Free Press Journal

Budget 2018: Existing Income Tax slabs, and useful deductions to know about

FOLLOW US:

As the Narendra Modi-led BJP government is set to announce its final union budget on February 1, 2018, before the 2019 parliamentary elections, there are certain modifications which may come into effect. Finance minister Arun Jaitley has lot on his plate in the aftermath of demonetisation and Goods and Services Tax (GST) and would be interesting to know how this budget pans out.

Jaitley is expected to announce some income tax relief for the middle class. The government may tweak income tax slabs and rates to bring down the burden on individuals, according to a survey by tax and advisory firm EY. Standard deduction for salaried individuals could make a comeback: The government may bring in standard deduction in Budget 2018 to reduce the tax burden of salaried individuals, reported NDTV.

In last year’s budget (2017), the government did not change income tax slabs/rates but gave a rebate of up to Rs 2,500 for taxable salary up to Rs 3.5 lakh. Under the Income Tax Act, there are many exemptions that can reduce your tax liability.


Income tax slabs for taxpayers for FY 2017-18:

General Category
(Up to 60 years of age)
Income Tax
Up to Rs 2.50 lakh Nil
Rs 2.50 lakh to Rs 5 lakh 5%
Rs 5 lakh to Rs 10 lakh 20%
Above Rs 10 lakh 30%

Senior citizens
(60-80 years)
Income Tax
Up to Rs 3 lakh Nil
Rs 3 lakh to Rs 5 lakh 5%
Rs 5 lakh to Rs 10 lakh 20%
Above Rs 10 lakh 30%

Super senior citizens
(Above 80 Years)
Income Tax
Up to Rs 5 lakh Nil
Rs 5 lakh to Rs 10 lakh 20%
Above Rs 10 lakh 30%

Surcharge of 10% for income between Rs 50 lakh and Rs 1 crore with marginal relief

Surcharge of 15% for income above Rs 1 crore with marginal relief

Rebate of up to Rs 2,500 for taxable salary up to Rs 3.5 lakh

Education and higher education cess of 3%

As you can see from the above table there are quite a few modifications for the tax slabs and now it’s up to the finance minister to make a detailed study out of it.

Now look at some deductions available for FY 2017-18:

House Rent Allowance under Section 10 (13A) of the Income Tax Act

This includes and follows:

1) Rent paid annually minus 10 per cent of basic salary plus dearness allowance

2) Actual HRA received

3) 40 per cent of basic and dearness allowance (50 per cent in case of metro cities)

Deductions under Section 80C

This deduction pertains to Section 80C of the Income Tax Act, and provides various provisions under which an individual can get deduction benefits up to Rs 1.5 lakh. Tax-saving mutual funds (ELSS), Employees’ Provident Fund (EPF), Public Provident Fund (PPF), Sukanya Samriddhi Account, National Savings Certificate and tax-saving fixed deposits are some of the investment options that offer benefits under Section 80C.

Also read: Union Budget 2018: Can the Budget be both populist and pragmatic?

Deductions under Section 80CCD(1B)

It provides deduction up to Rs 50,000 for investment in an NPS Tier 1 account

Deduction of interest on housing loan

Again like previous acts, Under Section 24B of the Income Tax Act, interest paid up to Rs 2 lakh on housing loan is allowed as deduction from your taxable income. On rented properties, the borrower can only claim deduction of up to Rs 2 lakh per year after adjusting for the rental income. And the amount above Rs 2 lakh can be carried forward for eight assessment years.

Deduction under Section 80EE

This particular section includes an additional deduction of Rs 50,000, and is available over and above the limit of Section 24B on interest paid on home loans if the person is buying a house for the first time.

Deduction under Section 80D

Those below 60 years of age can claim deduction of Rs 25,000, and those above 60 years of age can claim and Rs 30,000, towards medical insurance premium paid for self, spouse and children. Further, deductions can be availed through systemic processes and terms and conditions.

Deduction under Section 80E

Any tax-paying citizen can claim deduction for interest paid on education loan for him, spouse or children. There is no upper limit on the amount of deduction.

From the above-mentioned tax slabs and deductions, the government has a lot to think and ponder about the economy and the next fiscal year would be crucial to boost investment and also give an impression that India is really the world’s fastest-growing economy. PM Narendra Modi’s appeal to domestic and foreign investors to invest in India will depend on this year’s budget.