This additional deduction has been proposed in place of existing deductions of Rs. 19,200 for transport allowance and Rs. 15,000 for medical reimbursement. This will benefit 2.5 crore, salaried employees. Pensioners, who normally do not enjoy any allowance for transport and medical expenses, will also benefit from it.
The finance minister also raised cess on income tax to 4 per cent from 3 per cent for individual taxpayers on the amount of income tax payable. A new 10 per cent tax (cess extra) will be applicable on capital gains exceeding Rs. 1,00,000 upon sale of equity share or units of equity oriented funds.
Under the proposed changes in Budget 2018, in case of single premium health insurance policies having cover of more than one year, deduction will be allowed on a proportionate basis for the number of years for which health insurance cover is provided, subject to the specified limit.
The threshold for deduction of tax at source on interest income for senior citizens is proposed to be hiked from Rs. 10,000 to Rs.50,000.
The deduction available payment towards medical treatment of specified disease is proposed to be hiked to Rs. 1 lakh for very senior citizen (earlier Rs. 80,000) and senior citizen (earlier Rs. 60,000).