This report covers measures in India’s budget impacting individuals and their employers.
India’s budget for 2018-2019 was presented on 1 February 20181, with no changes to individual income tax rates, but changes to deductions and cesses (or levies). Below we highlight the key features, in terms of the direct tax measures affecting individuals and their employers. Unless otherwise indicated, the proposed amendments relating to direct taxes will apply from the assessment year (“AY”) 2018-19.
It is important to note that the changes affecting individuals in the budget represent a mixed bag of new deductions, credits, and incremental cess (i.e., levy). Some existing deductions from salary income have now been removed. The impact will depend on each taxpayer’s particular set of circumstances. In those cases where an assignee’s tax burden increases, the employer’s international assignment-related costs could rise accordingly, and vice-versa.
Key changes include the new Health and Education Cess, the standard deduction, the taxability of termination payments, reintroduction of tax on Long-Term Capital Gains on financial securities, removal of tax-free medical reimbursement, and the exemption of conveyance allowance. It is essential to prepare for these changes and to communicate quickly and clearly with key stakeholders, so that they can properly plan, budget, and make necessary adjustments.
These rates, for the financial year (“FY”) 2018-19, are subject to enactment of the Finance Bill 2018.
For Individuals, Hindu Undivided Families, Association of Persons, Body of Individuals and Artificial Juridical Persons.
|Total Income||Tax Rates|
|Up to INR 250,000||Nil|
|INR 250,001 to INR 500,000||5%|
|INR 500,001 to INR 1,000,000||20%|
|INR 1,000,001 and above||30%|
INR 1 = USD 0.0154 | INR 1 = EUR 0.01246 | INR 1 = GBP 0.011 | INR 1 = ZAR 0.1814
a. Rebate from tax of up to INR 2,500 or 100 percent of the tax whichever is less available for a resident individual whose total income is below INR 350,000.
b. Tax rates further need to be increased by the applicable surcharge and cess.
For Individuals, Hindu Undivided Families, Association of Persons, Body of Individuals, and Artificial Juridical Persons:
|More than INR 5,000 but less than INR 10,000,000||10%|
|Exceeds INR 10,000,000||15%|
Health and education cess at 4 percent is applicable on income tax (inclusive of surcharge, if any).
STT in the range of 0.05 percent to 0.125 percent is payable by purchases/seller as the case may be on the value of taxable securities transactions.
The Finance Bill will go through its Parliamentary stages in the coming weeks. Once approved by both houses of Parliament and by the President of India, the legislation will come into force.
1 For the budget speech and related budget documents, see the Ministry of Finance website, click here.
2 For 2017-2018 income tax slabs and rates, see Taxation of International Executives: India, a publication of KPMG International.
3 National Pension Scheme (NPS) is a defined contribution scheme wherein individuals can decide where to invest their money. It is a market-linked product and therefore offers returns based on the fund performance.
4 EPF, or the Employees’ Provident Fund, is a social insurance scheme that applies to businesses with at least 20 employees. Contributions to the EPF may be obligatory or voluntary depending on the salary amount paid to the employee in respect of the employee’s and the employer’s contributions.
For more publications, Webinars, and other materials on the Union Budget 2018-2019, published by the KPMG International member firm in India, click here.
The information contained in this newsletter was submitted by the KPMG International member firm in India.
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