October 28, 2020

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Download and Prepare at a time 50 employees Form 16 Part A&B for F.Y.2018-19 With Budget 2018 – Changes in the Income Tax Laws for AY 2019-20

When
the government introduced the Union budget on February 1, 2018, it
opened up some new avenues to save taxes. The government made various
amendments to the tax laws to give some relief to the taxpayers. This
article by H&R Block India will help you understand the 5 new or amended tax benefits announced by the government in the Union Budget 2018.
 

1) Standard deduction to salaried individuals and pensioners

Transport
allowance and medical reimbursement are two tax deductions which almost
every salaried taxpayer easily claims. The Finance Act, 2018 eliminated
these two tax benefits. The tax benefit from transport allowance is Rs
19,200 p.a. (Rs 1,600 p.m.), while from the reimbursement of medical
expenses, it is Rs 15,000 p.a. At first, it may appear to be a loss of
Rs 34,200 to you (Rs 19,200 + Rs 15,000). But, you don’t need to worry
as a standard deduction of Rs 40,000 has been brought in their place.
This is, in fact, a good news for you since the overall tax benefit has
increased by Rs 5,800 (Rs 40,000 – Rs 34,200).
Tax
benefit has also been extended to the pensioners. Pensioners were not
allowed any tax benefit of transport allowance and medical
reimbursement. Therefore, they can gain Rs 40,000 as tax-free income.

2) Enhanced deduction under section 80D

You
must be familiar with this deduction under section 80D that you can
claim when you pay a premium for medical insurance giving coverage to
you or your family. The tax deduction currently allowed is up to Rs
30,000 of the insurance covers you, your spouse or your children. You
can get an additional deduction of Rs 30,000 on premium paid if you have
a medical cover for your parents aged 60 years and above. If they are
aged below 60 years, then the tax deduction cannot exceed Rs 25,000.
However,
if anyone of you, your spouse or your parents is not covered under any
insurance policy, then you can claim a tax deduction up to Rs 30,000 for
the medical expenses incurred on them. Union budget for 2018 has
extended this benefit to senior citizens as well and increased the
deduction limit from Rs 30,000 to Rs 50,000.

Download and Prepare at a time 50 employees Form 16 for the Financial Year 2018-19 & Ass Year 2019-20.[ This Excel Utility can prepare at a time 50 employees Form 16 Part A&B for F.Y.2018-19]


A summary of deduction allowed under section 80D is explained in the table below:
Nature of amount spent
Family Member
Parents
Age below 60 years
(value in Rs)
Age above 60 years
(value in Rs)
Age below 60 years
(value in Rs)
Age above 60 years
(value in Rs)
A) Medical Insurance
25,000
50,000
25,000
50,000
B) Central Govt Health Scheme
25,000
50,000
C) Health Check-up*
5,000
5,000
5,000
5,000
D) Medical Expenditure
50,000
50,000
Maximum deduction
25,000
50,000
25,000
50,000
Further,
the Finance Bill also proposes that in case of single premium health
insurance policies which give coverage of more than a year, the
deduction shall be allowed on a proportionate basis for all those years
for which health insurance coverage is provided, subject to the
specified monetary limit.
 

3) Increase in the deduction limit under section 80DDB

The
tax deduction given to taxpayers for expenses incurred on treatment of
his own or any family member’s critical illness has also been raised.
Currently, the tax deduction is Rs 80,000 for a super senior citizen, Rs
60,000 for senior citizen and Rs 40,000 in any other case.
The
upper limit of deduction has been increased to Rs 1 lakh for both
senior as well as super senior citizens but the limit remains the same
for the taxpayers up to 60 years of age.
 

4) Increase in exemption limit on bank interest for senior citizens

In
the AY 2019-20, senior citizens will be able to claim deduction up to
Rs 50,000 on interest earned from bank deposits, post offices or
co-operative banks as per the provisions of a new section 80TTB of the
Income Tax Act, 1961. Any senior citizen who claims the tax deduction
under section 80TTB will not be allowed to claim the benefits of section
80TTA from AY 2019-20. Section 194A has also been amended to disallow
banks from deducting tax from payment of interest up to Rs 50,000 made
to a senior citizen.
 

5) Enhanced tax benefit on gratuity

The
tax exemption allowed on gratuity has also been increased in the Union
budget 2018. The taxpayers currently get a tax exemption of Rs 10 lakh
which will be raised to Rs 20 lakh. The taxpayers receiving gratuity on
or after 1st April 2018 will be able to enjoy the increased tax benefit
on gratuity.
 

6) NPS withdrawal exemption extended to non-employees

Employees
investing in NPS get exemption up to 40% of the total accumulated
balance in their NPS account at the time of withdrawal when they opt out
or close the scheme. The budget for 2018 has extended this tax benefit
to everyone investing in NPS.
 

7) No capital gains tax if the variation in stamp value and the actual consideration is up to 5%

The
taxpayers who sell an immovable property for a sale consideration which
is less than the value adopted by the stamp authorities (circle rate),
then the rec department considers the sales value as the actual sales
consideration. This results in higher capital gains even if the taxpayer
has not gained anything. Further, the buyer also pays tax on the amount
resulting from the difference in the stamp value and actual
consideration paid. This results in double taxation.
In
budget 2018, the government has taken steps to help taxpayers making
genuine transactions. The government has proposed that no adjustments
shall be made where the circle rate is not more between the sale
consideration and circle rate is not more than 5%.

All
these new or amended benefits can be claimed by the taxpayers from AY
2019-20. Most of the tax benefits can be availed at the time of filing Income tax return. Therefore, it is important to be aware of tax laws and file returns accurately. H&R Block India is the largest individual tax filing intermediary in India. The in-house team of tax experts at H&R Block can get your Income tax returns filed accurately providing you optimum tax benefits.

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