Impact Of Budget 2018 On Salaried Class
While leaving the income tax slabs unchanged, the budget saw the introduction of a standard deduction for salaried employees in lieu of the reimbursement of medical expenses and conveyance allowance, and an increase in education cess by 1%
“Intelligence is the ability to adapt to change.”- Stephen Hawking.
It’s been almost a week since the Finance Minister presented the Union budget of India, 2018. A week filled with discussions and debates, analyses and opinions on the rural-focused, growth-oriented budget. Pensioners have something to cheer about, as do farmers. The markets have reacted, and after the initial knee-jerk reactions, are gradually coming to terms with the budget. There are aspects of the budget where the effects will not be seen immediately, and impacts will become clear only with time.
While leaving the income tax slabs unchanged, the budget saw the introduction of a standard deduction for salaried employees in lieu of the reimbursement of medical expenses and conveyance allowance, and an increase in education cess by 1%.
So, what does this imply for organisations and how do they tweak employee benefits to ensure their workforce continues to derive the maximum value?
Salary structures across organizations will need to be reworked to take into account the withdrawal of medical expenses reimbursement & conveyance allowance. It’s also an opportunity to reinforce the employee value proposition
- The re-introduction of the standard deduction of Rs 40,000/- will see a net reduction of Rs 5800/- in the taxable income if the withdrawn conveyance (Rs 19,200/-) and medical expenses (Rs 15,000/-) are considered
- However, if the employees are in the highest tax bracket, considering the additional 1% cess, the above changes will be almost tax-neutral for them
- Companies who have not incorporated meal benefit can now restructure the Medical + Conveyance component of Rs 34,200 to a meal benefit of Rs. 2,850 per month. This will give added tax advantage + allow them to have meals of their choice at no additional cost to company. It will also enable the company to enhance its employee value proposition
- Companies who already have incorporated the meal benefit can now give maximum amount eg: If the current meal benefit is 1,100 per month, it can be enhanced to 2,850 by taking 21,000 of the 34,200 and maximise the advantage to their employees or in part respectively
- Companies already having sufficient meal benefit need to educate the benefits of the meal program in the new environment and enhance employee value proposition. The more employees adopt the meal benefit, stronger the employee satisfaction.
This era of reducing the number of tax-saving benefits has brought to the forefront the growing importance of meal benefits, not just as a tax saving measure, but as a valuable component of employee benefits. The Meal benefit offers employees benefits of nutrition, health and discounts on daily essentials. All this while saving taxes up to Rs. 12,500 per year.
Why opt for the ‘Meal card’ & the importance of tax-compliance
- Meal cards help employees the chance to enjoy highly nutritious meals; they also help them save taxes, an added incentive
- Meal cards offer the twin advantages of simplicity and convenience. The cards are safe, simple and easy to use
- Compliant meal cards are backed and powered by advanced technology, making the management and administration of the meal benefit program safe, secure and convenient
- It’s important to opt for a 100% tax-compliant meal card to comply with the tax laws
- While there are lots of players in the market, it’s essential to opt for a meal benefits provider that has core expertise in this area & a reputation to deliver high-quality employee benefits since a long time – you don’t want to take chances with your company’s reputation!
Employees need help in managing their taxes. The meal benefit remains at the forefront and plays the dual role of saving taxes along with providing them with healthy, nutritious meals. HR professionals who don’t have this benefit have a golden opportunity – since salaries need to be restructured in the next 6 weeks, why not help employees save taxes too?
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.