Amendment to Section-16 & 17 w.e.f. Assessment Year 2019-2020 under Income Tax Act.

Standard deduction to salaried employees and withdrawal of exemption pertaining to medical reimbursement [Secs. 16 and 17]

The following amendments have been made to the scheme of sections 16 and 17 :

•        Standard deduction - Clause (ia) has been inserted in section 16. This clause provides standard deduction from the assessment year 2019-20 in computing income chargeable under the head “Salaries”. The amount of standard deduction will be Rs. 40,000 or the amount of salary, whichever is lower.

•        Withdrawal of exemption pertaining to reimbursement of medical expenditure - Section 17(2) has been amended to withdraw exemption pertaining to reimbursement of medical expenditure of Rs. 15,000. This modification is also applicable from the assessment year 2019-20. However, other existing exemptions which are available for different medical facilities (e.g., medical facility to employees in Government hospitals and approved hospitals, payment of medi-claim insurance premium by employer) will continue.

Further, the Finance Minister in his budget speech has announced to withdraw the present exemption of Rs.1,600 per month of transport allowance (however, transport allowance exemption at enhanced rate of Rs. 3,200 per month shall continue to be available to differently abled persons).

EXAMPLES

X (48 years) is a cos accountant and employed by XYZ Ltd., Mumbai. He gets Rs. 2,00,000 per month as salary and Rs. 2,00,000 per annum as bonus. Besides, A Ltd. provides the following—

-           Transport allowance : Rs. 1,600 per month.

-           Medical facility in a hospital which is owned by XYZ Ltd. Cost to A Ltd. for providing this facility to X: Rs. 40,000.

-           Medical facility in a Government hospital: Rs. 28,000.

-           Medical facility in a private hospital (the same hospital is recommended by the Government for the medical treatment of Government employees): Rs. 18,000.

-           Medical facility (rule 3A) in an hospital approved by the Chief Commissioner : Rs. 53,000.

-           Medi-claim insurance premium paid by XYZ Ltd. for X and his family : Rs. 45,000.

-           Reimbursement by XYZ Ltd. of other medical expenditure : Rs. 18,000.

Income of X from salary will be calculated as follows —

 

A.Y. 2018-19

A.Y. 2019-20

Basic salary

24,00,000

24,00,000

Bonus

2,00,000

2,00,000

Transport allowance ( Rs. 1600 x 12 )

Nil

19,200

Medical facility in XYZ Ltd.’s hospital

Nil

Nil

Medical facility in Government hospital

Nil

Nil

Medical facility in a Private Hospital

Nil

Nil

Medical facility (Rule 3A)

Nil

Nil

Medi-claim insurance premium paid by NeXT Ltd.

Nil

Nil

Reimbursement of other medical expenditure (reimbursement up to Rs. 15,000 is not chargeable to tax for the Assessment Year 2018-19)

 

3,000

 

18,000

Gross Salary

26,03,000

26,37,200

Less : Standard Deduction U/s 16(ia)

Nil

40,000

Income under the head “Salaries”

26,03,000

25,97,200

Difference in Taxable Salary is  only Rs. 5,800.

 
Amendment at a Glance for A.Y. 2019-20
Amendment to [Sec.-2(24)] Amendment to [Sec.-2(42A)] Amendment to [Sec.-9]
Amendment to [Sec.-16 & 17] Amendment to [Sec.-28] Amendment to [Sec.-36 & 40A]
Amendment to [Sec.-43] Amendment to [Sec.-43CA] Amendment to [Sec.-44AE]
Amendment to [Sec.-49] Amendment to [Sec.-56(2)(x)] Amendment to [Sec.-79]
Amendment to [Sec.-80AC] Amendment to [Sec.-80D] Amendment to [Sec.-80DDB]
Amendment to [Sec.-80IAC] Amendment to [Sec.-80JJAA] Amendment to [Sec.-80PA]
Amendment to [Sec.-80TTA] Amendment to [Sec.-80TTB] Amendment to [Sec.-115AD]
Amendment to [Sec.-115BA] Amendment to [Sec.-115BBE] Amendment to [Sec.-115JB]
Amendment to [Sec.-115O & 115Q] Amendment to [Sec.-115R & 115T] Amendment to [Sec.-139A]
Amendment to [Sec.-140] Amendment to [Sec.-143] Amendment to [Sec.-145A & 145B]
Amendment to [Sec.-193] Amendment to [Sec.-194A] Amendment to [Sec.-145O & 245Q]
Amendment to [Sec.-271FA] Amendment to [Sec.-276CC] Amendment to [Sec.-286]
 
 
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