Automated Income Tax Prepare Excel Based Software for F.Y.2018-19 with Important Changes in Tax Rules from FY 2018-19

Every budget makes some changes to tax laws every year and Budget 2018 was no different. We must be aware of these changes and plan our taxes and investments accordingly. Below are the 13 changes that Budget 2018 made and all of these would be applicable from April 1, 2018:

#. Reintroduction of Standard Deduction

Budget 2018 has introduced a standard deduction of Rs 40,000 for salaried taxpayers. The good thing is this would be applicable for pensioners too. This deduction can be availed without submission of any proofs.

#. Transport Allowance & Medical Reimbursement no more Tax-free

With the introduction of the standard deduction, the Transport Allowance & Medical Reimbursement would no longer be tax-free. Currently, the transport allowance was tax-free up to Rs 19,200 and medical reimbursement up to Rs 15,000. Net of these allowances and introduction of standard deduction salaried taxpayers have additional tax exemption of only Rs 5,800.

Download: Automated House Rent Exemption Calculator

#. Cess on Taxes hiked to 4% (Health and Education Cess)

There has been NO change in the income tax slabs in Budget 2018. However, from FY 2018-19 the existing cess of 3% (Education, Secondary, and Higher Education Cess) has been increased to 4% and named as Health and Education Cess.

#. Reintroduction of Long-term capital gains tax on stocks and equity-based mutual funds

Budget 2018 has reintroduced long-term capital gains tax of 10%+cess (i.e. 10.4%) on gains made in the sale of equity or equity oriented mutual funds. To qualify for long-term capital gains the stocks/mutual fund should have been held for at least 1 year. The good news is capital gains up to Rs 1 lakh is tax-free.

#. Dividend distribution tax on Equity mutual funds

Starting FY 2018-19 the dividends from equity mutual funds would attract dividend distribution tax of 10%. However, the dividend received would be tax-free in hands of the investor. This is mainly to equate dividend and growth plans of equity mutual funds.

#. Increased tax exemption on interest income for senior citizens (80TTB)

Budget 2018 has introduced a new section 80TTB according to which senior citizens would be able to claim interest income up to Rs 50,000 as tax-exempted income. However, if you take benefit u/s 80TTB then you cannot claim tax benefit on interest received on savings bank account u/s 80TTA.

Download: Automated Arrears Relief Calculator U/s 89(1) with Form 10E from the F.Y.2000-01 to F.Y.2018-19

#. TDS limit on interest income increased for senior citizens u/s 194A

There is TDS (tax deduction at source) for almost all kind of income. However, as a relief to senior citizens, Budget 2018 has raised the limit for TDS on interest income from Rs 10,000 to Rs 50,000. So TDS would only be applicable for senior citizens if the annual interest income from a bank/post office is more than Rs 50,000.

#. Tax deduction for Single Premium Health Insurance Premium

In case assesses buy single premium health/medical insurance policy covering multiple years, the tax exemption u/s 80D would be available proportionately for all the years. For e.g., if you pay Rs 1,00,000 premium for a health policy covering for 5 years, you can claim Rs 20,000 tax exemption every year for 5 years subject to limits.

Download: Automated Advance Income Tax Calculator for F.Y.2018-19 with all feature of Budget 2018-19  

#. Increased deduction for medical insurance premium u/s 80D for senior citizens

The Medical Insurance premium and the preventive health check-up limit for senior citizens under section 80D has been increased from Rs 30,000 to Rs 50,000. This is good news in keeping with the ever increasing health care and related insurance costs.

#. Increased deduction for medical treatment u/s 80DDB for senior citizens

The deduction for medical treatment of specified critical illnesses has been increased to Rs 1 Lakh. Earlier the limit was Rs 60,000 for senior citizens and Rs 80,000 for very senior citizens. Following illness are covered under section 80DDB:

§                    Neurological Diseases

§                    Parkinson’s Disease

§                    Malignant Cancers

§                    AIDS

§                    Chronic Renal failure

§                    Hemophilia

§                    Thalassaemia

#. Extension of Partial Tax-exemption on NPS withdrawal to self-employed

The above changes would be applicable for the FY 2018-19. So make a note of the above and plan your investments and taxes accordingly

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NPS Tax Benefit u/s 80CCD(1), 80CCD(2) and 80CCD(1B),With Automated All in One TDS on Salary for Govt & Non-Govt employees for F.Y.2018-19

Tax Benefit on NPS Tier 1 and/or 2?

NPS has two Tiers – 1 and 2.

NPS Tier 1 is the long-term investment, which has restricted withdrawals and meant primarily for retirement planning. On maturity, you can withdraw a maximum of 60% of the corpus as lump sum and rest has to be used for annuity purchase.

NPS Tier 2 is for managing short to medium term investment. You can invest and withdraw anytime as per your wish. This is an optional feature and you are asked if you need Tier 2 account while opening NPS.

All the tax benefit related to NPS is available to invest in NPS Tier 1 account only.

NPS Tax Benefits:

NPS tax benefits are available through 3 sections – 80CCD(1), 80CCD(2) and 80CCD(1B). We discuss each below:

1. Section 80CCD(1)

Employee contribution up to 10% of basic salary and dearness allowance (DA) up to 1.5 lakh is eligible for tax deduction. [This contribution along with Sec 80C has 1.5 Lakh investment limit for tax deduction]. Self-employed can also claim this tax benefit. However, the limit is 10% of their annual income up to a maximum of Rs 1.5 Lakhs.

2. Section 80CCD(1B)

Additional exemption up to Rs 50,000 in NPS is eligible for income tax deduction. This was introduced in Budget 2015.

3. Section 80CCD(2)

Employer’s contribution up to 10% of basic plus DA is eligible for deduction under this section above the Rs 1.5 lakh limit in Sec 80CCD(1). This is also beneficial for the employer as it can claim tax benefit for its contribution by showing it as a business expense in the profit and loss account. Self-employed cannot claim this tax benefit.

 Click to Download the Automated All in One TDS on Salary for Govt & Non-Govt Employees for the Financial Year 2018-19 & Ass Year 2019-20 [ This Excel Utility can prepare at a time your Tax Computed sheet + Individual Salary Statement + Individual Salary Structure as per Salary Pattern of Govt and Non-Govt Concerned + Automated Arrears Relief Calculation U/s 89(1) with Form 10E from F.Y.2000-2001 to F.Y.2018-19 +Automated Income Tax Form 16 Part A&B and Form 16 Part B for as per the Finance Budget 2018-19]

Tax Benefit for Compulsory NPS deduction:

The earlier pension structure was replaced by NPS in most central and state government jobs since 2004. So anyone who joined after that has a compulsory deduction for NPS. The deduction is 10% of basic salary and dearness allowance (DA) and the employer to contributes the matching amount. The confusion for most employees is how they take tax benefit on their compulsory NPS deduction?

The employee has a choice as to which section [80CCD(1) or 80CCD(1B)] he wants to show his contribution.  Ideally he should show Rs 50,000 investment in NPS u/s 80CCD(1B). The tax deduction on rest Rs 12,000 can be claimed u/s 80CCD(1). The section 80CCD(1) along with Section 80C has investment limit eligible for tax deduction as Rs 1.5 lakhs. So he should make an additional investment of Rs 1,38,000 in Section 80C to save maximum tax. In all, he can save Rs 2 lakhs tax u/s 80C and 80CCD(1B).

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Most Important Changes in Tax Rules from FY 2018-19

The new financial year FY 2018-19 starts in another 2 weeks. Every budget makes some changes to tax laws every year and Budget 2018 was no different. We must be aware of these changes and plan our taxes and investments accordingly. Below are the 13 changes that Budget 2018 made and all of these would be applicable from April 1, 2018:

1. Reintroduction of Standard Deduction

Budget 2018 has introduced standard deduction of Rs 40,000 for salaried taxpayers. The good thing is this would be applicable for pensioners too. This deduction can be availed without submission of any proofs.

Download Latest Advance Income Tax Calculator for Financial Year 2018-19 & Ass Year 2019-20

2. Transport Allowance & Medical Reimbursement no more Tax-free

With the introduction of the standard deduction, the Transport Allowance & Medical Reimbursement would no longer be tax-free. Currently, the transport allowance was tax-free up to Rs 19,200 and medical reimbursement up to Rs 15,000. Net of these allowances and introduction of standard deduction salaried taxpayers have additional tax exemption of only Rs 5,800.

3. Cess on Taxes hiked to 4% (Health and Education Cess)

There has been NO change in the income tax slabs in Budget 2018. However, from FY 2018-19 the existing cess of 3% (Education, Secondary, and Higher Education Cess) has been increased to 4% and named as Health and Education Cess.

4. Reintroduction of Long-term capital gains tax on stocks and equity-based mutual funds

Budget 2018 has reintroduced long-term capital gains tax of 10%+cess (i.e. 10.4%) on gains made of the sale of equity or equity oriented mutual funds. To qualify for long-term capital gains the stocks/mutual fund should have been held for at least 1 year. The good news is capital gains up to Rs 1 lakh is tax-free.

5. Dividend distribution tax on Equity mutual funds

Starting FY 2018-19 the dividends from equity mutual funds would attract dividend distribution tax of 10%. However, the dividend received would be tax-free in hands of the investor. This is mainly to equate dividend and growth plans of equity mutual funds.

6. Increased tax exemption on interest income for senior citizens (80TTB)

Budget 2018 has introduced a new section 80TTB according to which senior citizens would be able to claim interest income up to Rs 50,000 as tax-exempted income. However, if you take benefit u/s 80TTB then you cannot claim tax benefit on interest received on savings bank account u/s 80TTA.

7. TDS limit on interest income increased for senior citizens u/s 194A

There is TDS (tax deduction at source) for almost all kind of income. However, as a relief to senior citizens, Budget 2018 has raised the limit for TDS on interest income from Rs 10,000 to Rs 50,000. So TDS would only be applicable to senior citizens if the annual interest income from a bank/post office is more than Rs 50,000.

8. Tax deduction for Single Premium Health Insurance Premium

In case assesses buy single premium health/medical insurance policy covering multiple years, the tax exemption u/s 80D would be available proportionately for all the years. For e.g., if you pay Rs 1,00,000 premium for a health policy covering for 5 years, you can claim Rs 20,000 tax exemption every year for 5 years subject to limits.

9. Increased deduction for medical insurance premium u/s 80D for senior citizens

The Medical Insurance premium and the preventive health check-up limit for senior citizens under section 80D has been increased from Rs 30,000 to Rs 50,000. This is good news in keeping with the ever increasing health care and related insurance costs.

10. Increased deduction for medical treatment u/s 80DDB for senior citizens

The deduction for medical treatment of specified critical illnesses has been increased to Rs 1 Lakh. Earlier the limit was Rs 60,000 for senior citizens and Rs 80,000 for very senior citizens. Following illness are covered under section 80DDB:

§                    Neurological Diseases

§                    Parkinson’s Disease

§                    Malignant Cancers

§                    AIDS

§                    Chronic Renal failure

§                    Hemophilia

§                    Thalassaemia

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