Do you have to shell out relatively more or less after the changes announced in Budget 2018? Let’s see how this budget alters you financial habits
It will not be an overstatement to say that the Union Budget is one of the biggest financial events in our country. Right from big industrialists to the common man, everyone waits anxiously to see how the new changes will impact their financial situations. So, here's how various provisions of this year's budget may affect your personal finances.
- Status quo in personal income tax rate
While salaried employees were hoping for an increase in the income tax rebate, the Finance Minister did not propose any changes in the personal income tax slabs this year. As a result, there will be no direct changes to the income tax you were paying.
- Standard deduction of Rs 40,000 for salaried employees
In the Union Budget 2018, a standard deduction of Rs. 40,000 was proposed for salaried employees, which will replace the annual transport allowance of Rs. 19,200 and medical allowance of Rs. 15,000. In effect, this additional deduction amounts to Rs. 5200. With these, you will have a little more disposable income to carry home.
- 10% LTCG on equity investments
Until now, long-term capital gains (LTCG) on equities were exempted from tax. However, post-budget 2018, a 10% tax will be introduced on LTCG that arises from the transfer of listed equity shares, surpassing Rs 1 Lakh, without any indexation benefit. Exemption will only be allowed for gains up to 31 January 2018.
For example, let's say you purchased equity shares of Rs. 200 on 31 October 2017 and will sell them on 31 December 2018 at Rs. 250. In this case, your capital gain will be Rs. 50 (Rs. 250 - Rs. 200). But, if the stock's value is Rs. 220 on 31 January 2018, then from your total capital gains (i.e Rs. 50), Rs. 20 (Rs. 220 - Rs. 200) will be exempted from tax. The remaining Rs. 30 will be taxed at 10% without indexation.
- Education, health cess combined into higher rate
While currently a 3% education cess was charged on personal income tax under the new tax structure, it will be replaced by a 4% Health and Education Cess. This means a slight increase in the tax outgoing from your salary.
- Increased custom duty
A factor that may considerably impact the outgoings from your pocket is the increase in customs duty of many daily use products. Unlike the previous trend of reducing customs duty, the government has increased the customs duty on certain items during Budget 2018.
Mobile phones: The finance minister proposed an increase in customs duty on mobile phones from 15% to 20%, meaning you will have to shell out more for buying a mobile now.
Juices: Customs duty has been increased up to 50% from the previous 30% rate.
Beauty products: The budget also spelt bad news for makeup lovers with customs duty on makeup, beauty products, perfumes etc., increasing from 10% to 20%.
Personal care products: Many grooming items, including shaving and aftershave preparations; deodorants etc. will also be more expensive now with customs duty being doubled from 10% to 20%.