Finance Minister Arun Jaitley was entrusted with the delicate task of matching the nation's expectations amidst fiscal constraints. The FM aptly summarised in his opening speech that he has the challenge of taking care of some deep-rooted thorns while trying to tend to a beautiful garden. It's time now to do a deep dive and see how well the FM has managed this and where the individual taxpayer stands.
TAX RATES UNTOUCHED
One of the things that all taxpayers expected, was an increase in exemption limit for income tax. Such increase in the exemption threshold benefits all but results in a tremendous loss of revenue. However, against the wave of popular opinion, the FM left the income slabs as well as the tax rates unchanged for all except the super rich. Individuals with a taxable income of more than Rs 1 crore would now attract a levy of 12% surcharge as against 10% earlier, thereby pushing the maximum marginal tax rate from 33.99% to 34.608%. Wealth tax was abolished, but to compensate for this loss the levy of additional surcharge of 2% has been proposed on the super rich with taxable income over rupees one crore, as mentioned above.
ENHANCED DEDUCTION TOWARDS HEALTH INSURANCE
The Budget proposes higher deduction towards health insurance, with key focus on very senior citizens (80 years of age and above) and specific ailments.
CONTRIBUTION TO NPS
In order to increase participation in the National Pension Scheme, an additional deduction of INR 50,000 for contribution has been introduced.
FILLIP TO SOCIAL CAUSES
With a view to encourage and enhance people's participation in the Swachh Bharat Abhiyan, any donation to the Swachh Bharat Kosh will be eligible for a 100% deduction. Likewise, donation by resident donors to the Clean Ganga Fund would be eligible for a 100% deduction. Similarly, donations made to National Fund for Control of Drug Abuse will also be eligible for 100% deduction.
Overall, while salaried people would be disappointed to see that the historic limits on medical reimbursements, LTA, HRA remain unchanged, one can state that the FM has provided an intelligent budget that focuses on social security and planning for future. He has avoided the temptation of doling out populous relief and focused on key development areas which shall result in long-term benefit to the nation.
(The article is authored by Poorva Prakash and Aarti Raote, Director and Aarti Raote, Director Deloitte Haskins & Sells LLP.)