The Union Budget for 2018-19 was presented by Shri. Arun Jaitley, Union Minister for Finance, Government of India, in Parliament on February 1, 2018.Here are some of the important points one should be aware of it.
1) Higher Interest Income Exemption for Senior Citizens:
In this budget , the government has increased interest income exemption limit on bank and post office deposits to Rs 50,000, from Rs 10,000 earlier. This means that no TDS will be triggered if interest income is upto Rs 50,000 , earlier it was Rs 10,000.
(Note : A senior citizen is an individual resident of India (man or woman) who is at least 60 years of age or more but less than 80 years of age. For the purpose of Income Tax calculation, this age is calculated as on 1st of April of that financial year, A financial year starts from 01 April to 31 March)
2) Dividend Distribution Tax on dividends from equity mutual funds:
Dividend is the amount distributed among shareholders by company from the profit it has earned during financial year. In Budget 2018-19 Dividend Distribution Tax (DDT) on equity funds has been imposed. Earlier, there was no tax on dividend from equity funds and only dividend received from Debt mutual fund was taxable. From FY 2018-19, if you hold equity mutual funds for more than a year, the gains are taxed at 10 per cent.
3) Long-Term Capital Gains tax on Equities:
If the capital asset (stocks, bonds, land, residential property etc.) is sold after 36 months from the date of acquisition, profits from the sale are termed as Long term Capital Gain. From 1st April 2018, a new long-term capital gains (LTCG) tax regime on equity instruments – listed shares or equity-oriented mutual funds – came into effect. Earlier such gains on equity were exempt from tax. Now investors have to pay 10% tax on gains exceeding Rs 1 lakh a year.
Equity holdings beyond a year is considered long term. For Example -if you buy Rs. 5 lakh worth shares on April 1 and sell the shares on April 2 the year after for Rs. 5.8 lakh then no tax liability will occur on account of capital gains because the profit is Rs. 80,000 only and not Rs. one lakh or higher. However, if you sell the shares for Rs. 6,01,000 then you will have to pay tax at the rate of 10% on the profit of Rs. 1.01 lakh.
4) Standard Deduction - Rs. 40,000
Standard deduction was reintroduced 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.Standard deduction has been reintroduced by amending the Finance Act 2018. The deduction is available under Section 16 of the Income Tax Act, 1961.
5) Higher cess
Cess is a form of tax (or tax on tax ) , an additional levy by the Central Government to raise funds for specific purpose. In this Budget for FY 2018-19 the government raised the cess on income tax to 4% from 3% earlier for individual taxpayers on the amount of income tax payable.
6) Tax Exemption on NPS for the Self-Employed :
Employees contributing to the National Pension System (NPS) were allowed to withdraw up to 40% of the Total Corpus without any tax at the time of maturity or closure of the account. The same benefit has now been extended to self-employed subscribers.
7) Lock-in period of 54EC (Capital Gains) bonds increased:
Long-term capital gain or capital gain is the gain that is derived out of a sale of an asset that has been held for more than 2 Years in case of Immovable Property and 3 years in case of Debt Funds or Jewellery. You can invest the gain in certain specified bonds to claim tax exemption within 6 months of the date of sale of the asset. Save tax on long-term capital gains by investing in 54EC bonds such as REC Capital Gain Bonds, NHAI Capital Gain Bonds, IRFC Capital Gain Bonds & PFC Capital Gain Bonds respectively.
So,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.
Higher Deduction on Health Insurance Premium (Section 80D):
Senior citizens can now 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. If Senior citizen do not have health insurance and are dependent on any of their children, then he or she who pays the premium shall be allowed to avail a tax deduction of upto Rs. 30,000
9) NPS on a par with PF, is now Tax-Free :
National Pension System (NPS) is a Pension Scheme, like other government scheme that was earlier exclusively only for salaried or government employees. NPS provides Pension benefits to all the Indian Citizens, irrespective of whether they are Government Employee, Private Scetor Employee, Self Employed or Professional. All Indian Citizens, whether Resident Indians or Non Resident Indians aged 18 to 60 years can join the NPS.
Types of NPS:
- Tier I Account: This is a non-withdrawable account meant for savings for retirement.
- Tier II Account: This is simply a voluntary savings facility. The subscriber is free to withdraw savings from this account whenever subscriber wishes. No tax benefit is available on this account.
The Union Cabinet in their Budget 2018-19 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. (Read: NPS rule changes explained in 10 points)
10) Tax Benefits on Single Premium Health Insurance Policies:
In cases where premium for health insurance for multiple years has been paid in one year, the deduction shall be allowed on proportionate basis for the number of years for which the benefit of health insurance is provided.
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