Changes in Income Tax rules 2018
As we are coming to the close of the 2018 Financial Year and come January your office will start asking you for your Tax Saving Investment Proofs, we thought it would be good to know the Tax Rule Changes that came into effect for FY 2018-19.
The following are some of the important tax changes directly impacting your personal finances that came into effect this year.
- No TDS on interest up to Rs 50,000 for senior citizens
The government increased interest income exemption limit for senior citizens on bank and post office deposits to Rs 50,000, from Rs 10,000 earlier. In addition, for senior citizens, tax deduction at source (TDS) will not be triggered if interest income is up to Rs 50,000.
- Long-term capital gains tax on equities
Another tax curve which was thrown during the Budget 2018 was the introduction of long-term capital gains (LTCG) tax on the sale of equity shares and equity oriented mutual funds. The tax has been re-introduced from FY 2018-19 after it was abolished in 2004.
Gains up to Rs 1 lakh will be tax-exempt in a single fiscal year. Gains over and above Rs 1 lakh will be taxed at the rate of 10 percent arising from the sale of equity shares and equity oriented mutual funds after holding it for a year.
- Hike in Cess liability
The government raised the cess on income tax to 4% from 3% for individual taxpayers on the amount of income tax payable. In addition to that, it has been renamed as ‘Education and Health Cess.’
- Higher deduction on health insurance premiums
Senior citizens now can avail deduction of up to Rs 50,000 for health insurance premium under Section 80D. Earlier the limit was Rs 30,000. Also, the deduction available for payment towards medical treatment of specified disease has been hiked to Rs 1 lakh for senior citizens.
- Dividend distribution tax on dividends from equity mutual funds
Budget 2018 also introduced taxation of dividend received from equity mutual funds. Dividend distribution tax (DDT) at the rate of 10 per cent has been introduced from April 1, 2018 which will be levied on dividends payments made by the mutual fund houses. It will be deducted by the MFs at the time of making the payments.
- Standard deduction – Rs.40,000
Standard deduction was introduced in this year’s budget in lieu of the earlier exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses. Unlike other deductions and exemptions, to claim standard deduction, one need not provide any documents and proof. A salaried individual or pensioner can claim standard deduction up to Rs 40,000 from his/her income.
- Lock-in period of 54EC bonds increased
Long-term profits from real estate sales are tax-free if invested in specified bonds under Section 54EC. Till last year, you had to stay invested in the 54EC bonds for at least three years to enjoy the tax break, but from this year, your money will be locked in for five years.
- Changes in NPS
Providing much relief to NPS (National Pension System) investors, the government has announced 100 per cent tax-exemption for the 60 per cent withdrawal which is allowed from the corpus at the time of maturity. However, the remaining 40 per cent of the corpus will still have to be mandatorily used to buy an annuity plan.
Earlier, of the total 60 percent of the corpus allowed to be withdrawn at maturity, only 40 percent was tax-exempt and the remaining 20 percent was taxable in the hands of the investor as per the tax slabs.
Apart from making withdrawals from NPS at the time of maturity tax-exempt, the government has also offered tax-saving benefits on Tier-II account of NPS for only central government employees. The tax-saving benefit is available under the overall limit of Rs 1.5 lakh of Section 80C of the Income Tax Act and comes with a lock-in period of three years.
- Government brings NPS on a par with PF, makes it tax-free
The Union Cabinet recently approved many changes in the NPS to make it more attractive for investors. NPS will be made fully tax-free on withdrawal. Subscribers will get full tax exemption on the 60% of the corpus that an investor is allowed to withdraw on maturity. This will help bring the NPS on a par with other tax-saving instruments like the PPF where withdrawals are fully tax-free. This is likely to be effective from April 1 next year.
- Aadhaar mandatory for applying for PAN card
The Supreme Court in its judgement on Aadhaar has upheld Section 139AA of the Income Tax Act. According to this section, it is mandatory for individuals to provide their Aadhaar details while applying for PAN. In addition to that, every individual having a PAN is mandatorily required to link his/her PAN with Aadhaar. The last date to link PAN with Aadhaar is March 31, 2019.
- Reduction in time limit to revise your ITR
If a person files ITR, he/she will have time till the end of financial year (i.e., March 31) to correct his/her mistake and file the ITR. Thus, if a return is filed in AY 2018-19, then a taxpayer will have time till March 31, 2019 to correct his/her mistake.
Earlier income tax laws allowed a taxpayer to revise his/her return up till two years from the end of the financial year for which the return is filed which has been reduced now.
FundsTiger can arrange loans from almost all the banks. You can apply for an attractive offer with best possible rate of interest and terms for Personal Loan, Business Loan , Home Loan and Car Refinance Loan.