Seven Income Tax Rules That Will Come Into Effect From Today

The Budget 2018 announced on February 1 this year by the Union Finance Minister Arun Jaitley enshrined a host of changes in the Income Tax (I-T) law. As the new income tax (I-T) rules are set to come in force from Sunday (first day of the financial year 2018-19), the tax payers ought to know the amendments in India's direct tax law. Though there was no change in the income tax slab for the individual tax payers, there was, however, a plethora of alterations as far as quantum of deductions, cess and corporate tax rate are concerned.

However, what turned out to be a major dampener in the budget 2018 was the re-introduction of long term capital gains (LTCG) on equities if the gains exceed Rs one lakh. Besides this, there was an announcement of rolling out standard deduction to the tune of Rs 40,000, replacing transport allowance and medical expenditure for the salaried employees. The Finance Bill 2018 also includes higher deduction from the income of senior citizens in case of critical illnesses.

Income Tax (I-T) law changes in Budget 2018 you must be aware of

1. Long term capital gains (LTCG) on equity: After a hiatus of 14 years, the government re-introduced long term capital gains amounting to Rs one lakh and above at the rate of 10% on the sale of equities and equity mutual funds if they are sold any time after one year of their purchase. This means even if you sell your equity on April 2, you will be liable to pay the tax at the rate of 10% on account of long term capital gains. The tax will not have indexation benefits also. However, the capital gains made before January 31 will be grandfathered. This means any rise before January 31 will not be taken into account while calculating the capital gain for the financial year 2018-19.

2. Corporate tax rate: Corporate tax rate that is currently 30% has been reduced for a set of companies. The corporate entities that have a turnover of upto Rs 250 crore are meant to pay only 25% corporate tax instead of 30% earlier.

3. Interest Income exemption:The finance minister offered a bounty of benefits for the senior citizens this year. The most important of them probably is the one that allows the senior citizens to avail exemption on account of interest income earned from the bank. The current amount of interest income of Rs 10,000 that is allowed to be exempted has been raised to Rs 50,000 in case of senior citizens. For the purpose, a new section 80TTB has been introduced.

4. Exemption under section 80D: The income tax exemption under section 80D of the income tax act, allowed for payment of health insurance premium and medical expenditure, has also been raised from the current limited of Rs 30,000 to Rs 50,000 for senior citizens.

5. Education and health cess: The education and health cess has been raised from the current rate of 3% to the new rate of 4%. This is the only additional levy on the small tax payers this time.

6. Standard Deduction: Another change that has been introduced in this year's tax law is the imposition of standard deduction of Rs 40,000. However, with the introduction of standard deduction, the tax payer will no longer be able to avail exemption on account of transport allowance and medical expenditure to the tune of Rs 19,200 and Rs 15,000, respectively, allowed earlier. Standard deduction was earlier allowed for salaried individuals until it was removed from assessment year 2006-07.

7. Medical Treatment: Exemption for Medical treatment of senior citizens has been raised to Rs one lakh. Earlier the limit was Rs 60,000 and Rs 80,000 for senior citizens and very senior citizens, respectively.