You would have got many mails or pdf documents covering the highlights of the Union Budget 2018. Hence, I chose to write only the important points here
# 1 – Salaried employees – Currently, Rs.15000 per year towards medical reimbursements and Rs.1600 per month towards travelling allowance is available as deduction from the salary income. But from 1st April 2018 onwards, a standard deduction of 40000 is proposed in lieu of the current deductions. Effectively two benefits (a) No need to procure and submit medical bills to the company (b) Overall increase in the deductions by Rs.5800.
# 2 – Cess – Currently, all the taxpayers are paying 3% cess on the base tax. It is proposed to increase it to 4%, thus, the tax outflow will be more!
# 3 – Corporate Tax – Currently, Tax on the income earned by companies having turnover upto Rs.50 Crores is 25% and it is proposed to increase the turnover to 250 Crores. Thus, companies with turnover upto Rs.250 Crore in FY 2016-17, will pay 25% tax in during FY 2018-19. Overall, there will be reduction in taxes.
However, partnership firms and LLPs will continue to pay 30% tax
Individuals (salaried and proprietors) will pay taxes as per the existing slabs. There is no change in it.
# 4 – Long Term capital gain on sale of listed securities and mutual funds (equity oriented) – Currently, they are exempt from tax. Now, it is proposed to tax at 10% on such gains (if the total capital gain in a year exceeds Rs.1 Lakh). This means, now all the classes of investment, be it real estate, fixed deposit, mutual funds or shares suffer capital gain tax! And you may more to the government.
# 5 – Senior Citizens – At present, a deduction upto Rs 10,000/- is allowed under section 80TTA to an assessee in respect of interest income from savings account. It is proposed to insert a new section 80TTB so as to allow a deduction upto Rs 50,000/- in respect of interest income from deposits held by senior citizens. However, no deduction under section 80TTA shall be allowed in these cases.
# 6 – Investment in capital gain exempt bonds – Currently, gain from the sale of any long term asset, if reinvested in Capital Gain bond, is exempt from tax. Now, it is proposed to give exemption to the gains from sale of land and building only. Secondly, the lock-in-period of bonds is 3 years and now it is increased to 5 years. This means, not good for tax savings.
Some more points worth noting –
# 7 all changes are applicable for the income earned on or after 1st April 2018
# 8 Standard Deduction of Rs.40000 for pensioners also! This is a big benefit to pensioners. Hitherto, there was no deduction from pension was available. Hence, less tax outflow for pensioners.