With the new economic year, new changes in income tax are going to have a definitive impact on individual portfolios. This time around, it is important for all professionals to gear up and plan investments accordingly so that they can have maximum benefits once the changes implemented in taxation. First and foremost individuals need to get accustomed to the new rules and regulations, implemented from April 1, 2018.
In the personal income tax bracket, there is no change in the tax ceiling but in case of corporates, where profit doesn’t exceed Rs 250 crore, the new tax rate is 25%. There is a surcharge of 10% of income tax in case net income is between Rs 50 lakh and Rs 1 crore whereas it is 15% in case net income exceeds Rs 1 crore, subject to marginal relief. The education cess of 4% is applicable instead of 3% and definitely, this is going to increase the burden on middle-class taxpayers.
The senior citizens (age of 60 and above) now face an additional deduction of Rs 40,000 on interest from bank deposits. No TDS will be counted till the amount remains within Rs 50,000. Meanwhile, they are also going to get a higher exemption for medical insurance and medical related expenses of Rs 50,000 which was Rs 30,000 earlier. In case of treatment of specified diseases, the deduction limit in case of medical expenditure has been increased to Rs 1 lakh under section 80DB. For women who have just started working, they can definitely ask her employer to reduce the contribution to EPF (Employee Provident Fund) to 8% during the first 3 years of employment which is otherwise 12% of basic. No doubt, this will be a win-win situation in net profit.
Investors with a long-term capital gain via indirect equity mutual funds are now scheduled to pay 10% plus surcharge as LTCG. Anyhow, this is subject to a relaxation of Rs 1 lakh per year per person and the value to calculate purchase price will be 31 January 2018 (the Budget announcement date). Interestingly, from now on, non-employee subscribers also have the benefit of tax-free withdrawal from NPS (National Pension System) from April 1. This exemption is currently not available to non-employee subscribers. On Single premium health insurance policies, the deduction is to be allowed on a proportionate basis for which the number of years for which health insurance is covered or provided.
One must not forget that 10% tax will be levied on dividend income from equity mutual funds. This 10% tax is referred to as Dividend Distribution Tax. In case anyone fails to file Income Tax, he will need to pay Rs 500 as penalty per day instead of Rs 100. The penalty of non-adhering to the notice has increased to whopping Rs 1000.