LTCG tax and other budget proposals to start from April 1
New Delhi : From April 1, a good number of budget proposals including the reintroduction of tax on long term capital gains(LTCG) exceeding Rs 1 lakh from sale of shares will be in limelight. The beginning of a new financial year will kick other tax proposals like reduced corporate tax of 25 per cent on businesses on turnover of up to Rs 250 crore and a standard deduction of Rs 40,000 in lieu of transport allowance and medical reimbursement.
For senior citizens, the tax deduction for critical illness will be Rs 1 lakh from April 1, as against the existing limit of Rs 60,000 for senior citizens and Rs 80,000 for very senior citizens. The exemption limit on income from interest for senior citizens has been raised five times to Rs 50,000 per year, the limit of deduction for health insurance premium and medical expenditure has been raised to Rs 50,000 from Rs 30,000 under section 80D of the I-T Act.
In the last budget of the present NDA government, Finance Minister Arun Jaitley had reserved the 10-15% surcharge on super-rich, while raising the health and education tax, levy on all taxable income, to 4 % from 3 % at present.
The 2018-19 Budget had after a gap of 14 years re-introduced 10 per cent tax on LTCG exceeding Rs 1 lakh from sale of shares.
At present, 15 per cent tax is levied on capital gains made on share sale within a year of purchase. However, it is nil for shares sold after a year of purchase.
However, indexation benefit for computing tax liability on sale of shares listed after January 31 will be available, which will come as a relief to investors. In July 2004, the government had abolished LTCG tax on shares and replaced it with the securities transaction tax (STT) - a same-day tax credit system that goes on.
Keeping the income tax rates and slabs unchanged, the Budget introduced Rs 40,000 standard deduction for salaried employees and pensioners instead of the present exemption in respect of transport and medical expenses.
The standard deduction, which is provided to salaried person, was discontinued from the assessment year 2006-07. Presently, no tax is applicable on Rs 19,200 of transport allowance and medical expenditure of up to Rs 15,000. This has now been counted in the new standard deduction of Rs 40,000 which may indicate very little benefit in tax saving considering that health and education tax has gone up.
Coming to corporate tax, the budget has lowered the rate to 25 % for companies with turnover of up to Rs 250 crore in 2016-17. The changes will benefit the entire class of micro, small and medium enterprises which has financial records for almost 99 % of companies filing their tax returns.
These budget proposals for 2018-19 financial year will come into effect from April 1