A Transformative Attempt To Simplify The Budget For New India

Shivani Jain
Aug 06, 2019   •  1 view

New financial year bring in new reforms with a bundle of hidden tax mysteries which are to be resolved in the quickest way. Account for all the changes through our blog before it’s too late!

ØNewly Introduced Surcharge- No changes in the income tax slabs and rates, individuals up to taxable income Rs 5 lakhs able to avail full tax rebate and hence no income tax to be paid. thereby the tax-rebate available under Section 87Ais increased to Rs 12, 500 from FY 2019-20 onwards. As per governments progressive taxation Wealthy taxpayers to pay higher taxes. In the past with surcharge of 10% on incomes above Rs50 lakhs and a surcharge of 15% on incomes above Rs1 crore however today two more slabs for surcharge have been added.Incomes between Rs 2 crore and 5 crores will effectively have to pay 39 percent as tax and those with income more than Rs 5 crore will have to pay more than 42 percent as tax.

ØTax-free National Pension System (NPS) Withdrawals- Lump sum withdrawals at the time of maturity are tax-exempt.From now 40 percent of the lump sum withdrawal is tax-exempt from the 60 percent corpus. Including government employees investing in Tier-II account of NPS can claim tax benefit under section 80C.

ØSimplified tax administration for individuals - Aadhar card can be used for filling tax returns and even can be quoted for high-value transactions.PAN card and Aadhar card can be used interchangeably. The income tax department is moving towards technological advancement where in a new system auto-fills basic tax forms for individuals based on Form 16 and Form 26AS data.

ØUnchanged personal income tax slabs-The interim budget 2019 have already made incomes up to Rs5 lakhs tax-exempt through rebate under Section 87A. But by considering the impact of higher standard deduction at Rs50,000 and the benefit of tax exemptions, a much higher income level can be framed as tax-free.

ØTax exemptions have been given on a conditional basis- Budget 2019 states an individual can claim additional deduction of Rs 1.5 lakh on interest paid on home loan under the newly introduced sec 80EEA subject to following conditions likeloan must be taken fromApril 1, 2019, and March 31, 2020; value of house property, not more than 45 lakhs and individual should not own any house prior the date of loan sanction. A further deduction of Rs 1.5 lakh is available over and above the existing Rs 2 lakh deduction on the home loan interest paid as per section 24. There is newly added exemption of Rs1.50 lakhs on purchase of environment-friendly electrical vehicles (EVs) to promote environmental protection activities.

ØAttract 2% TDS on cash withdrawals-With effect from September 1, 2019imposition of tax deduction at source (TDS) at the rate of 2 percent if the total cash withdrawn in a financial year exceeds Rs 1 crore from a bank, post office or cooperative bank from a single account in order to discourage cash transactions and push digital payments.

ØIncrease in Standard Deduction Limit- The limit of standard deduction has been increased by Rs 10,000 which means total benefit under standard deduction will now be Rs 50,000 in lieu of previously existing Medical allowance of Rs 15,000 and Transport allowance of Rs 9,200 annually

ØWider Tax Base-Mandatory ITR filing under cases like amount deposited in the current bank or co-operative bank account exceedingRs 1 crore in a financial year, Foreign travel Expenditure exceedingRs 2 lakh in the financial year; electricity bills of Rs 1 lakh or more in a year

ØTDS Payments-with effect from 1st September 2019, payment towards buying of the property along with payments made towards amenities like club membership fees, car parking fees, electricity, and water maintenance fees, etc will attract payment of TDS along with principal payment.

Individuals and Hindu Undivided Families (HUFs) will have to deduct tax at the rate of 5 percent for payments made to contractors and other professionals if it exceeds Rs 50 lakh in a year.

ØNotional rent from second self-occupied property is tax free-The notional rent refers tothe amount of the rent which the individual would have earned if the second house was let out by him, the earlier tax was required to be paid on such properties but from FY 2019-20 second vacant house is free from such tax

ØTax on giftsfor NRIs received by resident Indians- As per Budget proposal,tax will apply for the money paid or property situated in India transferred on or after July 5, 2019 in cases when as a gift from Indian residentgets acknowledged by non-resident Indians

ØTax saving on LTCG from house property-Save tax if you sold your house by investing the long-term capital gains (LTCG) into two houses instead of one earlier. The benefit can be availed only if capital gains do not exceed Rs 2 crore and once in an individual’s lifetime

ØIncrease in TDS threshold to Rs 40,000- Form 15Gwas required to be submitted to avoid TDS earlier on the interest income from the bank even for taxpayers with income below the taxable limit. In lieu to provide relief to lower-income taxpayers, the TDS limit is hiked to Rs 40,000 from Rs 10,000 earlier. This change will reduce paperwork to great extent for people in the lower-income brackets.

However, don’t get confused with the taxation of interest income earned from banks. The rise in TDS threshold limit refers to no TDS will be deducted by the banks for the interest income up to Rs 40,000.

However, interest incomes still taxable as per new tax laws.

Interest income on fixed deposit with banks is still taxable, whereas the tax-saving deduction under Section 80TTA can be claimed for the interest income earned out from the savings accounts.

Be a proactive investor after considering above stated benefits and indulge with our wise tax-saving investment strategies which will help you reduce your out flow and thus, give you greater income in hand.