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Benefit to salaried employees in Union Budget and computation

Amrish Koria 
on 09 February 2018

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The existing provision of clause (ii) sub-section (14) of Section 10 of the Income Tax Act 1961, provides the exemption of conveyance or transport allowance of Rs. 1,600 p.m. will be provided to an employee to meet his expenditure for the purpose of commuting between the place of his residence and the place of office.

This section also provides an exemption of transport allowance of Rs. 3,200 p.m. will be granted to an employee who is blind or deaf and dumb or orthopedically handicapped with a disability of the lower extremities of the body, to meet his expenditure for traveling between his residence and place of the office.

The existing provisions of clause (v) of the first proviso to sub-section (2) of Section 17 of Income Tax Act 1961, provides that reimbursement of medical expenditure incurred by an employee is exempt up to an actual amount incurred or Rs.15,000 whichever is higher. i.e., maximum exemption of medical expenditure incurred by an employee will be Rs.15,000.

Proposed Amendments for A.Y.2019-2020

A standard deduction of Rs.40,000 is proposed to be allowed to salaried employees in lieu of present exemption in respect of Conveyance allowance of Rs.19,200 p.a. plus reimbursement of medical expenditure of Rs.15,000.

It indicates an additional benefit of Rs.5,800 per annum which will result into a tax saving o the following amount for the different type of tax payers:

Individuals in tax slab of 30% can save up to approx. Rs.1,600
Individuals in tax slab of 20% can save up to approx. Rs.1,160
Individuals in tax slab of 10% can save up to approx. Rs.580

Moreover, presently 'Education Cess on income tax @2% and Secondary and Higher Education Cess' on income tax is @1% is levied.

The government proposed an amendment and introduce a new cess named 'Health and Education Cess' to be levied @4% of income tax including surcharge.

Therefore, now education cess and secondary and higher education cess clubbed in Health and Education cess which in total will be levied@4%.

Illustration:

Mr. Abhishek receives the following emoluments during the previous year ending 31.03.2019.

Basic pay: Rs.2,40,000
Dearness Allowance: Rs.35,000
Commission: Rs.10,000
Medical Expense reimbursed: Rs.25,000
Transport allowance: Rs.1,800 p.m.
Professional tax paid by employer; Rs.2,000

Calculation of Gross salary as per proposed amendment A.Y.2019-20 will be as under:


Particulars

Amount in Rs.

Amount in Rs.

Basic

2,40,000

Dearness Allowance

35,000

Commission

10,000

Medical Expense reimbursed
Transport allowance (1800 p.m.x12)

25,000
21,600

Total expense
- Standard Deduction

46,600
(40,000)

6,600

Professional Tax paid by employer

2000

Taxable salary

2,93,600

Tax on Taxable Salary@10%

4,360

Add: Health and Education Cess@4%

174.40

Total Tax payable by Mr. Abhishek

4,534.40


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