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Budget Highlights
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Budget cheers seniors, disillusions salaried, even as market absorbs shock!

February 2, 2018 3002 Views
MUKESH M. PATEL
Advocate

Budget 2018 has indeed been 'Charming for the Farming'… a historic document for the 'Kisaan,' 'Makaan' and 'Ayushmaan' focusing on the maiden launch of national Health Protection and Economic Growth & Development of the Agricultural & Rural Sectors!

The FM also needs to be complimented for the efforts of his team in widening the tax payer base and securing an appreciable rise in the direct tax revenue growth, alongwith the administrative focus on 'E-Assessment' for greater transparency and accountability.

The FM paid a rich tribute to his major constituency of tax payers, being the salaried class, who as he acknowledged, paid almost three times the income tax as compared to the segment of business and professional class of individuals, almost the same in number. While on one hand he has granted a respectable relief of Rs.40,000 by way of Standard Deduction, the simultaneous withdrawal of the exemption on account of Transport Allowance of Rs.19,200 and Reimbursement of Medical Expenses of Rs.15,000, totaling to Rs.34,200 has virtually left the Salaried with an effective gain of exemption of only Rs.5,800. Considering the increase in the tax burden of 1% Health and Education Cess, quite ironically, the maximum tax relief ranges only upto Rs. 1,070, with even a negative impact in higher slabs of income (See Box).

Taxable Income after Transport & Medical exemptions

Current Tax

FY 2017-18

Taxable Income after Standard Deduction & 1% rise in Cess

Proposed tax

FY 2018-19

Net Relief/Burden

(A) (B) (C) (D) (E)=(B)-(C)
3,01,000 51 2,95,200 0 51
5,05,900 14,090 5,00,100 13,020 1,070
7,50,000 64,375 7,44,200 63,793 582
12,28,000 1,86,327 12,22,200 1,86,327 0
24,00,000 5,48,475 23,94,200 5,,51,990 (-)3,515
50,00,000 13,51,875 49,94,200 13,63,190 (-) 11,315

No doubt, Senior Citizens have reason to cheer about the higher deductions for medical insurance and treatment and bank deposit interest.

 

Capital Market Shock With Soothing Relief!

The media forecasts in relation to taxing of Long Term Capital Gains have hit the bull's eye. However, the perceived shock of the aftermath has been very well absorbed by the market on account of the soothing relief in respect of the 'Grandfathering' provision as announced by the FM. The provision of adopting the Fair Market Value as on 31St January, 2018 or the actual cost of acquisition, whichever is higher, shall by and large ensure the comfort of the equity market investors in respect of their accrued gains until date. However, they will now be required to shell out the extra burden of 10% alongwith STT (which has also been retained) and this revenue gain alongwith the 10% DDT in respect of dividend on units of Equity Oriented Mutual Funds shall go to substantially augment the tax collections from the capital market.

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