Several changes and budget proposals including the reintroduction of the tax on long-term capital gains (LTCG) exceeding Rs 1 lakh from the sale of shares have kicked in from today, the beginning of 2018-19 financial year. Besides, 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 will come into effect from Sunday.
Here are some of the important decisions taken in this year's budget:
1. LTCG on equities
10 per cent tax on long-term capital gains (LTCG) over Rs 1 lakh, was proposed in the Union Budget 2018. At present, any long-term gains made on equity shares or any equity mutual fund units were exempt from tax. Also, the government extended indexation benefit for computing tax liability on sale of shares listed after January 31.
2. Standard deduction
Keeping the income tax rates and slabs unchanged, the Budget introduced a Rs 40,000 standard deduction for salaried employees and pensioners in lieu of the present exemption in respect of transport and medical expenses.
The standard deduction, which is provided to salary earners, 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 subsumed into the new standard deduction of Rs 40,000 which may mean very little benefit in tax saving considering that health and education cess has gone up.
3. Corporate Tax
With regard to corporate tax, the Budget has lowered the rate to 25 per cent 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 accounts for almost 99 per cent of companies filing their tax returns.
In 2015 Budget, Jaitley had promised to reduce corporate tax from current 30 per cent to 25 per cent over four years.
4. For senior citizens
The exemption limit on income from interest raised by five times to Rs 50,000 per year. No TDS will be deducted from the interest income of senior citizens now on. Also, the limit of deduction for health insurance premium and medical expenditure also raised to Rs 50,000 from Rs 30,000 under Section 80D.
The tax deduction for critical illness will be Rs 1 lakh from April 1 for senior and very senior citizens, as against the existing limit of Rs 60,000 for senior citizens and Rs 80,000 for very senior citizens.
What will be cheaper, costlier?
# Customs duty on completely build units (CBU) imports of motor vehicles has gone up to 25 per cent from 20 per cent earlier making them more expensive.
# Imported truck and bus radial tyres will become expensive too with a duty of 15 per cent now as against 10 per cent earlier.
# Imported mobile handsets will become costlier as customs duty has been increased from 15 per cent to 20 per cent while some of their parts and accessories will now attract duty of 15 per cent.
# Imported LCD/ LED/ OLED TV panels and other parts of TVs have been charged customs duty of 15 per cent.
# Perfumes, toilet water and imported beauty and make up preparations will now attract customs duty of 20 per cent as against 10 per cent earlier.
# Customs duty on wrist watches, pocket watches, smart watches/wearable devices and sunglasses have been doubled to 20 per cent.
# Finance Minister also doubled customs duty on cut and polished coloured gemstones, diamonds, including lab grown diamonds-semi processed, half-cut or broken, non-industrial diamonds to 5 per cent from 2.5 per cent earlier.
# Duty on imported footwear and silk fabrics also doubled to 20 per cent.
# Customs duty on imported fruit juices has been hiked by up to 40 per cent.
# Imported cranberry juice will now attract customs duty of 50 per cent from 10 per cent earlier. Duty on orange fruit juice has gone up from 30 per cent to 35 per cent while duty on other fruit and vegetables juice have been increased to 50 per cent from 30 per cent earlier.
# Customs duty on crude edible vegetable oils like olive oil, ground nut oil has been hiked to 30 per cent from 12.5 per cent earlier.
# While customs duty on refined edible vegetable oils including oil, ground nut oil has been hiked to 35 per cent from 20 per cent earlier.
# Imported gold items, including gold plated with platinum, unwrought or in semi manufactured form will become costlier as there will be a surcharge of 3 per cent of the aggregate duties of customs from nil earlier.
# The finance minister, while presenting the budget, announced relief on select items such as imported raw cashew nuts, solar tempered glass raw materials and accessories of cochlear implants.
# Customs duty on imported raw cashew nuts has been slashed from 5 per cent to 2.5 per cent. Solar tempered glass or solar tempered glass for manufacture of solar cells/panels/modules will now attract nil duty from 5 per cent earlier.
# Customs duty on raw materials, parts and accessories of cochlear implants has been reduced to nil from 2.5 per cent earlier.