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Income Tax rules: 10 ways taxpayers have been affected in the run up to Budget 2019
There were many changes in the income tax rules in 2018-19. The current financial year (2018-19) witnessed a lot of amendments to the income tax rules, which were introduced in the Budget 2018. The introduction of the standard deduction for salaried employees, higher deduction for senior citizens on health insurance premiums were some of the changes.
Budget 2019: Modi government is all set to announce its last budget of the current tenure on February 1 this year and the middle class are expecting a lot of favour from Finance Minister Jaitley this year before the Lok Sabha elections. There were many changes in the income tax rules in 2018-19. The current financial year (2018-19) witnessed a lot of amendments to the income tax rules, which were introduced in the Budget 2018. The introduction of the standard deduction for salaried employees, 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 between 'Budget 2018' and 'Budget 2019'-
1. Capital gain tax: 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%. However, listed shares or equity bought before February 1 (2018), were exempted from LTCG tax.
2. Mutual funds dividends: 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. Interest income of senior citizens: Senior citizens benefited as the government increased the interest income exemption limit on post office and bank deposit from Rs 10,000 to Rs 50,000.
4. Change in allowance rules: Standard deduction for transport allowance and reimbursement of miscellaneous medical expenses, were introduced in last budget. No document or proof is needed for standard deduction. An individual, salaried or pensioner can claim deduction up to Rs 40,000 from his income.
5. Cess on income tax: The cess on income tax was raised from 3% to 4% for individual taxpayers on the amount of the payable income tax.
6. National Pension System: 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.
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7. Tax free investment: Earlier, to reap tax-free investment, you had to stay invested in 54-EC bonds for a minimum of three years. Now, long-term profits from real estate are tax-free if invested in 54-EC for a lock-in period of 5 years.
8. Deduction for senior citizens: Senior citizens can now avail a deduction up to Rs 50,000 for health insurance premium under section 80-D.
9. Health insurance premium: 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. NPS withdrawal: Many changes in NPS rules were approved by the union cabinet. Now, the NPS withdrawal is fully tax-free.
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