Monday, 5 February 2018

Budget 2018: Here is how the income tax provisions affect your tax-outgo.

With the cost of medical treatments going up more than the general inflation levels and senior citizen having to spend relatively more money on their health.

From individual taxation point of view the budget 2018 can be termed as the budget of senior citizens. The finance minister has proposed various measures to provide relief to senior citizens.
With the cost of medical treatments going up more than the general inflation levels and senior citizen having to spend relatively more money on their health. Medical cost or medical insurance premiums constituted major part of the budget of senior citizens. Presently the senior citizen themselves or their children are entitled to claim deductions up to Rs 30000 for premium paid for buying health insurance policies. The finance minister has proposed to enhance this limit under section 80 D to Rs 50000.The finance minister has also extended the benefit of availing deduction in respect of expenses incurred for treatment of a senior citizen where the senior citizen does not have any health insurance which was available only to people over 80 years of age.
The other major relief proposed in the budget for senior citizen is in respect of interest income from banks, post offices and credit cooperative banks. The senior citizens mainly depend on the interest from fixed deposits for their day today expenses. 
 The finance minister simultaneously proposed to enhance the limit for tax deduction at source (TDS) by the payers. Presently the banks, post office and credit co operative banks deduct tax if the interest exceeds Rs 10000 from FD and RD now this limit is proposed to be raised to Rs 50000. Both these provisions will effectively leave more cash in the hands of senior citizens for meeting their day today expense.
The budget has also proposed to increase the limit of deduction under Section 80 DDB for treatment of some serious ailments from Rs 60000 to Rs 1 lakh. The ailments includes various disease like dementia and parkinsons disease which many senior citizen suffer from as these are age related disease. This deduction is also available for day today expense incurred for treatment and does not necessarily require hospitalisation.

Benefit to property sellers, sellers and buyers in case of difference between apparent consideration and value computed as per circle rates for stamp duty purposes.

The taxation of profits on sale of immovable property is taxed as business income for developer otherwise the same are taxed as capital gains. Computation provisions under both the situations provide that if the stated consideration is lower than the value computed based on circle rates will become taxable. Section 43CA is applicable for and Section 50C deals this situation where the immovable property is a capital asset. Under both the situations the provisions provide that where the value of apparent consideration is lower than the value as per circle rate adopted for the stamp duty payment, the difference between the two becomes taxable in the hands of the seller. If it is business asset the same becomes taxable as business income and as capital gains if the asset is held as capital asset.So even for a small difference between these two rates, the sellers are required to pay tax on circle rate valuation. 
In order to reduce the litigation and hardship to both the sellers and buyers for small difference between the circle rate and apparent consideration, the finance minister has proposed that the provisions of Section 43CA, 50C shall not be applicable in case the difference between these two value does not exceed 5% and the consideration as per agreement shall be treated as sale value for income tax purpose.

Restoration of standard deduction for salaried persons.

The salaried class has long been demanding for restoration of standard deduction which was available till 2005. Till 2005 salaried people were allowed a flat deduction from the taxable salary without proof of any expenses. The standard deduction is justified as salaried people as a class do not have any option to minimise their tax like the self employed people who can claim personal expenses as business expenditure. Salaried people are not allowed to claim many expenses like expense incurred for updating their skills, or expenses incurred for commuting from office of home and home to office. 
The restoration of standard deduction is certainly going to be very beneficial for the salaried people who do not have these two component as part of their salary as the entire standard deduction of Rs 40000 will add to their tax free income in such situation.


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