Here Are Five Changes in Income Tax Rules, Proposed in Union Budget 2018-19

Here are five changes in income tax rules, proposed in
Union Budget 2018-19:

1) The finance minister has proposed to increase cess on personal income tax and
corporation tax to 4 per cent from present 3 per cent. This will increase the effective
income tax an individual tax payer pays.
2) A standard deduction of Rs. 40,000 has been proposed to be introduced for salaried
individuals in Budget 2018. About 2.5 crore salaried employees and pensioners would
benefit from this proposal and it would cost the government around Rs. 8,000 crore,
according to the finance minister. According to Budget proposals, salaried individuals
will get a standard deduction of Rs. 40,000 on income in place of the present exemption
allowed for transport allowance and reimbursement of miscellaneous medical expenses.
Standard deduction allows for a flat deduction from income of a salaried individual
towards expenses an employee would incur in relation to his or her employment.
Standard deduction, which was earlier available to the salaried individuals on their
taxable income, was abolished with effect from assessment year 2006-07.
(Read: Standard deduction reintroduced for salaried individuals)
3) Finance Minister Arun Jaitley in Budget 2018 announced a new tax of 10 per cent on
long-term gains from investing in stock markets and equity mutual funds. Under the
proposed new tax, profits of more than Rs. 1 lakh from stock and equity mutual fund
investments held over one year will be taxed at 10 per cent. At present, profits from
stock and equity mutual fund investments held for more than 12 months are tax exempt.
However, long-terms capital gains made on investments up to January 31, 2018, will not
be taxed. (Read: In Budget 2018, 10% tax announced on long-term capital gains
from stocks, equity mutual funds)
5COMMENTS
4) The finance minister also introduced a 10 per cent tax on distributed income by
equity-oriented mutual funds at the rate of 10 per cent.
5) For senior citizens, the government has announced a number of measures that will
help ease their tax burden: Exemption of interest income on deposits with banks and
post offices to be increased from Rs. 10,000 to Rs. 50,000, hike in deduction limit for
health insurance premium and/or medical expenditure from Rs. 30,000 to Rs. 50,000
under section 80D and TDS not required to be deducted under section 194A and benefit
also available for interest from all fixed deposit schemes and recurring deposit
schemes.
o much joy of tax payers in the lower brackets of income tax, Finance Minister Arun Jaitley has
relaxed the chargeable rates.
Personal income tax in Rs 2.5 lakh - 5 lakh bracket has been reduced to 5 per cent from 10 per cent.
Jaitley further announced that there will be zero tax liability to people having annual income up to Rs
3 lakh to avoid duplication of benefits for the Rs 2.5-R 5 lakh tax slab.
Also read: Highlights of Arun Jaitley's Union Budget 2017-18 speech in Parliament
Earlier, the tax slabs had caps at annual income of Rs 2.5 lakh, Rs 5 lakh and Rs 10 lakh attracting
income tax of 10 per cent, 20 per cent and 30 per cent respectively.
Those with annual income between Rs 50 lakh to Rs 1 crore will be levied a surcharge of 10 per cent.
The 15 per cent surcharge on incomes above Rs 1 crore will continue to be charged.
After today's announcement the following tax slabs will be applicable:
Higher
Income Education
Annual Income Education
Tax Cess
Cess
Upto Rs 3 lakh (for senior citizens) Nil Nil Nil
Rs 2.5-5 lakh 5% 2% 1%
Rs 5-Rs 10 lakh 20% 2% 1%
Above Rs 10 lakh 30% 2% 1%
+ 10%
Above Rs 50 lakh 30%
surcharge
Above Rs 1 crore
1) Mr Jaitley reduced income tax rate on income

between Rs. 2.5 lakh and Rs. 5 lakh to 5 per cent from 10
per cent. However, he reduced Section 87A rebate
from Rs. 5,000 to Rs. 2,500. And no rebate will be
applicable for taxpayers having income above Rs. 3.5 lakh.
+ 15%
30%
2) This means tax savings of up to Rs. 7,700 for people with surcharge
taxable income between Rs. 3 lakh and Rs. 5 lakh. And for
persons with taxable income between 5 lakh and Rs. 50
lakh, tax savings of Rs. 12,900. A 10 per cent surcharge
has been proposed for individuals having income ranging
from Rs. 50 lakh to Rs. 1 crore. (Existing surcharge of 15
per cent will remain same for individuals having income
above Rs. 1 crore.)
3) A simple one-page form will be introduced for filing tax

return for individuals having taxable income up to Rs. 5 lakh
other than business income. The finance minister also said
that a person in this category who files income tax return
for the first time would not be subjected to any scrutiny in
the first year unless there is specific information available
with the tax department regarding his high value
transaction.
4) No deduction will be allowed for investment in Rajiv

Gandhi Equity Saving Scheme from Assessment Year
2018-19. This tax-saving scheme, announced in the Union
Budget for financial year 2012-13, was designed
exclusively for the first-time individual investors in the
securities market with gross total income below a certain
limit.
5) Income tax officials can now reopen tax cases for up to

10 years if search operations reveal undisclosed income
and assets of over Rs. 50 lakh. Currently, tax officers can
go back up to six years to scrutinise the books of accounts
of assesses. The amendment to the Income Tax Act will
take effect from April 1, 2017. This means that the books of
accounts of an assessee can be reopened by the taxman
back till 2007.
6) Taxpayers who do not file their returns on time will have

to shell out a penalty of up to Rs.10,000 from Assessment
Year 2018-19. However, if the total income of the person
does not exceed Rs. 5 lakh, the fee payable under this
section shall not exceed Rs. 1,000.
7) Mr Jaitley proposed a number of changes that will attract

lower tax on gains from property sale. The holding period
of a property for qualifying as long-term gains will get
reduced to two years, from three years currently. According
to the current tax norms, if a property is sold within three
years of buying, the profit from the transaction is treated as
short-term capital gains and is taxed according to the slab
rate applicable to him/her.
8) To address the existing anomaly of interest deduction in

respect of let-out property vs self-occupied property, the
finance minister proposed that the set-off of loss under the
head "income from house property" against any other head
of income will be restricted to Rs. 2 lakh for any assessment
year. And the loss not set off would be allowed to be
carried forward for set off against house property income
for eight assessment years.
Earlier, for properties rented out, a borrower could deduct
the entire interest paid on the home loan, after adjusting for
the rental income. However, according to the proposed
change, the borrower could claim deduction of up to Rs. 2
lakh after adjusting for rental income. Experts say the move
will dampen the demand for buying a second property for
the purpose of earning rental income. "High net worth
individuals used to buy properties on loan and were able to
set off the full interest liability against the lettable value of
property usually resulting in loss which would substantially
bring down tax liability and consequently their borrowing
costs. This avenue is now closed and loss above 2 lakh
would have to be mandatory carried forward," said
Sandeep Sehgal, director of tax and regulatory at Ashok
Maheshwary & Associates LLP.
9) Individuals will be now required to deduct a 5 per cent

TDS (tax deducted at source) for rental payments
above Rs. 50,000 per month. Tax experts say that the move
will ensure that persons who get large rental income come
into the tax net. It will be effective from June 1, 2017.
10) Partial withdrawals from National Pension System

(NPS) will not attract tax. According to the proposed
changes, an NPS subscriber can withdraw 25 per cent of
his/her contribution to the corpus for emergencies before
retirement. Remember that withdrawal of 40 per cent of the
corpus is tax-free on retirement.

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Here are five changes in income tax rules, proposed in

Union Budget 2018-19:

Upto Rs 3 lakh (for senior citizens) Nil Nil Nil

Rs 5-Rs 10 lakh 20% 2% 1%

Above Rs 10 lakh 30% 2% 1%

1) Mr Jaitley reduced income tax rate on income

3) A simple one-page form will be introduced for filing tax

4) No deduction will be allowed for investment in Rajiv

5) Income tax officials can now reopen tax cases for up to

6) Taxpayers who do not file their returns on time will have

7) Mr Jaitley proposed a number of changes that will attract

8) To address the existing anomaly of interest deduction in

9) Individuals will be now required to deduct a 5 per cent

10) Partial withdrawals from National Pension System

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