Budget 2018 Update: Income Tax Slabs remain unchanged

Budget 2018 Update: Income Tax Slabs remain unchanged

Credit rating agency Moody's said that the 2018 Budget seems to be in line with the fiscal consolidation path and reinforced the agency's recent rating upgrade of India.

Budget 2018 Update: Income Tax Slabs remain unchanged

Having introduced many changes in the Income Tax for salaried individuals, the Union Budget 2018 has abstained from making any changes to the Tax slabs.  Union Finance Minister Arun Jaitley, in his Budget today, has however introduced a Standard Deduction of Rs 40,000 for the salaried class.  This is the first Budget after the GST rollout on July 1, 2017.

Pre-Budget expectations of the minimum income tax exemption being raised from Rs 2.5 lakh to Rs 3 lakh did not see the light of the day.  However, the Standard Deduction, which was abolished with effect from Assessment Year 2006-07 has now been reintroduced.  The Standard Deduction, which was expected to be Rs 1 lakh, was kept at Rs 40,000.  This aims to bring the salaried class at par with businesses and  self-employed professionals, who can claim a variety of expenses.as business expense to get tax reliefs.

Beginning his budget speech, Arun Jaitley said, “Recapitalised banks have an ability to support growth. Indian economies have performed well since our government took over. India is expected to become the fifth largest economy very soon… This year’s budget will focus on consolidation and agriculture, infrastructure and healthcare”.

Being the last budget before the 2019 general elections, the FM opted to pick out sops for the agri sector.  A variety of schemes were announced to promote agriculture sector – animal husbandry, fisheries, organic farming.  His Budget speech in Hindi was to ensure that he was understood by the rural audience as well.

Mentioning the announcement made by Prime Minister Narendra Modi, that of doubling farmers revenue 2 times by 2022, Jaitley said that the minimum support price of all crops will increase at least 1.5 times production cost. Healthcare schemes will cover 10 crore poor families. This, per the Finance Minister, is going to be the world’s largest government-funded healthcare program. 50 crore people are expected to benefit by Rs 5 lakh per family per year.

Credit rating agency Moody’s said that the 2018 Budget seems to be in line with the fiscal consolidation path and reinforced the agency’s recent rating upgrade of India.

An additional Rs 11,000 crore is expected to come into the government kitty, as the Health and Education cess will be increased to 4% from 3%. However, the Standard Deduction will result in reducing the revenue by Rs 8,000 crore, said that Finance Minister.

Employee Provident Fund

  • Government to contribute 12% of wages of new employees to the Employee Provident Fund across all sectors for the next three years, in order to promote employment and job creation.
  • Contributions from Women employees will be brought down from 12 per cent to 8 per cent.


  • 5.1 Million new houses in rural areas and 3.7 million in urban areas to be built
  • Free Gas connection to target 80 million households as against 50 million earlier.
  • Government to bear the cost of electricity connections to 40 million houses (Rs 160 Billion)
  • Loan to self help groups to be raised to Rs 750 billion
  • Kisan Credit Cards extended to fisheries and animal husbandry

Senior Citizen Sops

  • Senior citizens have been allowed a Rs 50,000 deduction on health insurance premiums, up from Rs 30,000 per year.
  • Limit for investment in interest bearing LIC schemes has been increased from Rs 7.5 lakh to Rs .15 lakh.
  • Exemption on Interest Income from bank deposits has been raised to Rs 50,000


  • Standard Deduction Rs 40,000/- for salaried employees
  • A tax rate of 10% was imposed on distributed income of equity oriented mutual funds.
  • Corporate Tax for companies having a turnover of upto Rs 250 Crore has been reduced to 25% from the 30% earlier.
  • Long term capital gains in excess of Rs 1lakh will also attract a tax of 10%. The profits from stock and equity mutual fund investment held for more than 12 months was tax exempt earlier, but now will attract a long term capital gains tax. This will however not include those investments that were made prior to January 31, 2018.

Market Reaction

  • Sensex fell to 35,526, a drop of 250 points as the last Budget of the incumbent government appeared to be more of a populist budget.
  • Agriculture got major attribution during the Budget speech.
  • The country’s benchmark 10-year bonds slumped further today, as the government set a higher than expected fiscal deficit target for the year beginning April 2018.
  • Former Union Finance Minister P Chidambaram said that pegging the fiscal deficit at 3.3% for 2018-19 will have serious consequences.
  • Kiran Mazumdar Shaw, Chairperson of Biocon said that thought the big takeaway for the budget was the healthcare scheme, how it will be funded is a matter of concern. However the move to turn district hospitals into medical colleges seemed to be an interesting proposition, she added.
  • Calling it a trademark Budget announcement of an incumbent government facing Elections, Shilan Shah from Capital Economics, Singapore said that it was not surprise that the deficit targets were relaxed. He added that the BJP is looking to woo the rural voters in time for next years elections.

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