Budget 2018 has been announced and you cannot ignore it. It is going to affect you in more ways than you can imagine, here’s why:
1. This year tax slabs remain unchanged
Unlike the last budget, when the Finance Minister changed our tax slabs giving relief to taxpayers, this year the FM has decided to keep them unchanged. Instead, he has increased the education & health cess (an additional tax to meet specific expenses of the government) from 3% to 4%. Here are the slabs for the financial year 2018-2019 i.e. from 1st April 2018-31st March 2019.
2. But if you’re a salaried professional, you can now take Rs. 40,000 from your salary without paying any tax on it
Although the Finance Minister has kept our tax slabs untouched, in order to please salaried individuals he’s brought back Standard Deduction. This is an amount every salaried person can deduct from their salary and not pay any tax on it at all.
Currently, salaried people can claim several tax deductions but all of them require either proof or documentation. For example medical bills up to Rs. 15,000 and transport allowance up to Rs. 19200 per financial year were reimbursable provided you give proof. However now with the standard deduction, you don’t need any bills or documentation and you can claim a deduction of Rs. 40,000 per year.
3. If you’re planning on using cryptocurrencies I’d say you rather NOT. The FM has banished them for good
The government has officially declared bitcoin and other cryptocurrencies illegal for all purposes in India and that they’ll do everything they can to eliminate its usage. However, they are open to exploring the use of blockchain technology which currently powers bitcoin transactions.
This news has obviously affected cryptocurrencies which fell drastically today after this announcement.
4. If you’re planning to buy the iPhone X you’ll be paying some extra cash for it, thanks to customs duty
In order to promote Make in India, the government has raised customs duty on mobile phones from 15 per cent to 20 per cent, making them more expensive than before. That’s not all, even television sets, watches, and other electronics will attract a customs duty of 20%. Customs duty is the tax imposed on imported goods.
This is a push for electronic makers to start manufacturing their products in India. Few brands like Samsung, OnePlus and HMD Global’s Nokia, Apple are already a part of Make in India. We’re hoping this will create more jobs for us and also make these products affordable in the future.
5. For all those investing in the stock markets for the long run, your profits will take a hit:
Profits made by selling stocks at a higher price than what you bought them for are called capital gains. Capital gains can be long-term- gains made on selling shares held for more than a year and short-term- gains made on selling shares held for less than a year. Short-term capital gains are taxed at 15%. While currently, long-term capital gains are tax-free.
However, this budget tax on long-term capital gains made a comeback. Now the government has planned to tax long-term gains above Rs. 1, 00,000 at 10%. This comes as a huge shock to investors because for the last 15 years these gains were tax-free.
6. And so will your Mutual Fund returns:
Equity mutual funds that give dividend are tax free currently, but now they too will attract a tax of 10%. Though this tax has to be paid by the fund managers, they will pass on the incidence of this tax to the investors.
7. Lucky for all women employees, we can now take home extra cash. Thanks to a reduction in our EPF contribution:
Every month a part of your salary goes to employees provident fund, but in order to increase the take home salary for women the government has reduced this rate from 12% to 8% giving you more cash in hand to take back home!
8. And all the new people on the job, 12% of your EPF contribution will come from the government and not from you
Talking about take-home salary, for all those people who have just joined the workforce, with the new budget your take-home salary too will look attractive. Because for the first in 3 years, 12% of EPF will be given by the government.
9. The government has also figured a way to keep rising petrol prices under control:
Global crude oil prices are increasing to levels we cannot imagine. $70 per barrel. But still, the government has cut down petrol and diesel prices by Rs. 2 and removed additional excise duty on fuel by Rs 6. This doesn’t mean we will get to travel cheap, because a cess of Rs.8 per litre will be added to our petrol bills. It just means that petrol and diesel prices will remain stable.
The government cannot afford to give us more rate cuts because it will miss its fiscal deficit target for 2018-2019 which is supposed to be 3.3% of our GDP. Anything more than that and we’re doomed.
10. For all those above 60:
- Interest income from bank deposits will increase:
Currently, from the interest senior citizens earn on any bank deposits (like FD’s) up to Rs. 10,000 can be claimed as a tax deduction. Post April 1st, this deduction limit has been increased to to Rs 50,000 for interest income from deposits held with banks, co-operative society and post office by senior citizens. But no separate deductions will be available under section 80TTA for interest income from savings account for senior citizens.
- And you can claim more deductions for treatment of certain diseases:
Currently, a deduction limited to Rs 60,000 and Rs. 80,000 for very senior citizens is available to resident individuals and Hindu Undivided Family (HUF) for any expenses on medical treatment of specified diseases (i.e. malignant cancers, AIDS, etc). Post April 1st above deduction limit has been extended to Rs 1,00,000 uniformly for both categories. Also under Section 80 D the medical expenditure for senior citizen has increased from Rs 25,000(includes Rs 5,000 as premium) to Rs 50,000. The very senior citizen has Rs 30,000 without medical insurance.
- Along with deductions on health insurance:
Currently, a maximum deduction of Rs 30,000 is allowed to an individual or HUF for spending on health insurance premium (including Rs 5,000 towards preventive health check-up) for senior citizens. With Budget 2018, this deduction has increased to Rs 50,000.
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