» Business » Jaitley gives Rs 40,000 standard deduction to the salaried

Jaitley gives Rs 40,000 standard deduction to the salaried

Source: PTI
February 01, 2018 17:33 IST
Get Rediff News in your Inbox:

Experts, however, said that it is a very nominal benefit to the salaried class.

Illustration: Uttam Ghosh/

Giving a relief to salaried class, Finance Minister Arun Jaitley on Thursday proposed a standard deduction of Rs 40,000 in lieu of transport allowance and medical reimbursement entailing a revenue sacrifice of Rs 8,000 crore.


The minister, however, did not propose any change in the tax slabs or rates for individual taxpayers.

"In order to provide relief to salaried taxpayers, I propose to allow a standard deduction of Rs 40,000/- in lieu of the present exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses," Jaitley said while presenting the Budget 2018-19 in Parliament.

The standard deduction, which is provided to salary earners, was discontinued from the assessment year 2006-07.

Experts, however, said that it is a very nominal benefit to the salaried class.

“Standard deduction of Rs 40,000 p.a. for salaried individuals seems to be a very nominal benefit as the current tax-free limit for medical expense reimbursement of 15,000 p.a. and transport allowance exemption of Rs 1,600 p.m. is anyway leading to a total tax-free salary of Rs 34,200 p.a.," Alok Agrawal, senior director, Deloitte India said.

The finance minister said the government had made many positive changes in the personal income-tax rate applicable to individuals in the last three years.

"Therefore,  I do not propose to make any further change in the structure of the income tax rates for individuals," he said.

Jaitley also noted that there is a general perception in the society that individual business persons have better income as compared to the salaried class.

However, income tax data analysis suggests that major portion of personal income-tax collection comes from the salaried class, he observed.

According to Jaitley, for assessment year 2016-17, 1.89 crore salaried individuals have filed their returns and have paid total tax of Rs 1.44 lakh crore which works out to average tax payment of Rs 76,306/individual salaried taxpayer.

As against this, he said that 1.88 crore individual business taxpayers including professionals, who filed their returns for the same assessment year paid total tax of Rs

48,000 crore, which works out to an average tax payment of Rs 25,753/individual business taxpayer.

Jaitley said apart from reducing paper work and compliance, this will help middle class employees even more in terms of reduction in their tax liability.

"The revenue cost of this decision is approximately Rs 8,000 crore," he said.

The total number of salaried employees and pensioners who will benefit from this decision is around 2.5 crore.

Get Rediff News in your Inbox:
Source: PTI© Copyright 2022 PTI. All rights reserved. Republication or redistribution of PTI content, including by framing or similar means, is expressly prohibited without the prior written consent.

Moneywiz Live!