Tax Benefit to Individual after Budget 2018
Cess Hiked! Will Standard Deduction Be of Much Benefit to an Individual? It has been quite a few days since the budget is declared for the AY 2018-19. No changes were introduced in the tax rates and slabs but as they say every cloud has a silver lining, in this case, it was the standard deduction of Rs 40,000 from the income of salaried and pensioners. But because of Mr. Jaitley’s acumen, cess hike of 1% (earlier 3%, now 4%) became a source of perplexity for people.
This has brought several questions and doubts in their mind that how much more cess will one has to pay? What would be the profit because of standard deduction?, etc. For salaried people things are more complicated, while they are gaining a standard deduction of Rs 40,000 straight but losing Rs 19,200 on transport deduction and exemption of Rs 15,000 on medical allowances. So, they are left with a sum of Rs 5,800 only as a deduction on taxable income. And, this tax saving is said to get nullify because of the increment in cess.
Want to get a clear idea of what role standard deduction with increment of cess is playing for whom, go through the demo tables given below. These tables have been made by assuming the income from the income range of salaried individuals:
As it can be seen, individuals below the age of 60 having salary between Rs 2.5 lac to Rs 5 lac (both range inclusive) have to pay Rs 194 less and those earning in between Rs 5- 10 lacs (both range inclusive) have to pay Rs 150 less tax because of standard deduction. But people having salary more than Rs 10 lac have to pay Rs 712.8 more tax to the government.
From the above table, it’s clear that again those individuals between the age of 60-80 years falling in the range of Rs 3 lac to 5 lac and Rs 5 lac to 10 lac will have to pay Rs 218.7 and 174.8, respectively less tax than before but those falling above the range of Rs 10 lac will have to pay more tax of Rs 687.8 annually.
* Rs 34,200 (Rs 1,500+ Rs 19,200) calculated after taking the maximum permissible limits.
Now, individuals above 80 years of age falling in the income range of Rs 5 lac to 10 lac (both range inclusive) will have to pay less tax of Rs 274.8 but those having income more than Rs 10 lac have to bear more tax than before. The difference came out to be Rs 578.8 on an average.
The point is clear that the hike in cess along with the standard deduction is at least of some benefit for the middle class. Individuals having income more than Rs 1 lac per month are in loss as they will not have much significance of standard deduction rather increment in cess increased their overall tax. To save on taxes and make income on savings, there are several investment options available in mutual funds. All you need to do is, connect with us and take advice from our experts to start systematic investment plan (SIP).