The finance ministry didn’t interfere with the income tax slabs in Budget 2018, as the slabs remain unchanged. Nevertheless, it had a few proposals that will affect tons of taxpayers across the country.
So without much ado let us talk about few key reforms in income tax laws as proposed in the Budget 2018 that will take effect in approximately 6 weeks from now i.e. April 1, 2018:
- Resurrection of standard deduction
In what came as a huge relief for salaried individuals, Budget 2018 restored standard deduction of 40,000 INR from a person’s salary income. Besides salaried individuals, pensioners are now eligible to avail the benefits of standard deduction. No need to submit bills or proofs.
- Cess hike on income tax
Cess imposed on tax liability would be 4% from the erstwhile 3% on the amount of the income tax payable. The new cess is termed as Health and Education Cess.
- Tax on dividend income derived from equity mutual funds
A 10% tax will be levied on dividends from equity mutual funds. Though the dividend will remain tax-free for investors, it will be deducted by fund houses prior to distribution of the dividends.
- Medical reimbursements and transport allowance to fall under tax
Whilst the Budget 2018 resurrected standard deduction, tax benefits on medical reimbursements and transport allowance has been withdrawn. Currently, medical reimbursement amounting to 15,000 INR and transport allowance amounting to 19,200 per annum is exempted. However, starting from April 1 2018, both these allowances might become taxable.
- Limit of deduction raised under Section 80DDB and section 80D for senior citizens
Under section 80DDB, the limit has been raised to 1 lakh INR for senior citizens from the previous 60,000 and 80,000 INR for super senior citizens. Similarly, under section 80D, the limit has been hiked to 50,000 INR from the previous 30,000 INR.
- Tax benefit on NPS withdrawal
For self-employed, Budget 2018 proposed an exempt of 40% of total amount to be paid from the tax on NPS (National Pension System) withdrawal.
- TDS limit hike for senior citizens
According to the new tax rule, limit for deduction of TDS on the interest income is raised to 50, 000 INR from the previous 10,000 INR for senior citizens.
- Hike in investment limit in PMVVY or Pradhan Mantri Vaya Vandana Yojana
Investment limit in PMVVY to increase from 7.5 Lakh INR to 15 Lakh INR and this will be extended till March 2020.
Lastly yet importantly, in another news, the EPFO or the Employee Provident Fund Organisation may not tinker the interest rate and may keep it untouched at 8.65% on Provident Funds (PF).
While Budget 2018 brought in a streak of tax reforms, aforementioned are few reforms that we at Pocket HRMS have handpicked, since we believe these to be the most relevant to the masses.
Disclaimer: All the information, views and opinions expressed in this write-up are those of the authors and their respective web sources and in no way reflect the principles, objectives or views of Pocket HRMS.
Source: Techworl, Zee Business, Economic Times and Times of India.