Although no changes were made in the income tax rates for individuals, in view of the many positive changes made by the Modi government in the personal income tax rate during the last three years, Finance Minister Arun Jaitley – while presenting the Union Budget 2018-19 — had proposed some changes in the tax rules which will become effective from today, ie, April 1, 2018, which is also the beginning of the new financial year 2018-19. Being aware of these tax changes will help you plan your income and taxes better in the new fiscal.
Here's a list of all the tax change:
Starting from April 1, if you file your ITR post the deadline of July 31, 2018 (unless the tax department extends it), you will be liable to pay a maximum penalty of Rs 10,000.
As per the new law, a penalty of Rs 5,000 will be levied if the return is filed after the due date but before December 31 of that year and Rs 10,000 post December 31. However, as relief to small taxpayers, if your income is not more than Rs 5 lakh,the maximum penalty levied will be Rs 1,000.
Apart from penalty on late filing of ITR, if you make a mistake while filing for FY2017-18, then you would have time till 31 March, 2019 to file your revised return.
Earlier a taxpayer was allowed to revise his returns up till two years from the end of the financial year for which the return was filed. However, from now on, he will be allowed to revise his return only up till one year from the end of the financial year.
Therefore, for the financial year ending on 31 March, 2018, a person will have time till 31 March, 2019 to revise his ITR. The normal deadline for filing return for FY17-18 would be July 31, 2018.
If your salary includes medical reimbursement and transport allowance, then these two items will become fully taxable in your hands from April 1. The proposal was announced in Budget 2018.
Until and including FY 2017-18, income tax laws allowed transport allowance up to Rs 19,200 and medical reimbursement up to Rs 15,000 in a year to be claimed exempt from tax. Medical reimbursement was tax-exempt only if the actual bills were submitted to the employer but transport allowance did not require submission of bills.
However, in lieu of the above allowances, standard deduction of Rs 40,000 from salary and pension will be available. You can claim this deduction next year for FY 2018-19 (assessment year 2019-20) at the time of filing ITR.
Starting from FY 2018-19, the cess levied on the tax liability will be hiked by 1 per cent to 4 percent, as proposed in the budget. The cess will be called 'Education and Health Cess', replacing the current 3 per cent education cess. You will feel this impact when TDS is deducted from your salary and at the time of paying your income tax liability.
LTCG from the sale of shares and equity-oriented mutual funds will attract tax at a flat rate of 10 percent. Indexation benefit (adjusting the purchase cost with respect to inflation) will not be available. Further, LTCG up to Rs 1 lakh in one fiscal will be exempted from tax.
Dividends declared in equity-oriented mutual fund schemes will come under the purview of dividend distribution tax (DDT) with effect from April 1. The tax will be levied at 10 percent and will be deducted by the fund house before paying dividends.
Starting from 1 April, interest income earned by senior citizens will be exempt up to Rs 50,000 a year. This includes interest income earned from savings bank/post office accounts, fixed deposits (FDs) and recurring deposits (RDs). This tax benefit is available to them under the newly inserted section 80TTB of the Income tax Act. TDS will be deducted only if interest income is more than Rs 50,000 in year.
However, if you are claiming tax benefit under section 80TTB, you cannot avail it under section 80TTA. Under section 80TTA, interest earned from savings account (bank/post office) up to Rs 10,000 is exempt from tax.
Additional benefits are also available on premium paid for medical insurance. Health insurance premium paid for senior citizens will be allowed a maximum tax-break of Rs 50,000 under section 80D.
Senior citizens who do not have health insurance can also avail this benefit for medical expenses incurred. It is advisable to keep the prescription and medical bills handy in case the tax department might require it in the future.
Tax benefit under section 80DDB has also been increased to Rs 1 lakh for treatment of specified diseases such as chronic kidney diseases (CKD), cancers etc.
Bonds issued under section 54EC for saving tax on LTCG will be issued for a tenure of five years with effect from April 1, 2018, instead of three years. Added to this, it will be possible to save tax via these bonds for capital gains arising from only land, building or both.
Earlier capital gains from other assets like debt mutual funds, jewellery etc could be invested in these bonds to save tax.
Self-employed and professionals will now be able to withdraw 40 percent of their National Pension System (NPS) corpus tax-free when they close or opt out of it. Salaried employees are already allowed to withdraw 40 percent of their NPS corpus tax-free.