Filing return of FY 2017-18 (AY 2018-19) and Tax Planning for FY 2018-19 (AY 2019-20)

The due date to file the Income-tax returns for the F.Y. 2017-18 (A.Y. 2018-19) is 31st August 2018.

It is important to file the Income-tax return before due date as delay in filing the return will attract late filing fee under section 234F of the Income Tax Act, 1961. This late filing fee is to be mandatorily paid before filing of Income Tax return.

Some of the important changes for F.Y. 2017-18 (A.Y. 2018-19) that will affect your tax filing are listed here:

• Reduced rate of tax

The slab rate for income between 2.50 lakh to 5 Lakh has been reduced to 5% from earlier 10%. Click here to know the rates of taxes for F.Y. 2017-18 (A.Y. 2018-19).

• Rebate under section 87A reduced

Till Financial Year 2016-17, for a resident individual with taxable income upto Rs. 5 Lakh, rebate of Rs. 5,000/- was allowed. From Financial Year 2017-18, rebate of Rs. 2,500/- will be allowed to resident individual with taxable income upto Rs. 3.50 Lakh.

• Loss from house property

Till Financial Year 2016-17, for let out property, the entire loss from the said property could be adjusted against other income (without any limit). But from Financial Year 2017-18, the set-off of losses from House property, whether self occupied or let out, in a year is restricted to Rs. 2 Lakh, to be adjusted against any other income. Balance loss can be carried forward for set off against House Property Income in future till next 8 years.

• Late filing Fee

If the Income Tax return is not filed within due date i.e. by 31st August 2018, late filing fee will be levied under section 234F. This late filing fee have to be paid before filing of Income Tax return. Click here to read more.

• Holding period for certain long term capital assets reduced

Till Financial Year 2016-17, immovable property being land and building or both was considered to be Long Term Capital Asset if held for more than 36 months. From Financial Year 2017-18, such property will be considered as long term if held for more than 24 months.

• Limit of donations made in cash reduced

Till Financial Year 2016-17, donations made in cash upto Rs. 10,000/- was allowed as deduction. This limit has been brought down to Rs. 2,000/- from Financial Year 2017-18.

• Section 194-IB is inserted for Individuals and HUF who pay rent exceeding Rs 50,000/- per month

Individuals and HUF who pay rent to a resident exceeding Rs 50,000/- per month or part of the month, TDS at the rate of 5% is to be deducted on the total rent amount paid.

• Change in limit of Cash Payment for Expenses and Capital Expenditure

Till Financial Year 2016-17, the limit for any cash payment made to a single person in a single day against any expenses was Rs 20,000. Now, the limit for any cash payment against expenses made to a single person in the single day is Rs 10,000.

• Change in limits for Maintenance of Books of Accounts (Section 44AA)

If your net income* from Business or Profession in the Financial Year 2017-18:

1. is more than Rs 2,50,000/- OR
2. if your total sales from Business or Profession in the financial year is more than 25,00,000/-

then you need to maintain the books of accounts. Earlier these limits were Rs. 1,25,000 and Rs. 10,00,000 respectively.
*Net Income means Gross receipts less all expenses

• Important changes relating to Filing of Income tax Returns

• Exemption in Capital Gain if Invested in certain Bonds (Section 54EC)

The existing section 54EC allows exemptions up to Rs 50 lakhs in respect of long-term capital gains invested in bonds issued by NHAI or RECL only, within a period of six months after the sale of long term capital asset.
Now, not only the investment made in NHAI and RECL will classify for exemption but also the investment in any notified bonds which are redeemable after three years shall be eligible for this exemption.

• Change in limit for Contribution to NPS (Section 80CCD)

1. The employee or other individuals shall be allowed a deduction for amount deposited in National Pension System trusts (NPS).
2. The deduction under section 80CCD(1) cannot exceed 10% of salary in case of an employee or 10% of gross total income in case of other individuals.
3. For employees, additional deduction of 10% of salary is allowed with respect to employer contribution under section 80CCD(2). Thus, employees get overall deduction of up to 20% of the salary income.
4. In order to remove such disparity, from A.Y 2018-19, deduction u/s 80CCD(1) to non-salaried persons, has been increased to 20% of gross total income from the earlier limit of 10% of gross total income.

___________________________________________________________________________________________________________________________________

Since F.Y. 2018-19 has started, it is important to plan your investments and taxes well in advance so as to reduce tax liability. Also tax planning should be started right from the beginning of the Financial Year so as to take informed financial decisions.

There are certain changes made by the Finance Act 2018 for F.Y. 2018-19. Here is glimpse of these changes that will help you in your tax planning for F.Y. 2018-19:

• Cess

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

• Income from Salaries

A standard deduction of Rs. 40,000/- in lieu of Transport and reimbursement of miscellaneous medical expenses will be allowed. 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.

• Capital Gains

Long term capital gains on Listed Equity Shares and Units of  Equity oriented funds exceeding Rs. 1 Lakh will be taxed @ 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. 

• Pradhan Mantri Vaya Vandana Yojana

The amount that can be deposited to Pradhan Mantri Vaya Vandana Yojana is 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.

• 80D - Deduction in respect of medical insurance premium

The amount of deduction available to senior citizens for payment of mediclaim premium is increased as follows:

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

The amount of deduction available to senior citizens will be as follows:

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

The amount of deduction available to senior citizens will be 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/-.

Here are some of the ways to manage and save taxes for the new Financial Year 2018-19:

• Most common Deductions under Chapter VIA

1. Make investment under section 80C and avail deduction upto Rs. 1,50,000/-. For example, payment of life insurance premium, tuition fees, PPF, principal repayment of housing loan etc.
2. Make payment for medical insurance premium of self, spouse, parents, children and get deduction upto Rs. 25,000/- (Rs. 50,000/- for Senior Citizens) under section 80D.
3. If you are paying interest on educational loan taken for higher studies of spouse and children, deduction is available for such interest paid for 8 years under section 80E.
4. Deduction upto Rs. 50,000/- for housing loan repayment under Section 80EE.
5. Deduction upto Rs. 10,000/- for savings bank interest under section 80TTA for taxpayers other than senior citizens.
6. Deduction upto Rs. 50,000/- for interest on deposits and savings bank interest for senior citizens under section 80TTB.
7. If you stay in a rented house and do not receive any HRA, you can claim deduction under section 80GG for rent paid.

• Investment options under:

Atal Pension Yojana (APY)

Under APY scheme, an individual who is a citizen of India can contribute a particular amount to get a fixed pension on retirement. There is a tax benefit for contribution made to APY under section 80CCD(1) of Income Tax Act, 1961.

Read more.

Sukanya Samriddhi Yojana

With a view to empower girl child, the Government of India has come up with a scheme known as “Sukanya Samriddhi Yojana”. The amount of deposit is eligible for tax benefit under section 80C of Income Tax Act, 1961 subject to limits.

Read more.

So plan your taxes right from first quarter of the Financial Year and take maximum benefits of tax saving options.