How Budget 2018 affects your personal finances

The Union Budget is perhaps the biggest event on the annual financial calendar. Everyone-from corporate firms to the common man- tune in to their television sets. This is because any change (or lack of change) can greatly impact the financial situation for the rest of the year. In this article, let’s see what the budget announcements mean for personal finance.

1) Status quo in personal income tax rate

There have been no changes proposed for personal income tax rates this year. As a result, the tax slabs continue to be as follows:

Income Range

Income tax rate

Up to Rs 2.5 lakh


Rs 2.5 lakh to Rs 5 lakh


Rs 5 lakh to Rs 20 lakh


Above Rs 10 lakh



2) Education, health cess combined into higher rate

The current 3% education cess on personal income tax and corporation tax would be replaced by a 4% Health and Education Cess. This is to take care of the education needs and healthcare of BPL and rural families. This increase would help the government collect an additional amount of Rs 11,000 crore for this purpose.

3) Standard deduction of Rs 40,000 for salaried

A standard deduction of Rs 40,000 has been proposed for salaried employees. Standard deduction is the amount that is subtracted from the salary before the taxable income is calculated. This deduction has been bought back after being scrapped in the Union Budget 2005-2006. This would help employees reduce their tax liability.

And while this is good news, the annual transport allowance of Rs 19,200 and medical allowance of Rs 15,000 would be scrapped under the new budget.

4) Dividend Distribution Tax on equity mutual funds

The Finance Minister has proposed a dividend distribution tax of 10% on equity mutual funds. Until now, there was no DDT on equity mutual funds. The purpose of this tax is to provide a ‘level playing field’ across growth oriented funds and dividend distributing funds. This move likely to impact investors who depend on dividends from equity funds for their income since their in-hand income would reduce.

5) 12% EPF contribution by government for new staff

The government would contribute 12% towards Employee Provident Fund for new employees for three years. This would be applicable for sectors that employ a large number of people like textile, leather and footwear.

In addition, new female employees would have to contribute only 8% instead of 12% towards EPF for the first three years. This means, the take-home pay would be higher for these employees.

6) Health scheme

The Finance Minister has announced two major initiatives as part of the ‘Ayushman Bharat Program’. These are:

a) The National Health Protection Scheme

This scheme would provide a health insurance cover of Rs 5 lakh per family each year. This would benefit as many as 10 crore vulnerable families (50 crore individuals) in the country. This would be the world’s largest healthcare programme according to the finance minister.

b) Creation of Health and Wellness centres

Around 1.5 lakh health and wellness centres would be set up across the country providing comprehensive health care. These centres would provide free drugs and diagnostic services to the people. The government has allocated Rs 1,200 crore for this purpose.

7) More ETFs including debt ETFs

Following the success of the Bharat-22 ETF, investors can expect more Exchange Traded Funds (ETFs) to be announced. The Department of Investment and Public Asset Management (DIPAM) is set to introduce more ETF offers later this year. This includes debt ETFs too.

8) Gold related announcements

In this budget, the government has announced to create a comprehensive gold policy in order to develop gold as an asset class. A consumer friendly and trade efficient system of regulated gold exchanges would be created. In addition, the government has proposed to revamp the gold monetization scheme in order to help people to open gold deposit accounts in a hassle-free manner.


Every budget has a few positives and negatives. This time around, there have been more positives than negatives when it comes to personal finance. The increase in standard deduction and 12% EPF for new employees is a certain plus. However, the lack of change in personal income taxes would leave many disappointed.


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