The Budget 2018 didn’t do much for citizens and the salaried class. However, senior citizens got an upper hand in this budget. As a tax-payer, we should know the Income Tax Rules that will change from April 2018. Though, there is no change in the current Income Tax Slab. In the coming Financial Year i.e. 2018-19, we are going to get the impact of these changes on our incomes as well as daily lives. Here are the Top 10 Income Tax Rules that will Change from April 2018.
Recommended Read: Income Tax Slab for FY 2017-18
Top 10 Income Tax Rules that will Change from April 2018:
1) Standard Deduction of INR 40,000:
A standard deduction of INR 40,000.00 is on the proposal. This will benefit the salary group people. However, if this standard deduction gets a green flag in the parliament; then, the current exemption in transport allowance & medical reimbursement will be withdrawn. Hence, the net benefit to all the salary class people will be INR 5,800.00.
2) Health and Education Cess:
As per Budget 2018, the Health and Education Cess will be 4% instead of 3%. Therefore, as per the calculation, if your taxable income is INR 5.00 Lakhs, the will have to shell out INR 125.00 extra towards your income tax. And, if your taxable income is INR 15.00 Lakhs, then the extra amount which you will pay as your income tax is INR 2,625.00.
3) Increase in Tax-Exemption Limit for Senior Citizens towards their Interest Earnings:
Here is a bit relief for senior citizens. Currently, they are paying tax on interest income of INR 10,000.00 and above. However, from FY 2018-19 onwards, they will pay tax on interest income of INR 50,000.00 and above.
4) Increase in Tax-Exemption Limit on Medical Expenses for Senior & Super Senior Citizens:
Under Section 80D, the medical expenses limit will increase from INR 30,000.00 to INR 50,000.00. Also, under Section 80DDB, the limit of medical expenses will be now INR 1.00 Lakh for Senior and Super Senior Citizens both. The current limit under Section 80DDB for senior citizens is INR 60,000.00; and, INR 80,000.00 for super senior citizens.
5) Tax-Exemption on NPS Corpus for Self-Employed People:
Now, salaried & self-employed people will be on the same platform. Both the categories will get a tax-exemption of 40%. The current tax system has this exemption for salaried people only.
6) Tax on Dividend Income from Equity Mutual Funds:
In FY 2018-19, you will pay tax at the rate of 10% on dividends distributed in case of equity mutual funds.
7) Introduction of Long Term Capital Gain Tax on Equity Investments:
Be ready to pay a new tax of 10% on long-term capital gains; if capital gain exceeds INR 1.00 Lakh on selling of equity shares or units of equity funds.
8) Extension of Pradhan Mantri Vaya Vandana Yojana (PMVVY):
As per Budget 2018 proposal, Finance Minister Arun Jaitley advocates the extension of Pradhan Mantri Vaya Vandana Yojana till March 31, 2020. From FY 2018-19, senior citizens can avail maximum benefit from this scheme.
PMVVY is a pension scheme for senior citizens; where they get guaranteed interest rate of 8%.
9) Increase in Investment Limit in Pradhan Mantri Vaya Vandana Yojana (PMVVY):
Finance Minister, Mr. Arun Jaitley also planning to increase the investment limit in PMVVY from 7.5 Lakhs to 15 Lakhs.
10) Enhanced Income Tax Benefits on Single Premium Health Insurance Policies:
Budget 2018 has more benefits for you. On single premium health insurance policies with a term more than one year, the deduction will be allowed on a proportionate basis for the tenure for which health insurance cover is available; subject to a specified limit. The current limit for this deduction is upto INR 25,000.00.