Many income tax changes are applicable from 1st April 2018 that you need to know:
1. Penalty on late filing of Income Tax return (applicable 01 April 2018)
Penalty of upto Rs 10000 will be charged if you file your ITR after the deadline (31st July)
- If return filed after due date but before 31st Dec: Rs 5000 Penalty
- If return filed after 31st Dec : Rs 10000 penalty
- As relief to small taxpayers, if your income is not more than Rs 5 lakhs, the maximum penalty levied will be Rs 1,000.
2. Reduction in time limit for ITR revision (applicable 01 April 2018)
Previously, taxpayer was allowed to revise his returns up till 2 years from the end of the financial year for which the return was filed. However, from now on, he will be allowed to revise his return only up till 1 year from the end of the financial year.
Therefore, for the financial year ending on 31 March, 2018, the taxpayer will have time till 31 March, 2019 to revise his ITR. The normal deadline for filing return for FY17-18 would be July 31, 2018
3. Changes in Section 54EC – Capital Gain Bonds (applicable 01 April 2018)
Capital Gains Bonds issued under section 54EC for saving tax on LTCG will be issued for a tenure of 5 years with effect from April 1, 2018, instead of 3years.
Also, now you can save tax via these bonds only for for capital gains arising from land, building or both. Previously, capital gains from other assets like debt mutual funds, jewellery etc could be invested in these bonds to save tax.
4. Tax free withdrawal of NPS (applicable from FY 2018-2019)
Self-employed and professionals will now be able to withdraw 40% of their National Pension System (NPS) corpus tax-free when they close or opt out of it.
Salaried employees are already allowed to withdraw 40% of their NPS corpus tax-free.
5. Hike in cess levied on tax liability (applicable from FY 2018-2019)
Starting from FY 2018-19, the cess levied on the tax liability will be hiked from 3% to 4% . The cess will be called ‘Education and Health Cess’,
6. Dividend Distribution Tax introduced for Equity mutual funds (applicable from FY 2018-2019)
Dividends declared in equity-oriented mutual fund schemes will come under the purview of dividend distribution tax (DDT) with effect from April 1. The tax will be levied at 10 % and will be deducted by the fund house before paying dividends. Investors should now consider investing in Growth option of Mutual funds.
7. Long term capital Gains (LTCG) on shares and equity-oriented mutual funds (applicable from FY 2018-2019)
Previously, there was no LTCG for shares and equity funds. However, now LTCG from the sale of shares and equity-oriented mutual funds will attract tax at a flat rate of 10% .
Indexation benefit (adjusting the purchase cost with respect to inflation) will not be available.
Further, LTCG up to Rs 1 lakh in one fiscal year will be exempted from tax.
8. Additional benefit for Senior Citizens (above 60 years) : Interest Income (applicable from FY 2018-2019)
A New section 80TTB is introduced that allows deduction of Rs 50000 for the interest income earned by Senior citizens. TDS will be deducted only if interest income is more than Rs 50,000 in year. This includes interest income earned from savings bank/post office accounts, fixed deposits (FDs) and recurring deposits (RDs).
However, if you are claiming tax benefit under section 80TTB, you cannot avail it under section 80TTA. Under section 80TTA, interest earned from savings account (bank/post office) up to Rs 10,000 is exempt from tax.
9. Senior Citizen : Medical Insurance and Expenses: (applicable from FY 2018-2019)
Under Section 80D (medical insurance), a deduction of Rs 50000 is now allowed for Health insurance premium paid for senior citizens. The deduction allowed will increase to rs 1 lakh if it is for treatment of specified diseases such as chronic kidney diseases (CKD), cancers etc.
Also, if Senior citizens do not have health insurancem they can also avail this benefit for medical expenses incurred. It is advisable to keep the prescription and medical bills handy in case the tax department might require it in the future.
10. Rs. 40,000 standard deduction introduced:
This additional deduction of Rs 40000 has been proposed in place of existing deductions of Rs. 19,200 for transport allowance and Rs. 15,000 for medical reimbursement. After the re-introduction of standard deduction, the salaried people will get a flat deduction of Rs.40,000 from their taxable income. Standard deduction was earlier available for salaried individuals , till it was abolished with effect from assessment year 2006-07. This means that medical and transport allowance will be taxable, but you can claim a standard deduction of Rs 40000. You can claim this deduction next year for FY 2018-19 (assessment year 2019-20) at the time of filing ITR.