The finance minister proposes 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
For the 2.5 crore salaried people and pensioners, one of the key interests in the Union budget, is to find out the effect of the tax implications on their pay packages. This year’s Union budget has not brought in any dramatic changes, which could disrupt the emotions of the salaried class.
However, what has come as an added benefit for salaried people is that the Finance Minister Arun Jaitley has proposed 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. However, the transport allowance at enhanced rate shall continue to be available to differently-abled persons. Also, other medical reimbursement benefits, in case of hospitalisation for all employees shall continue.
Arun Jaitley has proposed 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.
Standard deduction shall significantly benefit the pensioners also, who normally do not enjoy any allowance on account of transport and medical expenses. The revenue cost of this decision is approximately Rs.8,000 crores.
In addition, Jaitley also announced a reduction in women employees’ contribution to EPF—to eight per cent for the first three years of their employment, as against the existing rate of 12 per cent or 10 per cent—with no change in employers’ contribution. This implies the new women employees will get an increased take-home salary for the first three years.
The Government also proposed to extend the facility of payment of 12 per cent employers’ contribution by the Government towards social security schemes— run by the Employees Provident Fund Organisation (EPFO) for new employees, for the first three years of their employment—to all sectors.
Jaitley also announced a reduction in women employees’ contribution to EPF—to eight per cent for the first three years of their employment, as against the existing rate of 12 per cent or 10 per cent—with no change in employers’ contribution.
Besides, the Government will contribute 12 per cent of the wages of the new employees in the EPF for all the sectors for the next three years.
The Government plans to extend the fixed-term employment facility to all sectors to create more jobs. Currently, the fixed-term employment facility is available to sectors employing a large number of workers, such as textiles, leather, and footwear under the Pradhan Mantri Rozgar Protsahan Yojana (PMRPY).
Rajesh Padmanabhan, Director, Group CHRO – ?Welspun Group, says, “The new budget incentivises new job creation and is a positive as we head trajectory wise to become the youngest nation in the world. Looking at the labour flexibility creation across sectors, we can expect more staffing and temping companies on the rise across levels. In addition, India needs exponential skill acceleration plans, while the budget shows the government still does not have a grand plan though we see skill building incentives in a few sporadic areas.”
Looking at the labour flexibility creation across sectors, we can expect more staffing and temping companies on the rise across levels.
Jaitley has also proposed to amend the Income Tax Act to notify a new scheme for assessment. The assessment will be done in the electronic mode, which will almost eliminate person to person contact, leading to greater efficiency and transparency.
The e-assessment system was introduced in 2016 on a pilot basis. In 2017, it was extended to 102 cities with the objective of reducing the interface between the department and the taxpayers.
“Cess increase is a distraction at an individual and more or less neutralises the SD deduction introduced though the lower income strata might benefit. Also, IT threshold enhancement was an expectation and did not come through. However, still the budget is pro spending and will enhance consumer spending across which is a huge plus for overall growth but corresponding disposable income could be an element which will need to hold out well,” Padmanabhan adds.
In the Union budget, Jaitley has proposed to extend the benefits under Section 80-JJAA of the Income Tax Act to the footwear and leather industry. Currently, a deduction of 30 per cent is allowed in addition to a normal deduction of 100 per cent in respect of emoluments paid to eligible new employees, who have been employed for a minimum period of 240 days during the year, under Section 80-JJAA of the Income Tax Act.
Padmanabhan also commends the efforts of rural housing and infra which will result in 3 billion days of employment creation across. “Would have loved to see a grand digital vision for India through digital skills plan or incentives as our biggest chance to accelerate getting to the top economic power in the world is through digital route,” he opines.
The minimum period of employment now has been relaxed to 150 days in the case of the apparel industry. Extending this relaxation of a minimum period of 150 days to footwear and leather industry also, the finance minister hoped this would encourage creation of new employment in this sector.