10 Income Tax Rules That Will Change From April.
10 Income Tax Rules That Will Change From April.
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.
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.
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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.
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).
