Union Budget 2018 proposals comes into effect

Several important changes will walk into the financial life of a number of Indians, courtesy April 1, it being the first day of the next financial year, 2018-19. All the proposals which were announced in the budget for the coming financial year will come into force from April 1.

From Sunday, Indian Accounting Standard (Ind AS) 115 would be effective for the new financial year. The new accounting standard is set to transform the way companies in several sectors will measure, recognise and disclose revenues in their financial statements. This revenue recognition standard provides for numerous additional disclosures, which will significantly enhance transparency of financial statements, said accountancy experts. In wake of this, the other two standards – Ind AS 18 and 11 – which are related to revenue and construction contracts, would cease to exist.

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 This additional deduction of Rs 20,000 will help a taxpayer save up to Rs 6,000 per annum. 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.

E-way bill

The businesses which transport goods of over Rs 50,000 in worth from one state to other will have to now carry an e-way bill from April 1. This measure is expected to clamp down on the trade that presently occurs on cash basis. The e-way bill provision of the Goods and Services Tax (GST) was introduced on February 1, 2018.

Compensation on termination or modification of employment

At present, certain compensation in relation with employment is out of the purview of taxation, that leads to base erosion and loss of revenue. But from April 1 things will change. “It is proposed that any compensation or other payments due to or received by any person in connection with the termination or the modification of the terms and conditions of any contract relating to his employment shall be taxable under the head income from other sources,” as per a report.

LTCG on equities

The Union Budget proposed 10 per cent tax on long-term capital gains (LTCG) over Rs 1 lakh. Till now, any long-term gains made on equity shares or any equity mutual fund units were exempt from tax. The government, however, extended indexation benefit for computing tax liability on the sale of shares listed after January 31.

Standard Deduction 

There has been no change in the Income Tax slabs this year but for salaried employees, a standard deduction of Rs 40,000 is introduced by the government in lieu of transport and medical reimbursements. Budget 2018 has also increased the cess on incomes from 3 per cent to 4 per cent, which can increase your tax bill.

Corporate Tax

Corporate tax on businesses with up to Rs 250 crore turnover has been reduced to 25 per cent from 30 per cent. If the turnover of a company is up to Rs 250 crores, it’s a big reason to cheer. Such company will pay less corporate tax, at 25 per cent. As 99 per cent of the tax-filing companies fall in this bracket, this is really a big change.

Health and Education Cess

The Budget 2018 didn’t make any changes in the tax rates or tax slabs for individuals and HUFs, which continue to remain the same for Assessment Year 2019-20 as applicable for AY2018-19. However, it has proposed a new Cess – Health and Education Cess – which will be levied at the rate of 4% of income tax, including surcharge, in place of the current 3% Education, Secondary and Higher Education Cess from Financial Year 2018-19 onwards.

Due to this change, the tax liability for highest tax bracket (assuming Rs 15 lakh income) goes up by Rs 2,625. For the middle income tax payers (between Rs 5 lakh and Rs 10 lakh), tax liability increases by Rs 1,125 and for the lowest bracket (Rs 2.5 lakh to Rs 5 lakh) by Rs 125.