10% tax on LTCG above Rs1 lakh from listed shares and equity-oriented mutual funds
In Union Budget 2018-19, the NDA government reintroduced 10% tax on long-term capital gains above Rs1 lakh from listed shares and equity-oriented mutual funds from April 01, 2018. Though the government has grandfathered the gains until January 31, 2018 (cut-off date). Besides, to give some relief to investors, the government had announced that the high quoted price of shares and NAV of equity mutual funds of January 31, 2018 will be used to calculate the capital gains.
There are four scenarios that arise and investors have to pay tax only in case the current trading price of a stock is above its highest quoted price on January 31, 2018 and the buying price i.e. scenario 1. In other three scenarios, investors don’t have to pay tax as illustrated in the below exhibit.
|Scenario 1 (Rs)||Scenario 2 (Rs)||Scenario 3 (Rs)||Scenario 4 (Rs)|
|Buying Price (Bought more than 1 year ago)||100||100||100||100|
|Highest Quoted Price on Jan 31, 2018||500||120||80||80|
|Selling Price after Jan 31, 2018||600||110||90||60|
|Presumed purchased price for calculating LTCG||500||110||100||100|
10% Dividend Distribution Tax (DDT) on Equity Oriented Mutual Funds
Union Budget FY18-19 also proposed to introduce DDT of 10% on dividend distributed by equity-oriented mutual funds to provide a playing field across growth and dividend schemes.
ELSS become EET from EEE status
With the application of LTCG tax on equity mutual funds, investors also have to pay 10% LTCG tax on capital gains from ELSS at redemption. Therefore, ELSS has become an Exempt-Exempt-Tax (EET) investment from being an Exempt-Exempt-Exempt (EEE) investment.
A standard deduction of Rs40,000 for salaried class and 4% Health and Education Cess
In Union Budget 2018-19, the salaried class was given a small boost with a standard deduction of Rs40,000, replacing the transport allowance and medical reimbursement. However, ‘Secondary and Higher Education Cess’ of 3% will be replaced by a ‘Health and Education Cess’ of 4% in FY2018-19.
New section 80TTB to allow deduction of Rs50,000 interest to senior citizens
In Union Budget 2018-19, a new section 80TTB was inserted so as to allow a deduction up to Rs50,000 in respect of interest income from deposits held by senior citizens.
Increased limit under section 194A
Deduction on TDS under section 194A on interest income for senior citizens has increased from Rs10,000 to Rs50,000.
Deduction on premium under section 80D increased to Rs50,000 for senior citizen
Deduction on a premium of medical insurance under Section 80D was also increased to Rs50,000 from current Rs30,000 for senior citizens.
Deduction for medical expenditure on critical illness under section 80DDB increased to Rs1 lakh
The deduction limit for medical expenditure in respect of certain critical illness also raised to Rs1 lakh from, Rs60,000 in case of senior citizens and from Rs80,000 in case of very senior citizens, under section 80DDB.