New in Income Tax – 2018: Although overall the tax slabs are kept same as last year but there are many smaller changes that are being done to the income tax rules. These rules can impact the tax paid and savings, done by the individual taxpayer. Some of these changes include:
1) Additional Discount of 40K: Till the previous financial year, one could get a saving on the transport allowance for 19,200 and for 15,000 on the medical bills submitted by the individual. In the new structure these provisions have been scrapped. However, a new rule has been brought up which provides a flat deduction of 40, 000 to every individual irrespective of the tax bracket, the person falls. The benefit of this new rule would vary from individual to individual based on the tax bracket.
2)Higher cess: Cess is an additional tax levied by the Government for some of the pre-decided activities. Cess rate in the previous structure was 3% and now it has been increased to 4% on the taxable income of the individual.
3)Long-Term Capital Gains Tax on Equity Investments: The biggest change in the income tax structure is with respect to the Gains from shares or equity-linked mutual funds. Earlier all these investments, if done for a long-term period (greater than 1year) were tax –free and did not demand any tax. In the current scenario, the funds are liable to a tax of 10%. Tax on these is calculated based on the difference of actual value at the time of possession and the redemption value. If the share or mutual fund is held for a period more than 1 year and a gain of more than 1 lakh is earned on it, then the gains are taxable by 10%. Any of the funds sold in a shorter span (Short Term Capital Gains) less than 1 year are apply a tax rate of 15%.
4)Tax on Dividend income of mutual funds: Another bad news for the inequity shares and equity-linked mutual funds holders is that the dividends earned from these investments would also be taxed at 10% rate.
5) Income tax benefit on single premium health insurance policy: Previously, health insurance companies were providing a flat tax exemption of 25,000 if you are paying the premium for future in advance. However, in the new structure, the individual gets a discount on the pro rata for the future years.
6) Benefit on NPS withdrawal: In the previous financial year, the withdrawal facility without any tax being applied was available to the employees with an upper limit of 40%. Form the current FY 2018-19, the facility has been extended to Non- employees as well.
Host of benefits have been included for Senior Citizens in the new Taxation rules –
1) Deduction in interest income for senior citizens: Good news for Senior Citizens, in the previous FY, Senior citizens were getting income tax deduction with an upper limit of 10,000 on the interest earned on savings account, RD account etc. under section 80TTA, In the new structure, an additional section 80TTB has been introduced by the government, which gives the privilege of tax free savings on the interest earned with an upper cap of 50,000.
2) The upper limit for PMVVY increased: Pradhan Mantri Vaya Vandana Yojana which was launched in 2017 for the senior citizens. This is an investment scheme in LIC and provides guaranteed returns of 8%. The scheme has been extended till 2020 now and investment cap has been increased from a previous 7.5 Lakhs to 15 lakhs.
3) Higher TDS for Senior Citizens: Limit on the tax deduction scheme for senior citizens has also been increased from a previous 10,000 to 50,000 in the current financial year.
4) Higher deduction under Section 80D for Senior Citizens: Increase in tax deduction on health premiums paid by the senior citizens, earlier, the amount 30,000 and now, it has been increased to 50,000. For young individuals less than 60, the limit is 25,000 same as previous year. They can use this new benefit by taking an additional deduction of 50,000 for their parents, making a total of 75,000.
5) Higher Income tax deduction for Senior Citizens for treatment of specific diseases: Under Section 80DDB, deductions available for treatment of specific medical diseases which was earlier 80,000 has been revised and increased to 1,00,00