The new financial year is here,and as a taxpayer, you need to be aware of the new Income Tax rules that are getting implemented this year. Here are the rules that are going to impact your earnings and your day-to-day lives.
1. Health and Education Cess
Tax rates did not undergo any changes in the 2018 budget. Tax slabs also didn’t change. They will remain the same forindividuals and HUFs, for the Assessment Year 2018-19. However, a new cess has beenintroduced Health and Education Cess. The rate will be4% of income tax, including surcharge replacing the current 3% Education, Secondary and Higher Education Cess.
2. Standard deduction reintroduced
Until now there was no provision of a standard deduction for salaried employees. However, there were provisions for exemption concerning Travel Allowance and reimbursement of medical expenses. The 2018 budget has proposed a standard deduction of a maximum of Rs. 40,000.
3. Deduction for seniors
Until now a deduction up to Rs 10,000 was liable to all individuals concerning interest earned from deposit accounts held with any bank or post office.
It has been proposed to now allow a deduction of up to Rs 50,000 for senior citizenswith respect to interest income from deposits held with banks, post-office or co-operative society.
4. Medical treatment of senior citizens for specified diseases
Existing provisions provide a deduction to resident individuals and HUFs for any amount spent on the treatment of specified diseases. The deduction was limited to Rs 60,000 for senior citizens and Rs 80,000 for very senior citizens. The Budget has proposed to enhance the deduction limits to Rs 100,000 for both senior and very senior citizens.
5. Enhanced deduction for health insurance, medical expenses related to senior citizens (Section 80D)
Until now a maximum deduction of Rs 30,000 was applicable to an individual or HUF for payment towards a health insurance premium including Rs 5,000 towards preventive health check-up for resident senior citizens. The latest Budget has proposed a maximum deduction limit of up to Rs 50,000. Moreover,senior citizens can also claim the deduction for medical expenditure. Any individual paying a health insurance premium for his/her senior citizen parents can also avail a maximum deduction of Rs 50,000
6. Compensation for termination or modification of employment
A specificpaymentforemployment was out of the purview of taxation until now,and it leads to base erosion and revenue loss.
The budget 2018 has proposed that any compensation or other payments in relation to termination or modification of the terms and conditions of contracts relating to employment shall be taxable under the head income from other sources.
7. Extending the benefit of tax-free withdrawal from NPS
An employee that contributesto the National Pension System (NPS) is allowed an exemption. The exemption is in respect of 40% of the total amount payable to him on the closure of his account or on his opting out.However, this exemption was not available to non-employee subscribers. The latest budget extends the benefit to all NPS subscribers.
8. Taxability of single premium health insurance policy
The budget has made clear that deduction shall be allowed on a proportionate basis for the number of years you have the cover, subject to the specified monetary limit in the case of single premium health insurance plans having a term of more than a year.
It is a crime and illegal to not pay your tax. You need to file your tax every financial year to be deemed a responsible citizen. The new and updated tax rules make it an ideal path to be more knowledgeable about tax. It is imperative that everyone has the basic knowledge of taxation and stay up to date with the latest trend. This keeps everyone abreast with the changes that your taxes undergo. You also have a relatively fair idea about how the tax thing works. Stay informed and be a responsible citizen for the country’s development.