Ten(10) Key Changes In Income Tax Rules That has came Into an Effect From April 1 2018
In Budget 2018, among the other income tax changes proposed, a standard deduction of Rs. 40,000 for the salaried class was introduced.
1.In Budget 2018, basic income tax rates and the slabs were kept unchanged
2.But many changes were announced that will impact many tax-payers
3.New long-term capital gains tax on equities, equity MF’s was announced
In Budget 2018, Finance Minister Arun Jaitley has kept the basic income tax rates and the slabs unchanged. However, he proposed a number of income tax changes that will impact many taxpayers. From a new long-term capital gains tax on stocks and equity mutual funds to relief for senior citizens on interest income – the changes announced in Budget 2018 are many. The finance minister also introduced a standard deduction for salaried employees which will, particularly, benefit those who are in lower tax slabs. He also proposed an increase in cess, which is charged on the amount of income tax payable. Most of these changes will be effective from FY 2018-19.The government on March 14 got the Budget for fiscal year beginning April 1 passed in Lok Sabha. Finance Minister Arun Jaitley moved the Finance Bill 2018, which contains taxation proposals, as well as the appropriation bill that details spendings in various departments. The bills were passed by voice vote. Also Read: Last date of filing income tax returns online ends today.
Here are 10 changes in income tax laws proposed in Budget 2018:
1) Rs. 40,000 standard deduction introduced: 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. After the introduction of standard deduction, the salaried class will enjoy a flat deduction of Rs. 40,000 from their taxable income. Standard deduction was earlier available for salaried individuals previously, till it was abolished with effect from assessment year 2006-07. The benefits arising from standard deduction depends on the tax bracket a salaried individual falls in.
2) Higher cess: 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. (Also Read: Deadline For Filing Income Tax Return Just One Week Away. 10 Things To Know)
3) Introduction of long-term capital gains tax on equity investments: 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. However, for the benefit of tax payers, the gains till January 31, 2018, are being grandfathered. This means that only gains over January 31, 2018, prices will be taxed. In some relief, the benefit of indexation will be allowed in unlisted shares for computing long-term capital gains tax that were unlisted as on January 31, 2018.
4) Tax on dividend income from equity mutual funds: A tax at the rate of 10 per cent will be levied on dividend distributed by equity-oriented mutual funds.
5) More income tax benefits on single premium health insurance policies: Health insurers typically provide some discount if you pay premium for a few years upfront. But earlier, an individual could claim deduction only up to Rs. 25,000. 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. For example, your insurer is offering a 10 per cent discount on health insurance premium if you pay Rs. 40,000 for the two-year cover. Under the proposed changes, the individual can claim Rs. 20,000 in both years.
6) Income tax benefit on NPS withdrawal: The government has proposed an extension to the benefit of tax-free withdrawal from NPS (National Pension System) to non-employee subscribers. Currently, an employee contributing to the NPS is allowed an exemption in respect of 40 per cent of the total amount payable to him or her on closure of account or on opting out. This exemption is currently not available to non-employee subscribers. The extension of tax-free withdrawal to non-employee subscribers will be available from financial year 2018-19.
7) Deduction in respect of interest income to senior citizens: Senior citizens will get higher interest income exemption limit on deposits in banks and post offices, including recurring deposits. Currently, a deduction up to Rs. 10,000 is allowed under Section 80TTA of the Income Tax Act to an individual in respect of interest income from a savings account. Under the tax laws, a new Section 80TTB is proposed to be inserted to allow a deduction up to Rs. 50,000 in respect of interest income from deposits held by senior citizens. However, no deduction under Section 80TTA shall be allowed for senior citizens.
The government also proposed to increase the investment limit in Pradhan Mantri Vaya Vandana Yojana or PMVVY to Rs. 15 lakh from Rs. 7.5 lakh. It also proposed to extend the Pradhan Mantri Vaya Vandana (PMVVY) scheme till March 2020. Pradhan Mantri Vaya Vandana Yojana, a scheme meant for senior citizens, offers a guaranteed interest rate of 8 per cent.
8) Higher TDS or tax deducted limit for senior citizens: 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.
9) Higher deduction limit under Section 80D of the Income Tax Act for senior citizens: In Budget 2018, the government proposes to increase the deduction for senior citizens on payment of health insurance premiums. The limit is set to go up from Rs. 30,000 Rs. 50,000. For individuals below 60 years of age, the deduction under Section 80D continues to be Rs. 25,000. But if their parents are senior citizens, above 60 years, they can claim an additional deduction of up to Rs. 50,000-taking the total deduction to Rs. 75,000 (Rs. 25,000 + Rs. 50,000), higher than the current limit of Rs. 55,000.
10) Higher income tax deduction for senior citizens for medical treatment of specified diseases: 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).