As the new financial year, 2018-19 kicks off, the Union Finance Minister Arun Jaitley has unveiled a ballot of changes in the Income Tax laws to be incorporated from April 1 in his last budget presented on February 1, 2018.
While various alterations, deductions in the cess and corporate taxes were inducted, there was no change in the income tax slab for the individual tax payers.
However, the major clog of the budget 2018 was the re-introduction of long-term capital gains (LTCG) on equities. Also, a standard deduction of Rs 40,000, in place of transport allowance and medical expenditure for the salaried employees will roll out from April 1.
- Long term capital gains on equity: After a long gap of 14 years, the government had reintroduced long-term capital gains amounting to Rs 1,00,000 or above at a rate of 10 % (without any indexation benefit) on the sale of equity or mutual funds even after one year of its purchase. At present, 15% tax is levied on the sale of shares within a year of its purchase while no tax is applicable if sold after a year of purchase. However, capital gains made before January 31, will be exempted while calculating the capital gains for the financial year 2018-19.
- Standard Deduction: Another change introduced in the Budget 2018 is the imposition of the standard deduction of Rs.40,000 to the salaried employees and pensioners in lieu of the current transport and medical expenses. Currently, the tax payers can avail the exemption of Rs.19,200 on transport bills and Rs.15,000 on medical bills. Now, the transport and medical allowances has been merged with a common standard deduction of Rs.40,000, thus allowing very little benefit in tax saving considering the increase in health and medical cess.
- Health and Education cess: Currently, 3% cess ( 2% for primary education and 1% for secondary and higher education) was levied on tax liability. However, it has been increased to 4% in the Budget 2018.
- Corporate tax: The companies that have a turnover up to Rs.250 crores will now be liable to pay 25% corporate tax instead of 30% which is the current tax rate.
- Interest Income exemption for senior citizens: The new Income tax rules has elated the senior citizens this year. The new rules now allow the senior citizens to avail exemption on the interest income earned from the bank. The current amount of interest income of Rs 10,000 that is allowed to be exempted has been raised to Rs 50,000 in case of senior citizens.
- Health insurance exemption under section 80D: The limit of deduction for health insurance premium and medical expenditure, has also been raised from the current limit of Rs 30,000 to Rs 50,000 for senior citizens under the section 80D of the I-T Act.
- Medical Treatment: The tax deduction for the critical illness of senior citizens has been raised to Rs one lakh. Earlier the limit was Rs 60,000 and Rs 80,000 for senior citizens and very senior citizens, respectively.
The changes will benefit the small and medium enterprises which accounts for almost 99 percent companies filing their returns and the senior citizens who can now avail maximum deductions in medical bills and income interests. It is to be seen what effect the new financial year has on the individual tax payers as no changes are made in the tax slabs.