Budget Changes 2018-19 and the Impact on Payroll – Webinar FAQs
As a follow-up to the Monthly Chronicle issue on Budget Changes, ADP India hosted a webinar on Budget Changes 2018-19 and the Impact on Payroll on 11 April 2018. The webinar recording can be viewed below.
There were many questions that came up during and after the webinar. While we have answered most of them, there were a few questions that repeatedly popped up. We have drafted them into a quick Frequently Asked Questions (FAQ) format, for the benefit of everyone. If you have further questions, please comment below and we’ll answer as soon as we can.
FAQs: Budget Changes 2018-19 and the Impact on Payroll
1. My question is on the Medical Allowance and Conveyance. How does this reflect on the tax-slip on the ESS portal? We have these components in our CTC, should we leave them as is or make any changes?
There are two options:
- keep the same structure and make component taxable;
- remove them
It is always better to remove these irrelevant components from the CTC.
The standard deduction would be shown as a deduction after Section 10 exemptions along with Professional Tax deductions.
2. What is the limit for housing loan interest deduction for Rented House Property? Earlier it was without any limit, but now it seems there is a limit of Rs. two lakh. Please confirm.
The interest still for let-out property still can be claimed with no limit. But in Budget 2017, there was an amendment in section 71 which states that loss under house property can be claimed only up to Rs. two lakh. That simply means the interest limit for self-occupied is two lakh and let out is unlimited, but the overall loss adjustment of house property against other heads of income is restricted to two lakh rupees.
3. Is the Gratuity amount taxable if total years of service is 4.8 years?
Please check the respective state law; a few states like Kerala and Tamil Nadu allow this policy of 4.8 years gratuity pay-out.
4. Will the 10% tax applicable to equity dividends be automatically tax deducted and credited to our accounts, or will we have to manually declare them when filing tax?
I think this would be an automatic deduction from the banks, but in case it is not deducted then you need to manually pay the same.
5. Should we include Medical Allowance in Gross Salary, or as a part of annual CTC component?
Changing the name won’t affect the taxability. Thus, please discuss internally and restructure your company’s CTC.
6. Are Medical Bills required?
As the component is no longer there, the bills are also not required.
7. For male employees, the first three years government contribution of 12% for the PF does that replace the Employer contribution? Or is it over and above the employer’s 12% contribution?
The 12% is company’s share and not over and above.
8. As informed, we will remove the conveyance and medical from our salary breakup. So these components can be shown as a special allowance which is taxable and 40,000 will be exempted for tax calculation. Is the understanding right?
Yes, you are right.
9. I understand that Budget proposals also seek to provide relief to salaried taxpayers by allowing a Standard Deduction of ₹40,000 in place of the present exemption allowed for transport allowance and reimbursement of miscellaneous medical expenses. Does this mean that:
i) Employees will no longer be required to provide documentary proof towards medical expenses (presently, ₹15,000) and travel expenses (presently, ₹12,000) in FY2018-19?
ii) The hospitalisation cost is also covered under this head and no extra amount will be reimbursable?
Yes. There would be no medical reimbursement from FY 2018-19 and thus no documentary proof required to submit towards such expenses.
Subscribe to our monthly newsletter to stay up-to-date on the tax and compliance changes in India.