As these new tax rules will also impact one's finances and tax planning, it is important for us to know about them.
Finance Minister Arun Jaitley, while presenting the Budget 2018, had proposed some changes in the income tax laws, which became effective from the start of the current financial year, ie. 1st April, 2018. As these new tax rules will also impact one’s finances and tax planning, it is important for us to know about them. Here are 5 such tax laws which will be applicable from the current year:
1. Benefit of Standard Deduction in lieu of medical reimbursement and conveyance allowance
Salary earners will now be entitled to a standard deduction up to Rs 40,000 against salary received from one or more employers during the year. Pensioners will be able to claim this not only against the pension received from the employer, but also against pension under the Employee Pension Scheme from provident fund offices. This deduction is also available against any pension received for an annuity purchased from insurance company by your employer under superannuation scheme. However, this deduction is not available against pension from insurance company on any annuity purchased by you as well as annuity purchased under the National Pension System (NPS). The benefit of tax-free medical reimbursement up to Rs 15,000 and transportation allowance up to Rs 1600 per month will not be available from the current year.
2. Changes in Section 80D
Earlier, in case premium for more than one year was paid, whole of the amount was allowed as deduction in the year of payment. From the current year you will be able to claim the deduction proportionately only for the year. Likewise for senior citizens the quantum of deduction is raised to Rs 50,000 against Rs 30,000 from the current year. Moreover the enhanced deduction of Rs 50,000 is available for all the medical expenses including hospitalisation incurred if the senior citizen does not have any medical insurance policy.
3. Increased deduction for bank interest for senior citizen
Up to last year all the tax payers were allowed a deduction up to Rs 10,000 under Section 80 TTA in respect of saving bank interest with banks, post office and cooperative banks. From this year a separate section 80 TTB is introduced for senior citizens under which not only the limit of Rs 10,000 has been increased to Rs 50,000, but also it will cover all the interest received from banks, post office and cooperative banks, whether on fixed deposits, recurring deposits or even saving bank account. For submitting Form No. 15H, the limit has been increased from Rs 10,000 to Rs 50,000 from the current year.
4. Long term capital gains provisions
Up to last year all the long-term capital gains made on sale of equity shares and units of equity oriented schemes, after having held for more than 12 months, were fully exempt under Section 10(38). However, from the current year the long-term capital gains in excess of Rs 1 lakh, would be taxed @ flat 10%.
For the purpose of computing the capital gains, any profit accrued till 31st January 2018 will not be taxed. So, the market value of shares or the net asset value of mutual funds units on 31st January 2018 will be taken as cost for the purpose of computing the long-term capital gains. The taxpayers should take benefit of this basic exemption of Rs 1 lakh for long-term capital gains every year in the income tax returns of all the family members including HUF if you have one.
From the current year the tenure of capita gain bonds under section 54 EC has been increased from three years to five years and the benefits is also restricted to long-term capital gains on sale of land and building only which up to now was available for all capital assets.
5. Mandatory payment of fee for delay in filing of income tax returns
From the current year onwards, you need to file your income tax return by 31st July unless you are carrying on business and are required to be audited under any other law. In that case the due date is 30th September. Up to the previous year there was no provision for payment of late filing fee if you failed to file the ITR by the due date. There was some provision whereby the assessing officer could levy a penalty of Rs 5000 if you failed to file the same within 12 months from the end of the financial year after giving you an opportunity to be heard.
From the current year the law is amended and you will have to mandatorily pay a late filing fee if you miss the deadline. The late fee would be Rs 5000 if the return is filed after the due date but by 31st December, beyond which the late fee would be Rs 10,000. The late filing would, however, be restricted to Rs 1,000 if the total income does not exceed Rs 5 lakh. It is interesting to note that the fee applicable from the current year is mandatory in nature and the assessing officer does not have any discretion over it.
(The author is a tax and investment expert)