If you missed the Budget highlights related to personal income tax, here are the details which you need to know if you are working in any organisation and fall under the tax slab.
Introduction of Standard Deduction of Rs 40,000
This replaces medical reimbursement and travel/conveyance allowance.
At present, you can get medical benefits reimbursed from employer to the extent of Rs 15,000. Conveyance allowance can be Rs 1,600 per month, effectively Rs 19,200 per annum.
This standard deduction of Rs 40,000 will replace the aforementioned benefits. The maximum tax benefit goes up from Rs 34,200 to Rs 40,000 per annum.
Enhancement of Tax Benefit for Health Insurance Premium to Rs 50,000.The benefit under Section 80D has been enhanced from Rs 25,000 to Rs 50,000 per financial year.
Additionally, the benefit for senior citizens has also been enhanced from Rs 30,000 per annum to Rs 50,000 per annum.
Many times, we pay health insurance premium for multiple years to avail discounts. However, the tax benefit (till now) was available only in the year of payment. This rule has now been changed.
If you are paying the premium for multiple years, you will get the proportionate benefit for those years. So, if you pay Rs 40,000 for two years, you can get a tax benefit for Rs 20,000 for each of the years.
No tax on interest income for senior citizens till Rs 50,000
A new section (80TTB) is proposed. Under the section, it is mentioned that interest income up to Rs 50,000 is exempt from tax. This benefit is applicable only to senior citizens.
The interest income can be on savings accounts, fixed deposits or recurring deposits. Such income shall be on deposits with banks, co-operative banks and post office.
Tax-payers, who are not senior citizens, can avail tax benefit of Rs 10,000 for interest income on savings bank account under Section 80TTA. There is no change for taxpayers less than 60 years of age.
It is mentioned that a tax-payer who has taken benefit under Section 80TTB cannot take tax benefit under Section 80TTA. Therefore, the benefit under Section 80TTB and Section 80TTA are exclusive.
Additionally, in case of senior citizens, the TDS (tax deducted at source) will be deducted only if the interest income exceeds Rs 50,000 (increased from Rs 10,000) in the financial year.
Enhancement of Tax Benefit for Medical Treatment of Critical Illnesses to Rs 1 lakh.
For the defined critical illness, you can claim tax benefit to the extent of Rs 1 lakh per financial year under Section 80DDB.
Earlier, the limit was Rs 60,000 for senior citizens and Rs 80,000 for very senior citizens (>=80 years). Now, the limit for both has been enhanced to Rs 1 lakh per annum.
The limit for tax-payers under the age of 60 remains the same at Rs 40,000 per annum.
Additionally, you can take tax deduction for the medical expense if you have not claimed reimbursement for the same expense under any insurance policy.
Pradhan Mantri Vaya Vandana Yojana has been extended till March 31, 2020. This means you can invest in the scheme till March 2020.
However, the maximum contribution per family has been increased from Rs 7.5 lakh to Rs 15 lakh.
PMVVY guarantees 8% interest income for senior citizens for 10 years.
With the introduction of Long-Term Capital Gains Tax on the sale of equity shares/equity mutual funds, you have to pay tax at 10% on such long-term capital gains (LTCG) if such LTCG exceeds Rs 1 lakh in the financial year.
Short-term capital gains (for holding period < 1 year) shall be taxed at 15% (unchanged).
Dividends from Equity funds to be taxed at 10%. Earlier, the dividend was exempt from tax. Now, the AMC will deduct dividend distribution tax (DDT) of 10% before handing over the dividend. Earlier, there was no DDT.
Other announcements
Health and education cess has now been enhanced to 4% from 3% earlier.
Benefit under Section 54EC (to save long term capital gains by investing in NHAI and REC bonds) has been now to limited to only capital gains arising from sale of land and building. Earlier, any kind of capital asset was defined. Moreover, the tenure of such bonds has been revised from 3 years to 5 years.
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The three government General Insurance companies (National Insurance, United India and Oriental Insurance) will be merged into a single entity and listed.
National Health Protection Scheme shall be launched that will provide medical coverage of Rs 5 lakh to poor families.
EPF contribution for new employees will be 8.33% for the first 3 years. For certain sectors such as textile, leather and footwear, government contribution to EPF account will be 12%.
EPF deduction for women at 8% for first three years of employment.
Source: https://www.personalfinanceplan.in/
