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While the budget did not offer anything to the salaried class by way of reduction in tax slab rates or an increase in exemption limit for the salaried class, Finance Minister Arun Jaitley introduced long-term capital gains of 10 per cent on gains exceeding Rs 1,00,000. The announcement led to a sharp response in the markets as the Sensex at the Bombay Stock Exchange fell by up to 464 points immediately after the announcement.
The finance minister, however, announced to not impose any tax on gains up to January 31, 2018. “However, all gains up to 31st January, 2018 will be grandfathered,” said Jaitley in his budget speech 2018-19.
Even as the move to impose tax on long-term capital gains in equities is set to benefit the government in terms of additional revenues, experts say this could have been structured in a manner that large investors were taxed and it does not disrupt the recent uptick in domestic equity participation through mutual fund route. While the equity penetration in India is under 5 per cent, some feel that this may disrupt the recent phenomenon of small investors in small towns investing in mutual funds for the long term.
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In terms of benefits for the salaried class the finance minister announced standard deduction of Rs 40,000 allowed for transport, medical reimbursement. Experts say that these additional deductions have been proposed in lieu of existing deductions of Rs 15,000 and Rs 19,600 for medical reimbursements and transport allowance respectively.
In another move that may put additional burden on tax payers, the finance minister announced to increase the health and education cess on personal income tax and corporation tax from existing 3 per cent to 4 per cent.
In term of some benefits, the finance minister announced to increase the deduction limit on health insurance premium in a year for senior citizens from existing limit of Rs 30,000 to Rs 50,000.
