5 Income Tax Changes affecting Tax planning from 01.04.2018

Tax planning is one of the Key planning in which everyone indulges to get the most out of the benefits available in Income Tax Act.

Budget 2018 proposed some key changes in the income tax laws which will become effective from 01.04.2018. Following are New Income Tax Changes affecting Tax planning from 01.04.2018:

1. Increased deduction in respect of Health Insurance Premium under section 80D for senior citizens:

– The amount of deduction for Senior Citizen is increased to Rs. 50,000/- from Rs. 30,000/- earlier.

– In case premium for more than one year is paid in a single year then only proportionate claim will be allowed subject to the specified monetary limit.

Illustration showing deduction under amended section 80D of Income Tax Act, 1961:

2. Tax on Long Term Capital Gain on Sale of Listed equity shares, units of equity oriented fund or unit of a business trust (Section 10(38)):

– From the Current year the Long term capital gain in excess of Rs. 1,00,000/- would be taxed at the rate of 10% (Flat Rate).

– Earlier long-term capital gains made on sale of equity shares and units of equity oriented schemes, after having held for more than 12 months, were fully exempt under Section 10(38).

– Any capital gains arising from the transfer of a Long Term capital asset being equity shares in a company, units of a equity oriented mutual funds or units of a business trust shall not be fully exempt anymore from on or after 01.04.2018.

3. Payment for Late filing of Income Tax Returns under section 234F

– If the assessee does not furnish the return of income on the due dates prescribed under Section 139(1) then the amount of late filing fees will be as under:

◊ If return is furnished after the due date but before 31^st December of Assessment Year – Rs. 5,000/- (If total income is up to Rs. 5,00,000/- – Rs. 1,000/-).

◊ In any other Case – Rs. 10,000/-.

4. Deduction under Section 80TTB of Income Tax Act for Senior Citizens on Interest Income

– New Section 80TTB has been introduced which provides benefit to Senior Citizen upto the limit of Rs. 50,000/- (Earlier limit was Rs. 10,000/- under Section 80TTA for everyone).

– It will also cover all the interest received from banks, post office and cooperative banks, whether on fixed deposits, recurring deposits or even saving bank account.

– Earlier deduction u/s 80TTA upto Rs.10,000/- will not be available to senior citizens in respect of interest on saving deposits.

– Further, corresponding amendment has also been made in section 194A which provides that no tax shall be deducted at source from payment of interest to a senior citizen upto Rs.50,000/-.

5. Removal of Conveyance Allowance & Medical Reimbursement and Introduction of Standard Deduction for Salaried and Pensioners

– A standard deduction upto Rs. 40,000/- will be allowed to Salaried person against the amount of Salary received from one or more employers during the year.

– From the Current year the benefit of Medical reimbursement of Rs. 15,000/- and Transportation Allowance upto Rs. 1,600/- per month will not be available.

– This standard deduction will benefit the pensioners also, who normally do not enjoy any allowance on account of transport and medical expenses.