Indian Budget 2018-19: Tax Benefits on Individual Incomes

The NDA Govt’s last budget before 2019 General Elections has built up new expectations from the public and industry. Here is the impact analysis of the budget on the Individual Tax Payers.

What’s in it for Individual Taxpayers?

Direct Tax slabs have remained unchanged for individual taxpayers as per the previous year (2017-18) rates. The short-term capital tax remains high @15%.

Tax Rate
Income up to 2.5 lakh
Income between 2.5 -5 lakhs
Income between ₹5 - ₹10 lakh
Income above ₹10 lakhs

There are certain changes in this year’s budget for other tax components:
  1. Transport and medical expenses of 19,200 & ₹15,000 respectively have been replaced by a standard deduction of 40,000, hence giving a net benefit of ₹5,800.
  2. Long-Term Capital Gains from listed shares has been removed from tax-free status after 13 years. Long-term capital gains exceeding 100,000 on listed equity shares and equity mutual funds until 31st Jan 2018 will now be entitled to 10% tax with no indexation benefit. 
  3.         There is a bunch of benefits for Senior Citizens –
    a.      the exemption limit on interest incomes from banks and post office has been increased from ₹10,000 to ₹50,000. 
    b.      there is a hike in deduction limit in health insurance premium and medical expenditure from ₹30,000 to ₹50,000.
    c.       increase in the upper deduction limit for medical expenses for certain critical medical illness to ₹100,000 for all senior citizens.

The first change can be seen as a neutral change as it won’t be adding any much benefit to the taxpayers. The LTCG exemption on equities has played a major role in increasing investor participation. The second change is negative and this will discourage the retail investor participation in the stock markets.  The third change is a positive change and will help in providing more relief to the senior citizens. The above benefits for senior citizens are in the backdrop of falling interest rates for a post office and bank fixed deposits which were a primary concern for them as most of them live off their fixed deposits and savings.

In my next article, I will be discussing the impact of the budget on business class, farmers, agriculture and rural economy.

Vidya Ratan: Bachelor of Business Studies (Finance) graduate from SSCBS, DU. The views expressed are my own based on the analysis and research on the topic from various books, reports, and web articles. The articles published here cover a variety of economics, finance, and general awareness related topics.

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  1. In this article I have mentioned the changes in direct taxes and its components and its further impact on the income of individuals and their savings.

    In my next article, I will be discussing the impact of the budget on business class, farmers, agriculture and rural economy.


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