Our Constitution has given the power to the Union Government to levy tax on any income other than agricultural income under Section 10(1) of the Income Tax Act, 1961. The Central Board of Direct Taxes (CBDT) is the policy-making body of the Income Tax department. India stands out among the fastest growing economies in the world.Its Union Budget is referred as the annual financial statement, which estimates receipts and expenditure of the government for a fiscal year from 1st April to 31st March.On Feb 1, the Hon’ble Finance Minister presented the Union Budget 2018-19 in the parliament that have made various positive changes in the personal income-tax rate following revision of 7th Pay Commission. Interestingly, the tax data analysisviewed that 16% of personal income-tax collection comes from the salaried employees and pensioners.
1.89 Crore salaried individuals have filed their returns during Assessment Year 2016-17 and have paid a total tax of Rs 1.44 Lakh Crore. The budget has provisioned the door for exemptions for tax saving investment nevertheless citizen do not like to pay taxes. Till now, taxpayers had to furnish medical bills and an undertaking for conveyance expenses to get benefit of Rs 19,200 under transport allowance and Rs 15,000 under the medical allowance.After Financial Year2006-07, the government now reintroduce a flat Standard Deduction of Rs 40,000 in lieu of the present exemption. However, the transport allowance shall continue to differentlyabled persons. Also medical reimbursement benefits for hospitalization to all employees shall continue. This Budget also announced a new National Health Protection Scheme that will cover 10 Crore poor families and other50 Crore people for providing each family an insurance of up to Rs 5 lakh every year in case of secondary and tertiary hospitalisation.
The Finance Minister proposes incentives for senior citizens to provide a dignified life.There is an exemption of interest income on deposits like Fixed Deposit, Recurring Deposit with Banks and PostOffices increased from Rs 10,000 to Rs 50,000. Such incomes are exempted from TDS under section 194A. From the fiscal 2018-19, the individual investment plan for the LIC Pension plan Pradhan Mantri Vaya Vandana Yojna (PMVVY) increased from 7.5 lakh to 15 lakh. Besides there are Senior Citizen Saving Scheme (SCSS) plan available for 8% interest rate. With this,now a pensioner (per couple) can invest a total of Rs 60 Lakh for assured return at 8% per annum.
The limit of deduction for Senior Citizen health insurance premium andmedical expenditurerose from Rs 30,000 to Rs 50,000 under section 80D.The limit of deduction for medical expenditure in respect ofcertain critical illness roseto 1 Lakh for all senior citizens under section 80DDB from Rs 60,000and Rs80,000 for senior citizen and very senior citizen respectively. There are permissible deductions of Rs 1,50,000 from gross total income under Sec 80C/80CCC. They are PPF, NSC,Equity-linked savings schemes (ELSS), MF, Annuity LIC, Life Insurance, Accrued Interest on NSC, Home Loan Principal, Stamp Duty/ Registration on House, Fixed Deposit for 5years, National Housing Bank, Post office CTD, Cont Sup Fund, National Savings Certificate (NSC), KVP, Provident Fund, LIC MF, Pension Fund, Senior Citizen Saving Scheme (SCSS), Sukanya Samriddhi Account (SSA).
From thelast year Union Budget, the tax rate for individuals in the lowest tax bracket of Rs 2.5 Lakh to Rs 5 Lakhhas been cut to 5 percent from 10 percent (20% for between5 Lakh to 10 Lakh and 30% for above 10 Lakh). Also the tax was also reduced to Rs 2,500 from Rs 5,000 for those earning between Rs 2.5 Lakh and Rs 3.5 Lakh. There is Nil tax for income upto 2.5 Lakh (3 Lakh for senior citizen and 5 Lakh for very senior citizen). Investments made under 80C up to Rs. 1.5 lakhs will continue eligible for tax exemptions since FY 2015-16.Budget 2015-16 introduced an additional income tax deduction of Rs. 50,000 for contribution to a voluntary pension scheme New Pension Scheme (NPS) under Section 80CCD.However, the education cess and secondary and higher secondary cess has been raised to 4% from 3% last fiscal.
There are other permissible deductions available under various sections. A taxpayer can plan these deductions from the beginning of the FY to avail benefit.
Pensioners’ woes : It is always a shock for pensioners and senior citizens when there is tax deduction at source from pension payment. They park funds as fixed deposit and get monthly/quarterly intereststhat fetch help them tide over their expenses. To keep tax liability to minimum, pensioners can invest on PPF (exempt tax basket). Also short term ELSS (3 years) and Tax saving FD (5 years) are good tax saving option. A health insurance premium can keep TDS at minimum. Donation to charitable institutions can further improve on their pay slip.Physical disability taxpayers can claim investment at pension paying authority. Also there is a provision for medical expenses of dependent children/parents and Medical Treatment of Sp disease on ailment prescribed.