The Union Budget 2019 has been presented twice this year by the central government. The interim budget in February is followed by the presentation of the full budget in July by the BJP government after its immense triumph in the general elections.
Both budgets constitute income tax-related notifications which would affect the personal finances of the Indians. Where the announcements made by interim finance minister Piyush Goyal in February have become operative, the declarations made in the budget proposals by finance minister Nirmala Sitharaman are due to come into force as they first need to be approved by the Parliament.
Let’s have a look at the tax proposals notified in these budgets and their repercussion on our finances.
Income Tax Proposals
Notification
- No changes can be seen in the income tax brackets and slabs for the Financial year 2019-20 in the full budget passed in July 2019.
- Surcharge rate has been increased for the individuals who come under the super-rich category means the one with an annual taxable income of more than Rs 2 crore but less than Rs 5 crore and the individuals with an annual taxable income of more than Rs 5 crore.
- Individuals whose net taxable income is less than or equal to Rs 5 lakh, will continue to get Tax Rebate up to Rs 12,500 and so attracts nil tax liability.
Effects
- Individuals with incomes > Rs 2 crore but < 5 crores will effectively have to pay income tax @ 39 per cent
- Individuals with income > Rs 5 crore will effectively have to pay income tax @ more than 42 per cent.
- Individuals with incomes < Rs 5 lakh will not have to pay any tax on income and will get a tax rebate of up to Rs 12,500.
Additional Deduction on the Purchase of an Affordable Home
Notification
- New Budget 2019 has brought additional deduction for individuals buying affordable homes.
- Now under the newly added section 80EEA, individuals can claim an increased deduction of Rs 1.5 lakh on interest paid on home loan subject to some conditions which are as follows:
- The loan must be availed between April 1, 2019, and March 31, 2020;
- The value of house property must not be more than Rs 45 lakh; and
- An individual should not have his/her own house on the date of loan sanctioning.
Effect
- Current deduction of Rs 2 lakh on the interest of home loan u/s 24 has now been further raised with Rs 1.5 lakh on the existing amount of Rs 2 lakh.
NPS Withdrawal Becomes Tax-Exempted
Notification
- New Budget 2019 has brought glad tidings for Individuals under the National Pension System (NPS) as now they can make tax-exempt lump sum withdrawals at the time of maturity. Individuals who invested in NPS can withdraw 60 per cent of the corpus as the round sum at the time of fruition of the scheme and the leftover 40 per cent has to be mandatorily used in buying an annuity plan.
Effect
- Now the complete 60% of corpus withdrawal will be tax-free.
At present, from the 60% of corpus which can be withdrawn as a lump sum – 40 per cent withdrawal is tax-exempt.
- Government employees who invest in Tier-II account of NPS are now eligible to claim tax-benefit u/s 80C.
2% TDS on Cash Withdrawal
Notification
- With the aim to boost the digital payments, Proposed Budget 2019 imposes tax deduction at source (TDS) @ 2 per cent on the cash withdrawals if it exceeds Rs 1 crore from a single account held with bank/post office / cooperative bank in a financial year.
Effect
- From September 1, 2019, TDS will be imposed at the rate of 2 % on cash withdrawals of more than Rs 1 crore.
TDS Applicable to Maintenance, Parking and Other Fees
Notification
- The new budget 2019 takes in the purview of TDS – the payments like club membership fees, maintenance fees, car parking fees, the fee for electricity and water, made while purchasing a property.
Effect
- From September 1, 2019, TDS will be deducted for the payment made for the property as well as for the payment made for the related services. Till now TDS is applicable to the payment made for buying the property only.
Read Also: All About Newly Added TDS (Tax Deducted at Source) Section 194M
Tax on Gifts from Resident Indians to NRIs
Notification
- New Budget 2019 levies taxes on the gifts received by non-resident Indians (NRIs) from resident Indians.
Effect
- The tax will be leviable on any transfer of property situated in India or any payment of money on or after July 5, 2019.
Stretched the List for Mandatory ITR Filing
Notification
Budget 2019 expanded the list of taxpayers who mandatorily needs to file an income tax return (ITR) in order to expand the tax base. As per the new budget 2019, ITR filing has become mandatory under the following conditions:
- When amount saved in the current account of a bank or co-operative bank surpasses the limit of Rs 1 crore in F.Y.;
- When foreign travel expenditure surpasses the limit of Rs 2 lakh in an F.Y.;
- When electricity expenses of an individual surpass the limit of Rs 1 lakh or more in an F.Y.
- When an individual claims capital gains tax exemption on investment in the house, etc.
Changes
- ITR filing has become mandatory for the individuals with income or expenditure more than the prescribed limit contingent upon some exceptions. Till now only the income aspect was considerable for ITR filing.
TDS on Payments of More Than Rs 50 lakh to the Contractor
Notification
- The new budget 2019 complies Individuals and Hindu Undivided Families (HUFs) to deduct TDS @ 5% for the amount paid to the contractors or other professional service providers if the amount is more than Rs 50 lakh in any F.Y.
Effect
- From 1 September 2019, Individuals and Hindu Undivided Families (HUFs) will deduct tax for the fee paid to the contractor or service providers at the rate of 5% if the fee exceeds Rs 50 lakh in a year. Till now, they do not have to deduct any TDS on such payments.
Brief Looks on Other Notifications and Effects of the Proposed Budget:
Increment in Standard Deduction
- Standard deduction has been increased from Rs 10,000 to Rs 50,000 – Sign of relief for salaried individuals!
No tax on notional rent
- Zero tax is payable on notional or deemed rent on your second house if nobody is residing there and it’s vacant.
Tax Saving on LTCG from house property
- Under the proposed budget, one can sell a house and save tax by investing in the long-term capital gains (LTCG) i.e. by investing two houses instead of the one owing earlier.
Note: This benefit is a once in a lifetime opportunity and is available only when the capital gains are within the limit of Rs 2 crore.
