When the budget was released for the financial year 2018-19, not many changes were announced especially in the income tax slabs. However, certain significant changes in the income tax calculations were made which came into effect from 1st April 2018.
Here are the details of 5 of those noteworthy changes:
1. Standard Deduction
The standard deduction is introduced to salaried taxpayers who are now eligible for flat Rs. 40,000 standard deduction on their income earned between April 1, 2018, and March 31, 2019. This change has replaced the previously existing transport allowance of Rs. 19,200 and medical reimbursement of Rs. 15,000.
The new change will be helpful for a person with a lower salary, but those with a higher salary would have to pay more than they paid in the financial year 2017-18.
2. The return of LTCG tax
There has been a reintroduction of the tax on long-term capital gains (LTCG) arrived from the sale of the equity shares or from the equity-linked funds, for the financial year 2018-19. From 1st April, a tax of 10% has been implied on all gains exceeding Rs. 1, 00,000.
For the investments that were made before the announcement of budges, that is January 31, 2018, they will be made eligible for indexation under certain conditions.
3. Tax on dividends
Dividends gained from equity mutual funds will be applicable for a tax of 10% in the financial year 2018-19.
4. Increase in Cess contribution
Cess is an additional tax which is imposed on basic tax liability and it is calculated on the income of taxpayers which is taxable. For the FY 2017-18, the health and education cess was 3% which is now increased to 4% for the FY 2018-19.
The Government has a number of schemes like Ekalavya Model Residential School for ST students, which will be funded with the help of this health and education cess. Finance minister Arun Jaitley made a statement during the budget announcement which explained that an estimate of Rs. 11, crores is expected to be collected from this increase.
5. Tax-free NPS withdrawal
There was a benefit which only employee subscribers received that of tax-free withdrawal from National Pension Scheme but that advantage has now also been extended to non-employee subscribers. This means that if you’re closing an NPS account or opting out of it, the total amount that would be received at that particular time is not included in the total income of all the subscribers.