7 Income Tax Changes that will be effective from April 1, 2018
The Budget 2018 has made no
changes in Income Tax Slab Rates for the financial
year 2018-19 (Assessment Year 2019-20). However,
it introduced some significant tax changes that will be effective from April 1,
2018. These tax changes will have an impact on how much taxes you will pay.
Therefore, as a taxpayer, you should be
aware of these tax changes which were introduced in the Budget 2018. In this
post, let us take a look at 7 important income tax changes that will come into
effect from April 1, 2018.
Reintroduction of Standard Deduction
The Budget 2018 has proposed
to reintroduce a standard deduction of a maximum of Rs 40,000 from salary
income. However, this standard deduction will replace the current exemption in
respect of transport allowance and reimbursement of medical expenses. Apart
from salaried employees, the pensioners will also be allowed to avail the
benefit of this standard deduction. There is no requirement to submit any documents/ proofs/bills to avail this tax
benefit. This change is a relief to the salaried class.
Reintroduction of LTCG Tax
The Budget 2018 has
reintroduced long-term capital gains (LTCG) tax on equity shares and units of equity oriented mutual funds. The
gains from the sale of equity shares and units of equity oriented mutual funds
will be taxed at 10% from April 1, 2018,
if the amount of gains is exceeding Rs. 1, 00,000. Earlier, long-term capital gains (LTCG) were exempted
from tax. However, the profits earned up to January 31, 2018, are being
grandfathered.
Cess increased to 4 percent
The Budget 2018 has made no
changes in Income
Tax Slabs and Rates for individuals and HUFs (Hindu
Undivided Families) for the financial year 2018-19. However, the government has
increased cess contribution to 4 percent
from earlier 3 percent. This cess will be
called “Health and Education Cess”. Cess is calculated on the amount of income
tax payable.
10% Dividend Distribution Tax in Equity Mutual Funds
A 10% Dividend Distribution Tax (DDT) will be imposed on dividend income of
equity mutual funds in the financial year 2018-19. However, the dividend distribution tax
will be deducted by the mutual fund houses on dividends before distribution.
Tax Exemption on NPS withdrawal
The tax-exemption benefit on
NPS withdrawal is also extended to non-employee subscribers in the budget 2018.
This means that a non-employee subscriber is also allowed an exemption in respect of 40% of the
total amount payable on the closure of
NPS account or opting out of it. This tax-exemption benefit will bring non-employed subscribers
at par with the employee class.
Tax Exemption on Interest earned by Senior Citizens
The Budget 2018 has increased the tax exemption limit on
interest income by senior citizens from Rs. 10,000 to Rs. 50,000. Interest
income will include interest earned from deposits accounts (Fixed Deposits and
Recurring Deposits) held with the post
office, banks, and co-operative society by senior citizens.
Increased Deduction for Health Insurance and Medical Expenditure for Senior Citizens
The budget 2018 has increased the deduction limit
for the medical insurance premium for senior citizens from Rs 30,000 to Rs
50,000 per annum under Section 80D. Similarly, the limit of deduction for
medical expenditure (critical illness) for senior citizens is also increased to
Rs.1 lakh under Section 80DDB.
Hope now you know the Income
Tax changes that will be effective from April 1, 2018.
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7 Income Tax Changes that
will be effective from April 1, 2018
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