Finance Minister Arun Jaitley ascertains several changes in the Budget 2018-19 and decided not to change the income tax rates and the slabs. FM, also, did a couple of changes in income tax that will impact the common man alias the taxpayers. All these changes will reflect from the next month as the taxpayers will set get to pay their share of the tax amount.
The changes like new long-term capital gains tax on stocks and equity mutual funds and relief for senior citizens on interest income have been introduced in the budget for the financial year 2018-19. FM, Arun Jaitley gave relief to the salaried people by introducing the standard deduction. Another key feature that will affect the taxpayers is that the increase in cess will now be directly charge on the tax income payable.
Here are the ten rules that will be effective from 1st April:
- Standard deduction of Rs. 40,000:
The Finance minister discontinued the existing deduction of Rs. 19,200 for transport allowance and Rs. 15,000 for medical reimbursement respectively and gave a flat deduction of rupees 40,000 for the same. This decision will benefit more than 2 crore salaried employees. Interestingly, the retired personnel will now enjoy the standard deduction as earlier they were not eligible for transport and medical allowance. On a whole, people under the salaried income will experience a direct deduction of Rs. 40,000 from their taxable income.
- Introduction of long-term Capital Gains Tax on Equity Investments:
10 percent tax (cess extra) will be imposed on the capital gains for more than Rs. 1lakh on the sale of equity share or units of equity oriented funds. This is a new tax implication that has been introduced by Arun Finance Minister the budget 2018-19. Although, the FM gave relaxation to the taxpayers as the gains till January 31, 2018, are evoked from this tax implication and thus the Capital Gains Tax after this date will come under the tax payable.
- Increased Cess:
Arun Jaitley also increased cess on income tax by one percent. Earlier the cess was 3 percent which has now become 4 percent on the amount of income tax payable.
- Tax on Dividend Income from Equity Mutual Funds:
The tax of 10 percent will be imposed on the dividend distributed by the equity-oriented mutual funds.
- More Income Tax benefits on single premium Health Insurance Policies:
The people with health policies will continue to avail benefits like earlier. Although, now the deduction for single premium health policies is over 1 lakh rupee and will be allowed on a proportionate basis till the policy complete its maturity period. Unlike earlier, the individuals with health policies were eligible to avail deduction upto 25,000 rupees only.
- Income Tax benefit on NPS withdrawal:
The Finance minister gave extension to the advantage of tax-free withdrawal from NPS (National Pension System) to non-employee subscribers. In the current period, an employee contributing to the NPS is allowed to have an exclusion of 40 percent of the total amount payable to him or her in case the person closes the account. Currently, the non-employees were not availing this benefit but the proposed exemption from the financial year 2018-19 will prove beneficial for them.
- Deduction in respect of interest income to Senior Citizens:
Now, the Senior citizens will avail greater interest income exemption limit on deposits in banks and post offices. This also includes RD i.e recurring deposits. Until now, the Senior Citizens were eligible for the standard deduction upto Rs. 10,000 under Section 80TTA of the Income Tax Act for every individual as an interest income from a savings account. The addition of, a new Section 80TTB is likely to be inserted to which will allow a deduction up to Rs. 50,000 in case of the senior citizens. Also, the senior citizens will not get any deductions under Section 80TTA from now onwards.
- Higher TDS or Tax Deducted limit for Senior Citizens:
The deduction of tax on interest income of the senior citizens is proposed to be hiked from Rs. 10,000 to Rs. 50,000 in the budget of financial year 2018-19.
- Higher deduction limits under Section 80D of the Income Tax Act for Senior Citizens:
The Finance minister proposes to hike deduction for senior citizens on payment of health insurance premiums. Now, the limit has increased from Rs. 30,000 Rs. 50,000INR. The individuals below 60 years of age, can avail this deduction under Section 80D in place of the earlier deduction of Rs. 25,000. In case of the parents under senior citizens category, then they are eligible to claim an additional deduction up to Rs. 50,000 which will increase the deduction total to Rs. 75,000 (Rs. 25,000 + Rs. 50,000), which is more than the current available limit of Rs. 55,000 INR.
- Higher Income Tax deduction for Senior Citizens for medical treatment of Specified Diseases:
The senior citizens can now avail rupees 1lakh for medical treatment of specified disease. This amount was earlier limited to rupees 60,000 INR.
These are the new tax reforms that will affect your payable tax from the financial year 2018-19.