Finance Minister Arun Jaitley in Budget 2018 left the basic income tax rates and slabs unchanged. However, he announced a number of changes that will impact how much tax you pay for FY 2018-19 (assessment year 2019-20). For financial year 2018-19, taxpayers have to fork out a higher cess of 4 per cent, as compared to 3 per cent for 2017-18. From April 1, 2018, a new long-term capital gains tax above Rs 1 lakh on sale of equity shares and equity-oriented mutual funds will be levied at 10 per cent, without the benefit of indexation. But for the benefit of taxpayers, only gains after January 31, 2018 will be taxed. Also, a tax at the rate of 10 per cent will be levied on dividend distributed by equity-oriented mutual funds.

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For FY19, taxpayers, particularly in the lower tax brackets, will benefit from the proposed introduction of Rs. 40,000 standard deduction. This standard deduction has been proposed in place of existing deductions of Rs. 19,200 for transport allowance and Rs. 15,000 for medical reimbursement. This will benefit 2.5 crore salaried employees. Pensioners, who normally do not enjoy any allowance for transport and medical expenses, will also benefit from it.

In Budget 2018, the finance minister also proposed a number of benefits for senior citizens, giving them a higher deduction on income from interest and tax benefits on healthcare spending.

For FY19, taxable income up to Rs 2.5 lakh would not attract any tax, for individuals under the age of 60 years. From Rs 2,50,001 to Rs. 5,00,000, it will attract a 5 per cent tax and from Rs. 5,00,001 to Rs. 10,00,000, a tax rate of 20 per cent. Taxable income above Rs 10 lakh will attract income tax at the rate of 30 per cent.

Income tax slabs for taxpayers for FY2018:

Income tax slabs for taxpayers for FY 2018-19:

For FY19, senior citizens will get higher interest income exemption limit on deposits in banks and post offices, including recurring deposits. A new Section 80TTB is proposed to be inserted in the Income Tax Act to allow a deduction up to Rs. 50,000 in respect of interest income from deposits held by senior citizens. However, no deduction under Section 80TTA will be allowed for senior citizens. Currently, a deduction up to Rs. 10,000 is allowed under Section 80TTA of the Income Tax Act to an individual in respect of interest income from a savings account.

Senior citizens will also enjoy higher threshold for deduction of tax at source on interest income. This limit for senior citizens is proposed to be hiked from Rs. 10,000 to Rs. 50,000. In Budget 2018, the government proposes to increase the deduction for senior citizens on payment of health insurance premiums.

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