Income Tax rules change 2018: This financial year (2018-19) has witnessed a lot of amendments to the income tax rules, which were introduced in Budget 2018. The introduction of the standard deduction for salaried employees, the higher deduction for senior citizens on health insurance premiums were some of the changes.
Here are 10 changes to Income Tax rules that took place in 2018
1. The latest Long-term capital gain (LTCG) tax regulation came into effect from April 1, 2018. Equity instruments, including listed shares or equity and oriental mutual funds, came in the tax net. These instruments were earlier exempted. Now LTCG gains exceeding Rs 1 lakh are taxed at 10% tax. However, listed shares or equity bought before February 1 (2018), were exempted from LTCG tax.
2. Initially, the dividends distributed by equity mutual funds were tax-free. Now, they attract a 10% tax. The dividends on the equity mutual funds are paid after subtracting a dividend distribution tax of 11.648% (including cess).
3. Senior citizens benefitted as the government increased the interest income exemption limit on the post office and bank deposit from Rs 10,000 to Rs 50,000.
4. The standard deduction for transport allowance and reimbursement of miscellaneous medical expenses were introduced in this year’s budget. No document or proof is needed for the standard deduction. An individual, salaried or pensioner can claim deduction up to Rs 40,000 from his income.
5. The cess on income tax was raised from 3% to 4% for individual taxpayers on the amount of the payable income tax.
6. Earlier, only the employees’ contribution to the National Pension Scheme (NPS) account were let to withdraw tax-free up to 40% of the total amount at the time of maturity. Now, this has been extended to self-employed subscribers too.
7. Earlier, to reap tax-free investment, you had to stay invested in 54EC bonds for a minimum of three years. Now, long-term profits from real estate are tax-free if invested in 54EC for a lock-in period of 5 years.
8. Senior citizens can now avail a deduction up to Rs 50,000 for health insurance premium under section 80D.
9. When the premium for health insurance for many years has been paid altogether in one year, the deduction is allowed on a proportionate basis for the tenure for which the health insurance benefits are provided.
10. Many changes in NPS rules were approved by the union cabinet. Now, the NPS withdrawal is fully tax-free.