Why Budget 2018 presented by Finance Minister is disappointing for aam junta:
- He reintroduced standard deduction — it was scrapped in 2004-2005 — Jaitley did away with medical and transport allowance, except for differently abled persons, and hiked cess from existing 3% to 4%.
- The standard deduction is now Rs 40,000, which will translate into a small saving of Rs 194 for a taxpayer with an income of Rs 5 lakh and Rs 150 for an assessee with income of Rs 10 lakh. But for taxpayers in a higher income bracket, the new tax measures will actually increase liability.
- The tax liability on income of Rs 25 lakh will increase by Rs 3,713 and the liability for income of Rs 75 lakh by Rs 20,584. In fact, at an income of Rs 12,62,400, the benefit from Rs 40,000 standard deduction will be completely offset by the loss due to additional 1% cess.
- The extra burden imposed on taxpayers will enable the government to collect an estimated additional amount of Rs 11,000 crore.
- The government proposed to tax LTCG of above Rs 1 lakh per annum at 10%, compared to the earlier rate of 20% after indexation when it was abolished in October 2004. Indexation is a process that neutralises the impact of inflation on profits.