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Budget Highlights. Good to read for General Knowledge

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The Union Budget 2018 aims to focus on development of agriculture, rural economy, improved health & education and increased employment. We have prepared a brief summary of budget points that may have effect on individual taxpayers like you.

Here’s are the Key Highlights of Budget 2018 :

A.  Changes that will affect Individuals

1. Income Tax Slabs, Rebate under section 87A, Surcharge

The rates for A.Y. 2019-20 (F.Y. 2018-19) are unchanged from A.Y. 2018-19 (F.Y. 2017-18).

2.  Cess

For the purpose of raising funds for education, it is proposed to replace Education Cess @ 2% and Secondary and Higher Education Cess @ 1% by Health and Education Cess @ 4%.

The impact of the same will be as follows:

  • Individuals (Less than 60 years of age)
Slab Net Taxable Income Existing Tax (including Cess) Proposed Tax (including Cess) Increase in Tax
Up to Rs. 2,50,000/- Rs. 2,50,000/-  Nil Nil Nil
Rs. 2,50,000/- to Rs. 5,00,000/- Rs. 5,00,000/- Rs. 12,875/- Rs. 13,000/- Rs. 125/-
Rs. 5,00,000/- to Rs. 10,00,000/- Rs. 10,00,000/- Rs. 1,15,875/- Rs. 1,17,000/- Rs. 1,125/-
Above Rs. 10,00,000/- Rs. 20,00,000/- Rs. 4,24,875/- Rs. 4,29,000/- Rs. 4,125/-
  • Senior Citizens (60 Years or more but less than 80 years)
Slab Net Taxable Income Existing Tax (including Cess) Proposed Tax (including Cess) Increase in Tax
Up to Rs. 3,00,000/- Rs. 2,50,000/-  Nil Nil Nil
Rs. 3,00,000/- to Rs. 5,00,000/- Rs. 5,00,000/- Rs. 10,300/- Rs. 10,400/- Rs. 100/-
Rs. 5,00,000/- to Rs. 10,00,000/- Rs. 10,00,000/- Rs. 1,13,300/- Rs. 1,14,400/- Rs. 1,100/-
Above Rs. 10,00,000/- Rs. 20,00,000/- Rs. 4,22,300/- Rs. 4,26,400/- Rs. 4,100/-
  • Super Senior Citizens (80 years or more)
Slab Net Taxable Income Existing Tax (including Cess) Proposed Tax (including Cess) Increase in Tax
Up to Rs. 5,00,000/- Rs. 5,00,000/- Nil Nil Nil
Rs. 5,00,000/- to Rs. 10,00,000/- Rs. 10,00,000/- Rs. 1,03,000/- Rs. 1,04,000/- Rs. 1,000/-
Above Rs. 10,00,000/- Rs. 20,00,000/- Rs. 4,12,000/- Rs. 4,16,000/- Rs. 4,000/-

3.   Deductions under Chapter VIA

a.    80D – Deduction in respect of medical insurance premium

It is proposed to increase the amount of deduction available to senior citizens for payment of mediclaim premium as follows:

Existing deduction limit Proposed Changes in limit
Amount of Deduction allowed for Senior Citizen and Very Senior Citizen:
Rs. 30,000/- Rs. 50,000/-

b. Section 80DDB – Deduction for expenditure incurred on medical treatment etc.

It is proposed to increase the amount of deduction available to senior citizens as follows:

Existing deduction limit Proposed Changes in limit
Amount of Deduction allowed for:
Senior Citizen: Rs. 60,000/-  

Senior Citizen and Very Senior Citizen: Rs. 1,00,000/-

Very Senior Citizen: Rs. 80,000/-

To know about specified diseases under section 80DDB click here.

c. Section 80JJAA – Deduction in respect of employment of new workmen

It is proposed to extend the benefit of this section to Footwear and leather business also. Under this section, 30% of the salaries and wages paid to new employees who have worked for at least 240 days in a financial year was allowed as a deduction. The condition of at least 240 days in a financial year is now proposed to be relaxed to 150 days.

Also the benefit of this section is proposed to be extended to new employee even if he has worked for a less than 240 days if he works with the employer for at least 240 days in the next financial year

d. 80TTB – Deduction in respect of interest on deposits in savings accounts

It is proposed to increase the amount of deduction available to senior citizens by insertion of a new section 80TTB as follows:

Particulars Existing deduction limit Proposed Changes in limit
Amount of Deduction allowed for Senior Citizen and Very Senior Citizen:
Interest from Savings Bank Account and Post Office Rs. 10,000/-  

Rs. 50,000/-

Interest from Fixed Deposits and Recurring Deposits: Nil

Also, no TDS shall be deducted under section 194A on the amount of such interest earned by Senior Citizens and Very Senior Citizens upto Rs. 50,000/-.

e.  Benefit of National Pension Scheme:

The benefit of tax-free withdrawal from NPS upto 40% of amount, which was earlier allowed to employee subscriber is now extended to non-employee subscriber.

4.  Income from Salaries

It is proposed to allow a standard deduction of Rs. 40,000/- in lieu of Transport and reimbursement of miscellaneous medical expenses. This deduction shall also be available to Pensioners who currently do not get any such benefit. Medical reimbursement benefits in case of hospitalisation etc will continue to be available in addition to above standard deduction.

However the Transport allowance benefit of Rs. 19,200/- per Annum and Medical allowance benefit upto Rs.15,000/- per Annum will be withdrawn.

5.  Capital Gains

a. The Finance Minister has proposed to withdraw tax exemption under S-10(38), on sale of Equity shares and/or units of Equity Oriented Funds, which are held by taxpayer for more than 12 months (i.e long term capital gain). We have broken down and tabulated this important amendment, especially for the benefit of our Return filers, as it has far reaching impact on your investment kitty.

Sr.No Scenario Tax Impact
1. Long Term Capital Gain realized, at any time during the F.Y 2017-18. No Capital Gains Tax. Exemption under S-10(38) is intact.
2. Long Term Capital Gain on shares purchased on or before 31st January, 2018 but sold at any time after 31st March, 2018. The amount of *Capital Gain in excess of Rs 1,00,000/- will be taxable @ 10%. However relief to the extent of capital gains as on 31st January, 2018 (Refer **example below, as pointed out in budget speech)
3. Long term Capital Gain on shares purchased after 31st January, 2018. The amount of *Capital gain in excess of Rs 1,00,000/- will be taxable @ 10%.

*Capital Gain- It is the excess of sales consideration over cost of acquisition of security, on sale of security. No indexation benefit will be allowed on cost of acquisition.

**Example: If Equity shares are purchased on 01/07/2017 at Rs.100 per share. And are sold on 01/09/2018 at Rs. 130 per share. Then there is a Long Term Capital Gain (LTCG) of Rs.30 per share.

Now suppose highest share price on 31/01/2018 is Rs.120 per share. Then, the taxable LTCG will be Rs.10. That is Rs 130 – Rs 120 = Rs.10.

The Exemption under section 10(38) will also not be available for similar long term capital gains in case of FII (Foreign Institutional Investors).

b. Exemption relating to investment in REC, NHAI bonds under section 54EC have been restricted.

Exemption from capital gain on investment in specified bonds restricted to gain from Land and Building only. Holding period increased from 3 years to 5 years.

Earlier this exemption was available to all long term Capital Gains.

c.   It is proposed to tax income distributed by Equity Oriented Mutual Funds @ 10%.

d.  Real Estate: In case of Capital Gains on immovable property, consideration or circle value whichever is higher is adopted and the difference is taxed in the hands of purchaser and seller. It is proposed that no adjustment to be made if the circle rate does not exceed 5% of consideration.

6. Presumptive Income u/s 44AE for Transport Business:
In case of Heavy Goods Vehicle (More than 12MT Gross Vehicle Weight) – Income will be deemed to be an amount equal to Rs 1000 per ton of Gross Vehicle weight or Unladen Weight as the case may be. No Change in Taxation of Income from Other Type of Vehicles.

7. In case of stock in business (if taxpayer is carrying out any business) is converted into capital Asset:

In case stock in business is converted into capital asset, the same will be taxed based on fair market value as on date of such conversion, as business income. Further the period of holding for determination of capital gain, on sale of such converted capital asset at a later stage shall be reckoned from date of such conversion.

8. Amendment to Sec. 143(1)(a)(vi)- Intimation received by taxpayers:

It is proposed to provide that no adjustment shall be made in respect of addition of income appearing in Form 26AS or Form 16A or Form 16 which is not been included in total income declared in return.

9. Changes for Non Residents

It is proposed to charge Alternate Minimum Tax (AMT) on non-corporate taxpayers operating in IFSC (International Financial Services Sector) at the concessional rate of 9%. Also it is proposed to exempt transfer of derivatives and certain securities by non residents from capital gains tax.

B. Taxation of Cryptocurrencies

The government has clarified that cryptocurrencies are not legal tender. Measures will be taken to curb its use for illegal activities.

C. Pradhan Mantri Vaya Vandana Yojana

The amount that can be deposited to Pradhan Mantri Vaya Vandana Yojana is proposed to be increased from Rs. 7.50 Lakhs to Rs. 15 Lakhs. The amount so deposited is available as deduction under section 80C subject to maximum of limit specified.

Source: myITreturn.com

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