Salaried class, as the largest individual tax contributor, had high expectations from the Union budget.
The finance minister in Budget 2018 has proposed few changes addressing the needs of the salaried class. The changes proposed are discussed below.
Standard deduction was last available in the tax year 2004-05 and was abolished thereafter.
It is now proposed to reintroduce standard deduction up to Rs 40,000 and this is certainly a welcome move.
However, this is more a consolidation and simplification of administrative processes given that medical reimbursements up to Rs 15,000 per annum and transport allowance of Rs 19,200 per annum has been taken away.
Further, it is now proposed to increase the education cess from 3 per cent to 4 per cent, which is applicable to all taxpayers, including the salaried class. This is certainly an added burden.
The proposal to enhance deduction under Section 80D from Rs 30,000 to Rs 50,000 in respect of payments made towards medical insurance, preventive health check-up and medical expenses relating to senior citizens is welcome and would enable some savings in taxes and encourage higher level of medical insurance.
Section 80DDB provides for a deduction for medical expenses incurred on treatment for specified ailments either for self or dependents.
The proposal is to enhance the deduction up to Rs 100,000 in respect of expenses relating to senior/ very senior citizens from the current levels of Rs 60,000 /Rs 80,000, respectively.
Salaried class had great hopes of relief from realignment of tax slabs and reintroduction of the standard deduction. There is nothing much for the salaried class to cheer from a tax saving perspective.
—Deloitte Haskins and Sells