Income tax reforms and changes are a regular occurrence in our country, and Indian taxpayers and investors are always shocked and surprised. While some of these changes have been a boon to investors, some have been a ban.
Having witnessed changes from the grandfathering of previous investments to the taxation of insurance claims, it would be good for investors to find more surprises in the future. Changes in investment rules, tax slabs, and rates will prove useful or disturbing calculations. Some will increase investor sentiment, others can pull it off, but while it makes sense to expect the best, you should always be prepared for the bad.
Here are the major tax changes we have seen over the last 10 years.
• Interest up to Rs 10,000 from a Savings Bank Account is tax-free.
• The Sec 80C deposit limit has been raised to Rs 1.5 lakh.
• The mortgage interest deduction for home loans has been increased to Rs 2 lakh.
• The holding period for long-term capital gains from other funds is increased to three years and a 20percent tax is levied after indexation.
• An additional deduction of Rs. 50,000 / – for contributions to the National Pension System (NPS) under Section 80CCD(1b).
• The interest on a home loan for rent is Rs 2 lakh.
• The minimum holding period for long-term capital gains from real estate has been shortened to two years.
• Rs 50,000 discount for RGESS funds as per 80CCG.
• Up to Rs 50,000 earned by senior citizens is tax-free including savings bank interest.
• Long-term capital gains above Rs 1 lakh from stocks and equity mutual funds should be taxed at 10percent.
• Additional interest deduction of `1.5 lakh for affordable housing.
• The TDS limit for interest has been raised to Rs 40,000 (Rs 50,000 for senior citizens).
• 60percent of NPS Corpus, which can be withdrawn at maturity, will be tax-free.
• ULIPs with a premium of Rs 2.5 lakh and above lose tax-exempt status and are declared taxable like mutual funds.
• Interest on Provident Fund (PF) contributions above 2.5 lakh per annum are taxable as ordinary income.
• Dividends from stocks and mutual funds should be taxed as normal income.
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