Its tax season and the most important thing on your mind would be how to save tax. It’s just the start of the new financial year and you must make wise investment decisions to save tax.
Saving tax is not that difficult if you are familiar with the changes introduced in Union Budget 2018-19. Why not take a look at these new tax rules which help you save tax?
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If you a salaried taxpayer, there’s good news. A standard deduction up to Rs 40,000 a year has been reintroduced just for you. This standard deduction replaces conveyance/transport allowance of Rs 19,200 a year and medical reimbursement of Rs 15,000 a year.
If you are already claiming transport allowance + medical reimbursement (Rs 19,200 + Rs 15,000), you can save Rs 5,800. This is Rs 40,000 – Rs 34,200.
Pension you have received for employment in the past, are also taxable as salary. This means standard deduction is also available for you and other pensioners. In the past, pensioners could not avail the transport allowance and medical reimbursement. Now, there’s the standard deduction of Rs 40,000 a year, which helps pensioners save a lot in tax.
2. Health insurance tax benefits
Before the Union Budget, the maximum deduction you enjoyed on the premiums paid on a health insurance plan for you + spouse + kids was Rs 25,000 a year under Section 80D (People below 60 years). This remains the same even after the Budget.
Before the Union Budget, If you paid the health insurance premiums on a health insurance plan for your parents who were senior citizens (60 years and above), the maximum deduction you could avail under Section 80D was Rs 30,000 a year.
After the Union Budget 2018-19, the maximum deduction on health insurance premiums paid for senior citizens under Section 80D, has been raised to Rs 50,000 a year.
You can avail the Section 80DDB tax deduction, if you (taxpayer) pay for the medical treatment of a critical illness for yourself or any family member.
The deduction used to be Rs 60,000 a year for senior citizens, Rs 80,000 for very senior citizens and Rs 40,000 for other citizens (60 years and below).
After the Union Budget 2018-19, the maximum tax deduction available under Section 80DDB has been increased to Rs 1,00,000 a year for all senior citizens. (This is 60 years+). There’s no change in the rule if you are below 60 years of age.
4. Senior citizens get tax exemptions on FDs
The Government has introduced the Section 80TTB from FY 2018-19. Senior citizens who are above 60 years, get to enjoy a deduction up to Rs 50,000 a year on interest income from deposits in banks/post offices/co-operative banks.
The interest you (senior citizen) earn on FDs and savings bank accounts, enjoy a maximum deduction up to Rs 50,000 a year, under Section 80TTB.
Remember: You (senior citizen) cannot claim a deduction under Section 80TTA, if you claim the tax deduction under Section 80TTB for FY2018-19.
The gratuity which you receive on retirement, being incapacitated (accident/any other reason), termination of employment or the gratuity received by a widow of a deceased employee/children/dependents was tax exempt till Rs 10 Lakhs.
This tax exemption is now enhanced to Rs 20 Lakhs. What does this mean? If you are going to retire or receive a gratuity after 1st April 2018, you can claim a higher tax exemption.
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