We are all aware that Interim-budget was presented in Feb 2019 by the then Finance Minister Shri. Piyush Goyal. With a new government now in place, a full general budget has now been tabled in the Parliament by the current FM Smt. Nirmala Sitharaman.
In both the Budgets, certain important proposals have been made which can have an impact on an individual’s Personal Finances.
I have been receiving multiple requests from many of my blog readers to have a dedicated post that lists all the important Budget 2019-20 proposals (based on interim & full budgets, both put together) at one place. So, here I am with a separate article and have tried my best to make this post as comprehensive as possible.
In case, you would like to add or correct any point, kindly feel free to leave a comment and I will update this list accordingly.
Comprehensive list of Budget 2019-20 Proposals for FY 2019-20 / AY 2020-21
Latest Income Tax Slab Rates FY 2019-20
No change in income tax slab rates for FY 2019-20 / AY 2020-21.
Increase in Surcharge on Individuals with income above Rs 2 cr
In view of rising income levels, a surcharge will be levied on individuals with taxable income of Rs 2 to 5 crore, and Rs 5 cr and above. The effective tax rate for these categories will increase by around 3 percentage points and 7 percentage points, respectively.
Surcharge is levied if taxable income is more than Rs 50 lakh. A Surcharge is levied on the amount of income tax payable and the Health and Education cess of 4 per cent will be levied on the amount of income tax plus surcharge.
New Section 80EEA : Income Tax Deduction on Home Loan Interest Payment
An additional income tax deduction of up to Rs. 1.5 lakh for interest paid on home loans borrowed during 01-04-2019 to 31-3-2020 has been proposed. This will be available under Section 80EEA. That takes the total deduction to upto Rs 3.5 lakhs (existing Rs 2 lakh limit + Rs 1.5 lakh new proposal).
New Section 80EEB : Income Tax Deduction of Rs 1.5 Lakh on Purchase of e-Vehicle
A new Tax deduction of up to Rs 1.5 lakh has been proposed on Interest paid on Loans taken to purchase Electronic Vehicles.
Rs 50,000 Standard Deduction for FY 2019-20 / AY 2020-21
The Standard Deduction of Rs 40,000 for FY 2018-19 is proposed to be increased to Rs 50,000 for FY 2019-20.
Related Article : ‘How to claim Rs 50000 Standard Deduction?‘
Income upto Rs 5,00,000 to be exempt from income tax (Tax Rebate u/s 87a)
Individual taxpayers having taxable annual income up to Rs 5 lakhs will get full tax rebate (u/s 87A) and therefore will not be required to pay any income tax.
TDS related proposals for FY 219-20 / AY 2020-21
As per the Interim & Full Budget 2019-20, below proposals with respect to TDS rates have been made;
- There will be no tax deducted at source (TDS) for interest income of up to Rs 40,000. This is applicable for interest earned from banks as well as from post office deposits. This limit has been increased from the FY 2018-19 limit of Rs 10,000.
- This will mean that the bank or the post office will not deduct tax on interest income of up to Rs 40,000 on FDs, RDs, Post office Schemes like MIS, Senior Citizen Savings Scheme, KVP, NSC etc.,
- Similarly, the TDS threshold for deduction of tax on rent has been raised from Rs 1.8 lakh to Rs 2.4 lakh. This threshold limit is applicable for home rent paid by non-individual entities.
- TDS of 2% will be levied on Cash Withdrawals of above Rs 1 cr in a year from a Bank Account.
- Budget 2019 has proposed to deduct 5% tax on net income portion of taxable life insurance proceeds instead of the current TDS of 1% of the gross maturity payout under the policy.
- A buyer is required to deduct TDS at the rate of one per cent of purchase price while purchasing an immovable property of more than Rs 50 lakhs. Effective 1 September 2019, the limit of Rs 50 lakhs would be towards consideration of the immovable property including all other charges incidental to the purchase of immovable property such as parking fee, society fee, club membership fee paid by the buyer. Earlier, due to lack of clarity, the limit of Rs 50 lakhs was considered towards the purchase price of the immovable property only and such additional charges were not considered.
- High Value payments made by individuals or HUF to professionals and contractors (examples; payments to Wedding planner, house construction contractor etc.,) have to deduct 5% TDS in case the aggregate payments made to a single service provider during the year exceeds Rs 50 lakh.
- TDS on monthly payments above Rs 50000 : Individuals and HUF who are not required to get their financials audited and are paying rent of more than Rs 50,000 pm have to deduct TDS @ 5% of the rent paid in a financial year as tax.
Related article : ‘Latest TDS Rates FY 2019-20 | TDS Rate Table for AY 2020-21‘
No notional rent on second Self-Occupied Home
Until FY 2018-19, income tax on notional rent is payable if one has more than one self-occupied house. No tax on notional rent on Second Self-occupied house has been proposed. So, you can now hold 2 Self-occupied properties and don’t have to show the rental income from second SoP as notional rent.
Related article : ‘Self Occupied Property (SOP) & Tax implications‘
Long Term Capital Gains tax exemption on Sale of Property
- The benefit of rollover of capital gains under section 54 of the Income Tax Act will be increased from investment in one residential house to two residential houses for a tax payer having capital gains up to Rs 2 crore. This benefit can be availed once in a life time.
- Under Section 54GB(5) of the Income Tax Act, 1961, long term capital gains on the sale of residential property will be exempt if the sale proceeds are invested in a eligible Startup, provided such transfer took place prior to March 31, 2019. As per the latest full Budget 2019-20, this has now been extended to March 2021.
Related article : ‘How to save Capital Gains Tax on Sale of Land / House Property?‘
Mandatory filing of Income Tax Return
The General Budget 2019-20 has proposed to make return filing compulsory for persons;
- Who have deposited more than Rs. 1 crore in a current account in a year, or
- Who have expended more than Rs. 2 lakh on foreign travel,
- Electricity consumption bill of more than Rs. 1 lakh, or
- Persons claiming the benefits of tax exemption for long term capital gains under various provisions under section 54 of the Income Tax Act.
Related article : ‘Do I need to file my Income Tax Return?‘
Amendments to NPS Scheme
To give effect to the cabinet decision already taken to incentivise NPS, it is proposed as under
- To increase the limit of exemption from current 40% to 60% of payment on final withdrawal from NPS (it means that a lump sum withdrawal of 60% from your NPS account will be exempt from tax i.e. tax-free, at the time of maturity).
- For allowing a deduction for the employer’s contribution upto 14% of salary from the current 10%, in the case of Central Government employee.
- To allow deduction under section 80C of the Income Tax Act, 1961, for the contribution made to Tier-II NPS account by Central Government employees.
Gifts to NRIs (non-relatives) can be Taxable
- Currently gifts given by Indian residents to non-resident Indians – apart from the specified list of relatives – would be claimed as non-taxable. Because, the onus was on the recipient to disclose such gifts and then pay the gift tax.
- But, budget 2019-20 proposed to amend the rules to make it mandatory for recipients (NRI) to disclose such gifts received if they originate in India and then pay a tax on it.
- The value of these gifts is added to the income (exceeding Rs 50,000), if made to anyone apart from the specified relatives or blood relations and will be taxed as per the normal slab rates applicable to resident Indians, except if a double taxation treaty prohibits the same.
Related article : ‘Got a Gift? Find out, if it is Taxable or Tax-free?‘
Proposals related to Mutual Funds
- CPSE ETF to come in ELSS variant : The government will launch its Central Public Sector Enterprises (CPSE) exchange-traded fund (ETF) in a tax-saving mutual fund scheme format like ELSS Mutual Funds. The CPSE ETF is an initiative by the government of India to divest its shareholding in select state-owned companies.
- To allow the concessional rate of tax for short-term capital gains on the transfer of units of FoF (Fund of Funds).
- Currently all FOFs irrespective of the underlying asset class gets taxed as per debt fund taxation. The concessional short term cap gains is being proposed for certain type of FoF only and not all of them.
- The STCG @ 15% rate will be applicable on FOFs that invests in a CPSE fund or CPSE ETFs.
ITR with Prefilled capital gains and expenses
Pre-filled IT returns with capital gains, interest on FDs, Form 16s etc., so as to reduce time spent on filing Income Tax Returns.
PAN & Aadhaar are Interchangeable
A proposal to make PAN and Aadhaar number interchangeable has been made. This means, if you do not have say PAN number, you can quote your Aadhaar Number in place of it. Also, a proposal to issue Aadhaar to NRIs who are holding an Indian passport has been made.
GST Return Filing
Taxpayers whose Annual Turnover is less than Rs 5 crore can file only Quarterly Returns.
Other important proposals / schemes :
- Import Duty on Gold and other Precious metals have been hiked to 12.5% from 10%.
- A Special Excise Duty of Re 1 per liter on Petrol and Diesel has been proposed.
- A new series of coins for Re 1, Rs 2 Rs 5, Rs 10, Rs 20 to be minted so that the visually impaired can easily identify them.
- To promote cash less economy, business establishments with an annual turnover of Rs 50 crore will have to use BHIM, UPI, Aadhaar Pay, NEFT, RTGS modes of payments and not impose charges or merchant discount rates on customers or merchants. The RBI and banks will absorb these costs.
- e-Assessment : Faceless assessment of tax returns in electronic mode will be launched this year in a phased manner.
- Govt to launch PM Karam Yogi Maan Dhan Pension scheme for Small shopkeepers whose annual turnover is less than Rs 1.5 cr pa.
I hope you find this post informative and useful. Do share your comments, cheers!
(Kindly note that proposals are brought before either house of the Parliament of India in the form of a bill. A bill is the draft of a legislative proposal, which, when passed by both houses of Parliament and assented to by the President, becomes an Act of Parliament.)
(Image courtesy of solargaria at FreeDigitalPhotos.net) (Post first published on 08-July-2019)