A Comparison on Tax Computation Between FY 2017-18 and FY 2018-19

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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%.
A Comparison on Tax Computation Between FY 2017-18 and FY 2018-19

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:

A Comparison on Tax Computation Between FY 2017-18 and FY 2018-19

We can see that it hardly impacts a taxpayer with less than Rs 5 lakh annual income.

Individual B with Rs 25 lakh income:

A Comparison on Tax Computation Between FY 2017-18 and FY 2018-19

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.

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