Tax proposals come into effect tomorrow

■ Standard deduction makes its return after 13 years

■ The 2018- 19 Budget had after a gap of 14 years reintroduced 10 per cent tax on LTCG exceeding 1 lakh from ` sale of shares. ■ However, indexation benefit for computing tax liability on sale of shares listed after January 31 will be available, which will come as a relief to investors.

New Delhi, March 30: Several budget proposals including the reintroduction of tax on long term capital gains ( LTCG) exceeding ` 1 lakh from sale of shares will kick in from April 1, the beginning of FY19.

Besides, other tax proposals like reduced corporate tax of 25 per cent on businesses on turnover of up to ` 250 crore and a standard deduction of ` 40,000 in lieu of transport allowance and medical reimbursement will come into effect from Sunday.

While the exemption limit on income from interest for senior citizens has been raised five times to ` 50,000 per year, the limit of deduction for health insurance premium and medical expenditure has been raised to ` 50,000 from ` 30,000 under section 80D of the I- T Act.

For senior and very senior citizens, the tax deduction for critical illness will be ` 1 lakh from April 1, as against the existing limit of ` 60,000 for senior citizens and ` 80,000 for very senior citizens.

In the Budget, finance minister Arun Jaitley had retained the 10- 15 per cent surcharge on superrich, while raising the health and education cess, levied on all taxable income, to 4 per cent from 3 per cent at present. These proposals too will come into effect from Sunday.

The 2018- 19 Budget had after a gap of 14 years reintroduced 10 per cent tax on LTCG exceeding ` 1 lakh from sale of shares. Currently, 15 per cent tax is levied on capital gains made on share sale within a year of purchase. However, it is nil for shares sold after a year of purchase.

However, indexation benefit for computing tax liability on sale of shares listed after January 31 will be available, which will come as a relief to investors. In July 2004, the government had abolished LTCG tax on shares and replaced it with the securities transaction tax ( STT) — a same- day tax credit system that continues.

Keeping the I- T rates and slabs unchanged, the Budget introduced a ` 40,000 standard deduction for salaried employees and pensioners in lieu of the present exemption in respect of transport and medical expenses.

The standard deduction, which is provided to salary earners, was discontinued from the assessment year 2006- 07.

Presently, no tax is applicable on ` 19,200 of transport allowance and medical expenditure of up to ` 15,000.

This has now been subsumed into the new standard deduction of ` 40,000 which may mean very little benefit in tax saving considering that health and education cess has gone up.

With regard to corporate tax, the Budget has lowered the rate to 25 per cent for companies with turnover of up to ` 250 crore in 2016- 17.