A standard deduction from salary income up to 40,000 Indian rupees (INR) in lieu of reimbursement of medical expenses and transport allowance has been given. Simultaneously, tax exemptions on transport allowance of INR 19,200 and medical reimbursement of INR 15,000 have been discontinued effective tax year 2018/19.
Computation of long-term capital gains
For equity shares and equity-oriented mutual funds, which have been sold on recognised stock exchanges in India and securities transaction tax (STT) has been paid, the long-term capital gain earned (if any) is fully exempt from tax. For long-term capital gain to be exempt in such cases, STT should also be paid on acquisition stage for shares acquired on or after 1 October 2004 (subject to certain exceptions as prescribed in this regard for acquisition of shares in an initial public offering (IPO), bonus, or rights issue by a listed company, etc.).
Effective 1 April 2018, the above-mentioned exemption has been withdrawn, and long-term capital gain exceeding INR 100,000 will be taxable at the rate of 10% (without any indexation benefit). It is important to note that gains accrued based on fair market value (FMV) as on 31 January 2018 have been grandfathered (i.e. will not be liable to tax).
For transaction of sale effective 1 April 2018, the cost of acquisition will be determined as the higher of the following:
- Actual cost of acquisition.
- The lower of:
- FMV as of 31 January 2018.
- The full value of consideration arising on transfer.
Health and education cess
Health and education cess at the rate of 4% of the income tax and surcharge (if applicable) will be levied to compute the final tax liability of individuals.