There has been no change in tax slabs for the financial year 2018-19.
But there has been changes in the taxation and they are:
- A standard deduction of Rs 40,000 on taxable income in lieu of transport and medical expenses
- Education and healthcare cess increased to 4% instead of 3%.
This changes the way your income is computed as a resident of India. Is this good news?
Let us compare two individuals who are Indian residents below 60 years of age with salaried income. Individual A has a salaried income of Rs 5 lakhs per annum and Individual B has a salary of Rs 25 lakhs per annum.
Some notes before we start:
- Conveyance allowance and Medical allowances are not taxable upto a limit.
- For the year 2018-19, there will be no conveyance or medical allowance of Rs 19,200 and Rs 15,000 respectively that could earlier be reimbursed.
- Tax savings depends on tax slabs you fall under.
- The standard deduction allowable for salaried employees earning an annual income between Rs 75,000 and Rs 5 lakh was equivalent to Rs 30,000 or 40% of the income, whichever was lower. The limit was set at Rs 20,000 for those earning more than Rs 5 lakh.
- A standard deduction does not require any disclosures, investment proofs or bills.
Individual A with Rs 5 lakh income:
We can see that it hardly impacts a taxpayer with less than Rs 5 lakh annual income.
Individual B with Rs 25 lakh income:
The above table shows that the tax payable by the individual will be higher than before. The liability of tax payable will increase with increasing income after these changes.