Important Changing Income Tax Rules for INDIVIDUALS from 1st April, 2018

In Budget 2018, few changes are made in Income Tax Act and Rules. These changes are being implemented since 1st April 2018 i.e., they will show their effect in their return of A.Y. 2019-20 which is to be filed after 31st March 2019.

Out of those, following are some changes which you need to know:


The standard deduction is proposed to be flat ₹40,000/- from the Salary Income of an Individual. This clause is also applicable to Individuals pensioners who didn’t enjoy any transport allowance or medical expenses in the earlier provisions. Now with the introduction of this new provision, the Individual will not get deduction of Transport Allowance (₹19200) and Medical Expense Reimbursement (₹15000) in total ₹ 34,200/-.

2.  Increase of Education Cess:

The GoI has announced a hike in the Education Cess to 4% from 3% as in earlier provisions. This clause is applicable to only Individual Tax Payers. For tax payers other than Individual, 3% education cess is still persists.

3. Long Term Capital Gain on Equity Investments:

Equity Investments includes not only Equity Shares but also units of equity oriented funds; i.e., if you sell an equity oriented Mutual Funds / Schemes / Bonds or any kind of Equity oriented Stocks, it will be covered under this newly introduced provision. Accordingly, 10% tax is imposed on the gains of selling the above-mentioned investments.

This issue is now-a-days becomes a much debatable issue.

For the purpose, cost of acquisition is to be considered higher of the following: (a) Actual Purchase Price of the Investment, and (2) Price of the Investment as on 31st January, 2018. But if Sales Price is lower than both (a) actual purchase cost, and (2) Fair Market Value as on 31st January 2018, then the cost of acquisition shall be lower of the above two.

Selling such investments up to 31st March 2018 will attract no Income Tax.

4. Tax implications on dividend from Equity Oriented Mutual Funds:

In earlier provisions, no dividend was taxable where STT is paid. In the new provision, the dividend received by the assessee from the investment in Equity Oriented Mutual Funds is chargeable to tax @ 10%.

5. Benefits on Single Premium Health Insurance Policies:

At earlier provisions, Health insurance premium is allowed as deductions only up to ₹25,000/-, and that amount is available for deduction in the year in which the payment has been made. Now the scenario changed. Under the proposed scheme of Budget 2018, in case the Single Premium Health Insurance Policy covers a period more than 1 year, the proportionate amount of premium is allowed as deduction in every year up to which the health insurance scheme going to benefit.

6. Tax Benefit on NPS Withdrawal:

Closure of NPS Account will attract tax but from that withdrawal, 40% amount is an exemption. I.e., only 60% of NPS withdrawal is chargeable to Income Tax. This benefit of exemption was only available to an individual being an employee; and not available to non-employee subscribers. Now from the Budget 2018, the benefit of above exemption on withdrawal of NPS to non-employee subscribers is given.

7. Interest Income to Senior Citizens:

A new section 80TTB is introduced in the Income Tax Laws; which prescribes that Senior Citizens and Super Senior Citizens are allowed an additional deduction up to ₹50,000/- on interest on Deposits with Bank and Post Offices. But, now no deduction u/s 80TTA is allowed to Senior Citizens.

8. Pradhan Mantri Vaya Vandana Yojana:

Investment Limit is increased to 15 Lakhs from 7 Lakhs is proposed in the Budget 2018. This scheme is available to only Senior Citizens. The interest rate in this scheme is 8%. It is also proposed to extend this scheme up to March 2020.

9. TDS on Interest on Deposits of Senior Citizens:

Earlier the TDS on Interest is applicable if it goes beyond ₹10,000/- p.a. Only in case of Senior Citizens, this limit is extended up to ₹50,000/-. This means, on interest of Deposits of Senior Citizens with Bank and Post offices, no TDS is to be deducted if such interest is restricted up to ₹50,000/-

10. Deduction available for Medical Treatment of Specified Diseases to Senior Citizens

The deduction is available for payment towards medical treatment of specified disease is proposed to be hiked to ₹1,00,000/- for Super Senior Citizens (earlier ₹80,000)/- and ₹1,00,000/- for Senior Citizens (earlier ₹ 60,000/-).

11. Changes Deductions u/s 80D – Premium towards Medical Insurance Policies

The GoI has again benefited to Senior Citizen in this segment. The deduction on premium towards medical insurance policy is set to be increased from ₹30,000 to ₹50,000/-. For individuals below 60 years of age, the limit of such deduction is continues to remain ₹25,000/- but if they pay premium for their parents who are Senior Citizens then such individuals will get additional deduction of ₹50,000/- for their parents, totaling to ₹75,000/- which is currently ₹55,000/-.

12. Income Tax Return filing Due Dates:

Every Individual whose accounts are not required to get Audited can file their return of Income up to 31st July 2018 u/s 139(1) without attracting any penalty. If such individuals file their return before 31st December 2018, then they would definitely attract a penalty of ₹5,000/- and ₹10,000/- if files their return of income after 31st December 2018. But if the income of person doesn’t exceed ₹5,00,000/- then such penalty shall not exceed ₹1,000/-.

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