Penalty on late filing of Income Tax Return
Govt has announced major income tax changes on new financial year, this include penalty on late filings of ITR, Medical and transport allowance.
Following changes have come into effect from 1st April 2018
Penalty on late filing of Income Tax
If you failed to file your Income Tax Return on due date i.e. 31st July but before 31st December , you will have to pay the penalty of Rs 5,000, post December you need to pay penalties of Rs 10,000.
As relief to Startups and small taxpayers, if turnover not more than Rs 5,00,000, maximum penalty will be applicable of Rs 1,000.
Timeline of revise your ITR
As you know earlier taxpayer was allowed to revise his return till two year from the end of financial year but from now if you make mistake while filings then you would have time till 31st March to revised return.
Medical reimbursement and transport allowance to become taxable
If your salary includes medical reimbursement and transport allowance, then these two items will become fully taxable in your hands from April 1. The proposal was announced in Budget 2018.
However, in lieu of the above allowances, standard deduction of Rs 40,000 from salary and pension will be available. You can claim this deduction next year for FY 2018-19 (assessment year 2019-20) at the time of filing ITR.
Hike in Education and Health Cess on tax liability
Starting from FY 2018-19, hike in Education and Health Cess by 1% to 4%, replacing the current 3% education cess. This will impact when TDS is deducted from salary and tax liability.
Levy of LTCG tax on shares and equity-oriented mutual funds
LTCG from the sale of shares and equity-oriented mutual funds will attract tax at a flat rate of 10 percent. Indexation benefit (adjusting the purchase cost with respect to inflation) will not be available. Further, LTCG up to Rs 1 lakh in one fiscal will be exempted from tax.
DDT introduced for equity mutual funds
Dividends declared in equity-oriented mutual fund schemes will come under the purview of dividend distribution tax (DDT) with effect from April 1. The tax will be levied at 10 percent and will be deducted by the fund house before paying dividends.
Tax-free withdrawal for NPS account holders
Self-employed and professionals will now be able to withdraw 40 percent of their National Pension System (NPS) corpus tax-free when they close or opt out of it. Salaried employees are already allowed to withdraw 40 percent of their NPS corpus tax-free.
Senior citizens to get more benefits
Starting from 1 April, interest income earned up to Rs 50,000 a year by senior citizens will be available for deduction. This includes interest income earned from savings bank/post office accounts, fixed deposits (FDs) and recurring deposits (RDs). This tax benefit is available to them under the newly inserted section 80TTB of the Income tax Act. TDS will be deducted only if interest income is more than Rs 50,000 in year.
However, if you are claiming tax benefit under section 80TTB, you cannot avail it under section 80TTA. Under section 80TTA, interest earned from savings account (bank/post office) up to Rs 10,000 is exempt from tax.
Additional benefits are also available on premium paid for medical insurance. Health insurance premium paid for senior citizens will be allowed a maximum tax-break of Rs 50,000 under section 80D.
Senior citizens who do not have health insurance can also avail this benefit for medical expenses incurred. It is advisable to keep the prescription and medical bills handy in case the tax department might require it in the future.
Tax benefit under section 80DDB has also been increased to Rs 1 lakh for treatment of specified diseases such as chronic kidney diseases (CKD), cancers etc.
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Summary
If you failed to file your Income Tax Return on due date i.e. 31st July but before 31st December , you will have to pay the penalty of Rs 5,000, post December you need to pay penalties of Rs 10,000.
As relief to Startups and small taxpayers, if turnover not more than Rs 5,00,000, maximum penalty will be applicable of Rs 1,000.