Arun Jaitley did not tinker with the income tax slabs nor did he raise the exemption limit in Budget 2018, but there were a few proposals that will have an impact on how much taxes you will end up paying.

Here are 10 income tax changes that will come into effect from April 1, 2018, once the Finance Bill is passed by the Parliament.

  • Re-introduction of standard deduction

In a relief to the salaried class, the FM has re-introduced standard deduction of Rs 40,000 from salary income. Apart from salaried class, even pensioners will be allowed to avail the benefit of this deduction. Central Board of Direct Taxes (CBDT) Chief Sushil Chandra has clarified that to avail this tax benefit one would not be required to submit any proofs or bills, it can be claimed straightaway.

  • Transport allowance and medical reimbursements to become taxable
  • While standard deduction has been reintroduced, the tax benefit available on transport allowance and medical reimbursements has been taken away. Currently, transport allowance of Rs 19,200 and medical reimbursement of Rs 15,000 per annum is exempted from tax. If the Budget is passed by the Parliament, then starting from April 1, 2018, these two allowances will become a taxable part of your salary.

    • Cess hiked to 4 per cent

    Cess levied on your tax liability has been hiked by 1 per cent from the current 3 per cent to 4 per cent. This cess will be called “Health and Education Cess.” So, if you have net taxable income of Rs 5 lakh, your tax outgo will marginally increase by Rs 125. Similarly, for someone with a net taxable income of Rs 15 lakh, their tax liability will increase by Rs 2,625.

    • Introduction of tax on long-term capital gains (LTCG) on equity and equity-oriented mutual funds

    Starting from April 1, tax will be levied on LTCG arising from the sale of equity and equity-oriented mutual funds. Earlier, these gains were exempt from tax. It will be charged at a rate of 10 per cent plus cess at 4 per cent. However, to provide relief to small investors, LTCG up to Rs 1 lakh will be exempt from tax per fiscal.

    • Increase in tax-exempt limit of interest income for senior citizens

    In a bid to provide relief to senior citizens, Budget has proposed to increase the tax exempt limit on interest income for senior citizens from Rs 10,000 to Rs 50,000. Interest income will include interest earned from fixed deposits (FD) and recurring deposits (RD).

    • Raising the threshold limit for the TDS for senior citizens

    Along with the raising the limit of tax-exempted interest income for senior citizens, an amendment has been proposed in the tax deducted at source (TDS) TDS law. As per the proposed change, no TDS will be deducted from interest incomes up to Rs 50,000 a year for senior citizens.

    • Hike in the deduction limit on medical expenditure

    It had been proposed to raise the limit of deduction under section 80D and section 80DDB for senior citizens. Under section 80D, the limit has been proposed to be hiked from Rs 30,000 to Rs 50,000. Similarly, under section 80DDB, the limit has been hiked to Rs 1 lakh for all senior citizens from Rs 60,000 (in case of senior citizens) and Rs 80,000 (for super senior citizens).

    • Dividend distribution tax on equity mutual funds

    Tax at the rate of 10 per cent will be levied on the dividends distributed in case of equity mutual funds. However, this dividend will remain tax-free in the hands of investors. The tax will be deducted by the fund houses before distribution of dividend. This will impact investors who were relying on dividends from balanced funds as a source of regular income.

  • Extension of Pradhan Mantri Vaya Vandana Yojana
  • Pradhan Mantri Vaya Vandana Yojana (PMVVY) has been proposed to be extended till March 31, 2020. Along with the extension of scheme, the maximum investment limit has also been proposed to increase to Rs 15 lakh.

    • Tax-exemption on NPS corpus for self-employed

    For self-employed people, it has been proposed to exempt 40 per cent of the total amount payable from tax upon closure of National Pension System (NPS). This tax benefit will now bring self-employed individuals at par with the salaried class.


    1. Short n sweet while immensely useful.
      Regards LTCG , pl clarify the following:
      1. The purchase price will be actual or,
      That on 31st Jan 2018 , as explained in one of the papers.
      2. Can the LTCLOSS be carried forward, like S T LOSS and if so for how many years.

    2. The purchase price actual or the price as on 31st January 2018 which ever is higher, will be considered base price to calculate Gain or Loss.
      How one will know what was price on 31st January 2018 of a particular script (share), if he sells the same after 2-3 years?

      Yes. LTCLOSS can be carried forward like STLOSS for 5 years.

    3. I also same doubts as that of Mr. A.S. DESHMUKH.. Please clarify. Also what is the treatment of LTCG in respect og Shares sold ( which are held for more than 1 year ) between !st Feb. to 31st March,2018.

    4. I also have same doubts as that of Mr. A.S. DESHMUKH.. Please clarify. Also what is the treatment of LTCG in respect og Shares sold ( which are held for more than 1 year ) between !st Feb. to 31st March,2018.

      • The LTCG Tax will come into effect from 1st April, 2018. So, there will be no tax if sold between 1st February ’18 to March ’18.

    5. How LTCG is determined in respect of shares held for more than 12 months, but which are unquoted shares ( ie.,) shares which are not listed at all or shares which are delisted / suspended for trading ?.

    6. Mn Sr citizen hun. April 2018 se 81 Years Shuru hogaya hai. AMRICA Mn REHTA hun.Single Parent hun. Mn N 2-3 Sal se Return file Nahin Ki hai. Pension details Bank se BHI nahin LI hai. KYA Return file Na kerne Ka Fine Pay KERNA HOGA? Fine KITNA hai AUR kab TAK Pay KER SAKTE HN? Please Email se reply send Karen. Thanks.

    7. I am 65yrs old & working with salary of Rs 1lac/ month and pension Rs.12227/month. Kindly find out what is my tax liability. Thanks. Dr. L. N. Mohan.

    8. My wife is a house wife and I have taken a pension policy on her name in Feb 2007 for 10 the policy is matured, since the rate of interest in the banks are very less ,so I want to withdraw the matured amount arround of Rs 12 lac.can u clearlify that how much her tax liability & is there any chance of saving tax.Till date she didn’t filed return.

    9. Thanks lot —-very good advice for old ,please advice how I produce my medical
      bill and get benefit from I T . Thanks A K Basu

    10. Hi,

      I hold a ABC company shares since 2010 which is giving bonus in the ratio of 2:1 and ex-bonus date is 6th March 2018

      However the confusion is about the calculation of LTCG on the original shares and the bonus that i am due to receive in 1-2 days.

      Also what if i wish to sell all or only original quantity in next 5- months.

      I would appreciate if you help me clarify this doubt.

    11. Why source is restricted to recover full tax upto 1st march thereafter deposit remaining balance tax in bank up to I think June. Govt shd allow source to recover tax extended up to June especially for pensioner otherwise to all employees too. Returns must be filed by source. Pan had been misprinted in returned neither enquired by I/tax nor by checked by source. Shd have Website system to check tax deposited with I/tax against pan which also facilitate to produce tax paid / return cert available online. Department / company . ashok kumar

    12. I purchased a land two years ago for certain amount. Now the land value has increased. How much will I be taxed upon selling the same?

    13. I have a question about exemptions in 2018-19 I have a special child who is totally dependent I have CMO certificate what is amount I will get exempted unde which Sec of 80 . And also in 2019-20.hope your reply

    14. The minor benefit of Interest limit not to eb taxed for Senior Citizens is a pittance. It roughly works out to a benefit of Rs. 4000 to Rs. 8000 in a whole year.
      I feel that the Senior Citixens deserved something much better. This is a category of people who have no source of income other than Interest and maybe in some cases, returns from investment in MFs or Shares.
      AT LEAST FOR SENIOR CITIZENS THE TAX FREE SLAB COULD HAVE BEEN INCREASED TO Rs 4,00,000/- Specially since the Senior citizens cannot take any advantage from most other benefits given to other normal tax payers.

    15. Thanks for this valuable comprehensive compilation.
      Kindly clarify whether the standard deduction is applicable for pensioners as well

    16. Dividend Distribution Tax – that was the last straw that will affect millions of regular income earners from MFs. For many their only source of livelihood. Now even the hardcore BJP supporters amongst those affected by it won’t vote for them in 2019.

    17. Meri income salary base income h to kiya mera return aa sakta h mera yearly 800000 h aur m ek Pvt Ltd m engineer k post par hu


    Please enter your comment!
    Please enter your name here