10 key Income Tax rules will change from April 1 – All you should know

Know how the change in Income Tax rules will impact you.

New Delhi: While presenting the Union Budget 2018, Finance Minister Arun Jaitley had announced a slew of changes in the tax band that will come into effect from April 1, 2018.

Here are the key tax changes that will come into effect from April 1

Re-introduction of standard deduction

Giving a relief to salaried class, finance minister Arun Jaitley proposed to re-introduce standard deduction. He announced standard deduction of Rs 40,000 in lieu of transport allowance and medical reimbursement. The standard deduction, which is provided to salary earners, was discontinued from the assessment year 2006-07. The total number of salaried employees and pensioners who will benefit from this decision is around 2.5 crores. Central Board of Direct Taxes (CBDT) has clarified standard deduction can be claimed straightaway, implying that that tax payers will not be required to submit any proofs or bills to avail it.

Transport and Medical Allowance may be taxable

The introduction of standard deduction of Rs 40,000 p.a. for salaried individuals will however increase the tax burden of individual tax payer. Eaerlier these tax payers would tax-free limit for medical expense reimbursement of 15,000 p.a. and transport allowance exemption of Rs 1,600 p.m.

Cess hiked to 4 percent

Finance Minister Arun Jaitley proposed to replace existing 3 percent education cess on personal income tax and corporation tax with a 4 percent 'Health and Education Cess'. At present, a 3 per cent cess, consisting of 2 per cent cess for primary education and 1 per cent cess for secondary and higher education, is levied on personal income tax and corporation tax.

Long-term capital gains Tax

Finance Minister Arun Jaitley in his Budget for 2018-19 announced levying long-term capital gains tax on profits made from share sales. The proposed long-term capital gains tax on equity holdings will apply on profits made from sale of shares on or after April 1, 2018. While the tax will kick in on shares sold on or after April 1, the acquisition cost for the purpose of computing the capital gains will be the higher of the actual purchase price or the maximum traded price on January 31.

Tax exemption for Senior Citizen

Finance Minister Jaitley announced exemption of interest income on deposits with banks and post offices. Interest income will be increased from Rs 10,000 to Rs 50,000 for senior citizens.

TDS for Senior Citizen

TDS will also be not required to be deducted under section 194A. The benefit will be available for interest from all fixed deposit schemes and recurring deposit schemes

Medical expenses for Senior Citizen

The finance minister also hiked in deduction limit for health insurance premium and/ or medical expenditure from Rs 30,000 to Rs 50,000 under section 80D. Additionally an increase in deduction limit for medical expenditure for certain critical illness from Rs 60,000 (in case of senior citizens) and from Rs 80,000 (in case of very senior citizens) to Rs 1 lakh for all senior citizens, under section 80DDB has also been announced.

Dividend Distribution Tax on equity mutual funds

Finance minister Arun Jaitley in his Budget 2018 speech proposed to introduce dividend distribution tax (DDT) on equity mutual funds at the rate of 10 percent, to provide a level field across growth-oriented and dividend distributing schemes.

Pradhan Mantri Vaya Vandana Yojana for Senior Citizen

Jaitley 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.

National pension scheme for  non-employee subscriber

Finance Minister proposed 40 percent exemption of the total amount payable to the National pension scheme for  non-employee subscribers.