Tax Law for the FY 2018-19
The only thing that is constant in this world is change, more so with the taxing provision. Tax laws are the part of dynamic laws and it changes with the changing time. Income Tax provision for the current financial year 2018-19 has also witnessed number of amendments which were introduced by the Union Budget 2018. Being the last quarter of the current financial year, this is the time to review the amendments to the income tax rules as applicable for the FY 2018-19. There are lots of beneficial & adverse amendments, as under:
1. Long term capital gain (LTCG) on sale of shares which was earlier exempt from tax is now taxable @ 10% if the amount exceeds Rs. 1 Lakh. The taxation provisions even extend to the equity oriented mutual funds. However, in case of old shares of the taxpayer income accruing till 01.02.2018 (i.e., the date of presentation of budget) were exempted from LTCG tax due to specific grandfathering clause proposed. FY 2018-19 will be the first year after LTCG exemption has been withdrawn. Taxpayer will be required to worked out gain accruing till 01.02.2018 & gain arising after 01.02.2018.
2. Dividends distributed by equity mutual funds were not liable for any tax at the time of distribution of such dividend till 31.03.2018.
Dividend Distribution Tax (DDT) is now made applicable to equity mutual funds w.e.f 01.04.2018.
Now, dividend by equity mutual fund will attract 10% of dividend Distribution Tax (DDT). The dividends on the equity mutual funds will be after reducing DDT @ 10% plus surcharge & cess.
3. FY 2018-19 carries special tax benefit for the senior citizens. Earlier, interest from SB A/c & post office was eligible for deduction u/s 80TTA to the extent of Rs. 10,000/-. It was same for all categories of individual taxpayer. Now, Senior citizens are given a special treatment by increasing the limit from Rs. 10,000/- to Rs. 50,000/- Even FDR interests are includible for this limit of Rs. 50,000/- for senior citizens.
4. Exemption was available to the salaried taxpayer towards conveyance / transport allowance (up to Rs. 19,200/-) and towards reimbursement of medical allowance (up to Rs. 15,000/-). Now these exemptions are withdrawn and standard deduction of Rs. 40,000/- is given to the salaried taxpayer. The best part is that no document or proof is required for claiming standard deduction. An individual salaried taxpayer or pensioner can claim deduction up to Rs 40,000/- from his income as standard deduction.
5. Earlier, an education & higher education cess @ 3% was applicable on all income tax liability. The cess has been raised from 3% to 4% for the current FY 2018-19.
6. National Pension Scheme (NPS) is an investment option provided by the Government to provide for retirement planning fund to the citizens of the country. Earlier, investment option was available only to the salaried taxpayer which is now extended to the self employed as well. Recently, various changes in NPS rules have been approved by the union cabinet including full exemption withdrawal from NPS.
7. Any Long Term Capital Gain (LTCG) arising from sale of any long term capital assets by any class of taxpayer (be it individual, HUF, Company etc) is eligible to claim tax exemption u/s 54EC if the amount is invested in the specified bonds of NHAI/REC. Earlier, there was a lock in period of 3 years which is now enhanced to 5 years.
8. The limit of claiming deduction u/s 80D towards health insurance / mediclaim has been enhanced up to Rs 50,000. When the premium for health insurance for many years has been paid altogether in one year, the deduction is allowed on a proportionate basis over the tenure for which insurance benefits is provided by the insurance company.