Extracts of the Union Budget 2018

Here’s the insight of what budget 2018 has in store for you in terms of taxation.

(A) Changes that will affect Individuals

1. Income Tax Slabs, Rebate under section 87A, Surcharge

The rates for A.Y. 2019-20 (F.Y. 2018-19) are unchanged from A.Y. 2018-19 (F.Y. 2017-18). To know the rates, click here .

2. Cess

For the purpose of raising funds for education, it is proposed to replace Education Cess @ 2% and Secondary and Higher Education Cess @ 1% by Health and Education Cess @ 4%.

The impact of the same will be as follows:

• Individuals (Less than 60 years of age)

• Senior Citizens (60 Years or more but less than 80 years)

• Super Senior Citizens (80 years or more)

3. Deductions under Chapter VIA

a. 80D - Deduction in respect of medical insurance premium

It is proposed to increase the amount of deduction available to senior citizens for payment of        mediclaim premium as follows:

b. Section 80DDB - Deduction for expenditure incurred on medical treatment etc.

It is proposed to increase the amount of deduction available to senior citizens as follows:

To know about specified diseases under section 80DDB, click here .

c. Section 80JJAA - Deduction in respect of employment of new workmen

It is proposed to extend the benefit of this section to Footwear and leather business also. Under this section, 30% of the salaries and wages paid to new employees who have worked for atleast 240 days in a financial year was allowed as a deduction. The condition of atleast 240 days in a financial year is now proposed to be relaxed to 150 days.

Also the benefit of this section is proposed to be extended to new employee even if he has worked for a less than 240 days if he works with the employer for atleast 240 days in the next financial year

d. 80TTB - Deduction in respect of interest on deposits in savings accounts

It is proposed to increase the amount of deduction available to senior citizens as follows:

Also, no TDS shall be deducted under section 194A on the amount of such interest earned by Senior Citizens and Very Senior Citizens upto Rs. 50,000/-.

4. Income from Salaries

It is proposed to allow a standard deduction of Rs. 40,000/- in lieu of Transport and reimbursement of miscellaneous medical expenses. This deduction shall also be available to Pensioners who currently do not get any such benefit. Medical reimbursement benefits in case of hospitalisation etc will continue to be available in addition to above standard deduction.

5. Capital Gains

a. It is proposed to tax long term capital gains on Listed Equity Shares and Units of  Equity oriented funds exceeding Rs. 1 Lakh @ 10% without indexation. The gains earned upto 31st January 2018 are exempt.

Example: If an Equity shares are purchased on 01/07/2017 at Rs.100 per share. And are sold on 01/09/2018 at Rs.130 per share. Then there is a Long Term Capital Gain (LTCG) of Rs.30 per share.

Now suppose highest share price on 31/01/2018 is Rs.120 per share. Then, the taxable LTCG will be Rs.10. That is Rs.130 - Rs.120 =Rs.10. 

b. Exemption relating to investment in REC, NHAI bonds under section 54EC have been restricted.
Exemption from capital gain on investment in specified bonds restricted to gain from Land and Building only. Holding period increased from 3 years to 5 years.
Earlier this exemption was available to all long term Capital Gains.

c. It is proposed to tax income distributed by Equity Oriented Mutual Funds @ 10%.

d. Real Estate: In case of Capital Gains on immovable property, consideration or circle value whichever is higher is adopted and the difference is taxed in the hands of purchaser and seller. It is proposed that no adjustment to be made if the circle rate does not exceed 5% of consideration.

6. Changes for Non Residents

It is proposed to charge Alternate Minimum Tax (AMT) on non-corporate taxpayers operating in IFSC (International Financial Services Sector) at the concessional rate of 9%. Also it is proposed to exempt transfer of derivatives and certain securities by non residents from capital gains tax.

(B) Taxation of Cryptocurrencies

The government has clarified that cryptocurrencies are not legal tender. Measures will be taken to curb its use for illegal activities.

(C) Pradhan Mantri Vaya Vandana Yojana

The amount that can be deposited to Pradhan Mantri Vaya Vandana Yojana is proposed to be increased from Rs. 7.50 Lakhs to Rs. 15 Lakhs. The amount so deposited is available as deduction under section 80C subject to maximum of limit specified.

Click here to read more on section 80C.

(D) E-Assessment

It is proposed to extend the implementation of E-assessment introduced in previous budgets nationwide. The existing system of assessment shall be replaced with E-assessment. The assessment will be done in an electronic mode. It will almost eliminate person to person contact leading to greater efficiency and transparency.

(E) Taxation of Farmer Producer Companies

It is proposed that Companies registered as Farmer Producer Companies having turnover of upto Rs. 100 Crores shall be allowed 100% deduction of profits derived for a period of five years starting from F.Y. 2018-19 from providing assistance to its members engaged in primary agricultural activities.

(F) Corporate rate of tax

It is proposed to extend the benefit of reduced corporate tax rate of 25% to companies who have turnover upto Rs. 250 crore in F.Y. 2016-17. Earlier the benefit of reduced corporate tax was available only to companies whose turnover was less than Rs. 50 crore in F.Y. 2015-16.

(G) Trust

It is proposed to disallow the expenses incurred by the Trust in cash in excess of Rs. 10,000/-. It is further proposed that if TDS is not deducted by such Trusts on an expense, then 30% of that expense shall be disallowed.

(H) Other points

1. On Indirect Taxes front, since it is the first budget after implementation of GST, proposals for changes are made only in Customs.
2. The government will contribute 12% of wages as Employee Provident Fund in all sectors for next three years. Also the contribution of women employees to Employee Provident Fund will be brought down to 8% from 12%.
3. Rs. 5 Lakh per family per year will be given as health protection to poor and vulnerable families as a part of National Health protection Scheme.
4. It is proposed to established dedicated Affordable Housing Fund. The government aims to provide homes to every poor person by 2022.
5. The Minimum Support Price (MSP) for all crops will be increased to 1.5 times of Cost of Production.
6. It is proposed to provide nutritional support to Tuberculosis  patients at Rs. 500/- per month. Rs. 600 crores is proposed to be allocated for this purpose.