Although no changes were made in the tax slabs for the financial year 2018-19, there were some significant changes in income tax calculations like that of LTCG on equities.
As per the changes announced on 1st of February, the Annual Budget announcement day, here are 5 significant changes in your income tax calculation that will be effective from 1st of April, 2018.
Salaried tax payers are eligible for flat Rs 40,000 standard deduction on their salaried income earned between 1st April 2018 to 31st March 2018. This standard deduction will replace the existing Rs 19,200 transport allowance and Rs 15,000 medical reimbursement.
This new change will however help a salaried person with lower income. Ones with higher income will will pay more than they would in financial year 2017-18. Find out how by reading the comparison on tax computation between FY 2017-18 and FY 2018-19.
LTCG tax is back
Tax on long term capital gains (LTCG) from sale of equity shares or equity-linked funds was reintroduced for the FY 2018-19. All gains from these exceeding Rs 1,00,000 will be taxed at 10% from 1st April 2018.
Investments made before 31st of January, that is before the budget announcement was made will be eligible for indexation under certain conditions. Find out How LTCG Will Be Calculated on Equity & MF in 2018-19?
Tax on dividends
A 10% tax is applicable on dividends gained from equity mutual funds in the FY 2018-19.
Increase in Cess contribution
There has been an increase in health and education cess from 3% in 2017-18 to 4% in 2018-19. Cess is calculated on the taxable income of tax payers. It is an additional tax levied on basic tax liability.
This health and education cess will help fund government's new schemes schemes to be launched like Ekalavya Model Residential School for ST students. An estimated Rs 11,000 crore is expected to be collected from this increase as per finance minister Arun Jaitley's statement during the budget.
Tax-free NPS withdrawal
The benefit of tax-free withdrawal from National Pension Scheme is extended to non-employee subscribers. This means that on closure of the NPS account or opting out of it (not exceeding 40%), the total amount that one gets at such a time will not be included in total income of all subscribers.