The Union Budget 2018 failed to do much for taxpayers as well as the salaried class. 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.
Here is the list of tax changes applicable from April 1 2018
The government has proposed to provide a standard deduction of Rs 40,000 from salary income to employees. However, the current exemption in respect of transport allowance and reimbursement of medical expenses will be withdrawn. The net benefit will only be Rs 5,800.
Health and Education Cess
Government has proposed a new cess - Health and Education Cess - which will be levied at the rate of 4% of income tax. At present, a 3% cess, consisting of 2% cess for primary education and 1% cess for secondary and higher education, is levied on personal income tax and corporation tax.
Deduction in respect of interest earned by senior citizen
Budget has proposed to increase the tax exempt limit on interest income for senior citizens from Rs 10,000 to Rs 50,000. Interest income will include interest earned from fixed deposits (FD) and recurring deposits (RD).
Medical treatment of senior citizens for specified diseases
For senior and very senior citizens, the tax deduction for critical illness will be Rs 100,000 from April 1, as against the existing limit of Rs 60,000 for senior citizens and Rs 80,000 for very senior citizens.
Dividend Distribution Tax
Tax at the rate of 10 per cent will be levied on the dividends distributed in case of equity mutual funds. However, this dividend will remain tax-free in the hands of investors. This will impact investors who were relying on dividends from balanced funds as a source of regular income.
Budget has proposed to increase the tax exempt limit on interest income for senior citizens from Rs 10,000 to Rs 50,000. This means TDS will not be deducted on interest income of upto Rs50,000. Interest income will include interest earned from fixed deposits (FD) and recurring deposits (RD).
Long term capital gain
The biggest announcement in the Union Budget 2018-19 was the reintroduction of the long-term capital gains (LTCG) tax that would see investors paying 10% tax on the gains made by selling shares even after holding them for more than a year.
However, to offer a partial relief to investors, the government has proposed that all gains up to January 31 would be grandfathered. In other words, the gains would be computed based on the share price on January 31.
With regard to corporate tax, the Budget has lowered the rate to 25 per cent for companies with the turnover of up to Rs 250 crore in 2016-17.
The changes will benefit the entire class of micro, small and medium enterprises which accounts for almost 99 per cent of companies filing their tax returns.
Extension of Pradhan Mantri Vaya Vandana Yojana
The government proposed to extend Pradhan Mantri Vaya Vandana Yojana up to March 2020. The Current investment limit will be increased to Rs 15 lakh from the existing limit of Rs 7.5 lakh per senior citizen. Pradhan Mantri Vaya Vandana Yojana is a pension scheme for senior citizens, which is offered by Life Insurance Corporation of India (LIC).
National pension scheme for non-employee subscriber
For self-employed people, it has been proposed to exempt 40 per cent of the total amount payable from tax upon closure of National Pension System (NPS). This tax benefit will now bring self-employed individuals at par with the salaried class.
The Union Budget 2018-19 was the last full budget before the general elections next year, when a vote on account would be presented. The next full budget will be presented by the new government.