary of women employees, government had decided to reduce their employee contribution to 8% of basic salary as against 12% for male employees. This will be applicable for new employees untill 3 years of their employment.
Government announced PMRPY (Pradhan Mantri Rozgar Protsahan Yojana) scheme in last year’s budget marking 8.33% employer contribution relief to the employers hiring fresher employees for the first 2 years. They have now raised the contribution relief to 12% for all sectors. This will reduce CTC (cost to company) of the company for hiring any fresher employee. Companies may also pass on the benefit to increase take home salary of the employees.
Overall there were only two major benefits for the salaried employees in the budget 2018. Basic Excise duty has been decreased on Petrol and diesel prices but an additional cess has been levied as well. Therefore, no big benefit on travel expense.