March 31st, 2018 is the last date for filing Income Tax returns for Financial years 2015-16 and 2016-17, and taxpayers are a busy lot right now.
Starting April 1st, some major changes are being implemented in the tax structure, which should be known to all taxpayers.
By understanding these changes, the taxpayer can prepare better, and plan investments accordingly.
Here are these changes:
Contents
Long-term Capital Gains Tax Returns:
Long-term capital gains tax or LTCG on equity investments is making a comeback this year. Capital gains in excess of Rs 1 lakh made on the sale of equity shares will be taxed at 10%, starting April 1st. Capital gains on equity sales till January 31st are being grandfathered.
Gains on equity-linked shares will be also taxed. Equities held for more than 1 year would be only taxed and exempted from indexation.
Cess Becomes Higher
Health and Education Cess would be now charged at 4%, compared to 3% earlier. This change was announced by Finance Minister Arun Jaitley during Union Budget.
Standard Deductions Come Into Picture
As announced in the Union Budget, Standard deductions have come into the picture, effective April 1st, 2018. Right now, standard deductions of Rs 19,200/- for transport allowance and Rs 15,000/- for medical reimbursement is in place, which has been increased to Rs 40,000/-. Hence, salaried employees can now get a standard deduction of flat Rs 40,000/-, every financial year.
Around 2.5 crore employees are set to benefit from this change, effective April 1st, 2018.
Tax On Mutual Fund Dividends Is Introduced
An additional tax of 10% has been introduced for dividends gained from mutual funds, effective April 1st, 2018.
This tax of 10% is only applicable on those mutual funds, which are linked with equity shares. Last year, mutual funds from India pumped in Rs 1 lakh crore into the stock market, which is increasing at an amazing pace since 2016.
However, long-term capital gain tax and tax on mutual funds, both can impact these numbers now.
Tax-Free Pension
And, finally, a good news. Effective April 1st, non-employee subscribers can withdraw pension funds without paying any income tax. This exemption has been made for NPS (National Pension System) related withdrawals.
We will keep you updated, as we receive more updates.