7 Income Tax Changes That Takes Effect From April 01,2018
1. Pay LTCG tax on stock market investments
Get
ready to pay tax on long-term profits from your stock market
investments. Till now, you paid no tax on your profits if you held
stocks and equity-oriented mutual funds for one year, but from this
year, you will have to pay a tax of 10% of the profit if your profit
exceeds Rs100,000 a year. Remember that your profits till 31 January
2018 have been grandfathered, or are protected. Profits made after this
date will be taxed if held for a year.
2. The salaried will enjoy a standard deduction of Rs40,000.
A
reduction of Rs5,800 in taxable salary is in store for the salaried.
They have lost the tax-exempt annual transport allowance of Rs19,200 and
medical reimbursement of Rs15,000, but gained a standard deduction of
Rs40,000, giving a net reduction of taxable salary income of Rs5,800.
There is no need to submit medical and transport bills to the employer
this year.
3. The 60-plus get Rs50,000 tax-free interest.
All
types of deposits with banks, co-operative banks and post offices held
by all categories of senior citizens (60-plus) will now have interest up
to Rs50,000 a year tax-free. Earlier, this limit was Rs10,000 for all
income-tax assesses. It has now been raised for senior citizens by
Rs40,000.
4. The 60-plus get Rs20,000 additional deduction on health premiums.
Senior
citizens now get a deduction for health insurance premium under section
80D of Rs50,000, up from Rs30,000 last year. There is also a hike in
the deduction limits for medical costs on specified critical illnesses
from Rs60,000- 80,000 for senior citizens and Rs100,000 for very senior
citizens who are 80 years and above.
5. Increase in lock-in period for investment in 54EC bonds.
Long-term
profits from real estate sales are tax-free if invested in specified
bonds under Section 54EC. Profits become long term if the asset is held
for at least two years. Till last year, you had to stay invested in the
54EC bonds for at least three years to enjoy the tax break, but from
this year, your money will be locked in for five years.
6. Tax exemption on NPS for the self-employed.
Till
now, employees contributing to the National Pension System (NPS) were
allowed to withdraw up to 40% of the total corpus without any tax at the
time of maturity or closure of the account. The same benefit has now
been extended to self-employed subscribers.
7. Mutual funds to pay dividend distribution tax.
Mutual
fund investors will now pay a 10% dividend distribution tax for income
distributed by equity mutual funds. This will affect schemes that were
distributing dividends as a strategy.
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