A slew of changes that were announced in Budget 2018 could affect your financial health in the financial year 2018-2019. Not only salary and interest income, it could also impact your return from equities. To keep you updated, here are few changes one should know about before starting a new financial year.Also Read - Budget 2021: An Increase in Standard Deduction Limit May Bring Relief to WFH Employees | Here's What it Means

Standard Deduction

From the new financial year onwards, you will get a standard deduction of Rs40,000 on your taxable income. But this will not add much to your tax savings as the government has simulateously taken away tax exemptions  on the transport allowance of Rs19,200 per annum and medical reimbursement of Rs15,000 a year. The math shows that salaried class will have a marginal benefit of just Rs5,800 on their taxable income. Also Read - Income Tax Changes You Should Know Before Filing ITR This Year


Till financial year 2018 three per cent cess (two per cent for primary education and one per cent for secondary and higher education) was levied on your tax liability. From the financial year 2019 it has been increased to four per cent for educational and healthcare needs of poor families. Also Read - Finance Act 2018 Clarifies Applicability of Standard Deduction For Pensioners

Long Term Capital Gain (LTCG)

You will no more enjoy tax-free satus on equities even if you stay invested for more than one year. This is because, from 2018-2019, 10% tax (without any indexation benefit) will be levied on long term capital gain exceeding Rs1 lakh. The gain from equities is clubbed as short term if holding period is less than one year and long term if it is held for one year and more from the date of purchase.

It is, however, important to note that your gains will be exempted until January 31, 2018, after which all your gains will get taxed. Arun Jaitley, the Finance Minister, said in his budget speech, “If an equity share is purchased six months before January 31, 2018, at Rs100 and the highest price quoted on January 31, 2018, in respect of this share is Rs120, there will be no tax on the gain of Rs20 if this share is sold after one year from the date of purchase. However, any gain in excess of Rs20 earned after January 31, 2018, will be taxed at 10 per cent if this share is sold after July 31, 2018. The gains from equity share held up to one year will remain short-term capital gain and will continue to be taxed at the rate of 15 per cent.”

LTCG is calculated by subtracting the cost price from the sale price of the share . While sale price is the market price at which you sell your share, the cost price needs some calculation if bought before before February 1, 2018. According to new income tax rules, it shall be higher of

a) the actual cost of acquisition ; and

b) the lower of (i) the market value as on January 31, 2018, and (ii) the sale price of the share

Moreover, LTCG will be levied over and above securities transaction tax or STT, which is levied on transactions in shares, bonds and debentures.

Dividend Distribution Tax (DDT)

If you were buying dividend option of balanced funds to earn tax-free income every month, you wont be able continue with it. This is because from now onwards 10 per cent DDT will be levied on dividend option of equity funds.

Interest Income

For senior citizens the exemption limit on fixed and recurring deposit has been increased to Rs 50,000 from Rs10,000. This means TDS will not be deducted on interest income of upto Rs50,000. For interest income above Rs 50,000 tax will be deducted at source for senior citizens. Having said that, interest income from savings account will continue to be tax-free for the amount upto Rs10,000

 Health Insurance

The deduction limit for senior citizens under section 80D has been increased to Rs50,000 from the the earlier level of Rs30,000. Considering premium rates are very high for senior citizens, an increase in the deduction limit would allow you to claim higher deduction on a health insurance policy bought for your parents.

Pradhan Mantri Vaya Vandana Yojana

Pradhan Mantri Vaya Vandana Yojana is a pension scheme for senior citizens, which is offered by Life Insurance Corporation of India (LIC). The existing investment limit  under the plan has been increased to Rs15 lakh from the limit of Rs7.5 lakh. The scheme offers pension at a guarantreed return of 8 per cent over the period of 10 years.