On Feb 1, 2019, the Finance Minister Shri Piyush Goyal presented the 'interim' budget for the Financial Year 2019-20. Since the general elections are due soon, the full-fledged budget will be presented only after the new Govt. is formed sometime in May/June.
Meanwhile, the present Govt. took the opportunity to make some key changes in the tax laws.
Listed below are some the salient aspects of the same.
1. Tax rebate on income up to Rs 5 lakh
There is no change in the tax slab rates. Accordingly, for an individual of age less than 60, the tax rates continue to be the same as under:
a) Income upto Rs.2.50 lakhs: Nil
b) Income between Rs.2.50-5 lakhs : 5% of the income exceeding Rs.2.50 lakhs
c) Income between Rs.5-10 lakhs : Rs.12,500 + 20% of the income exceeding Rs.5 lakhs
d) Income above 10 lakhs : Rs.1,12,500 + 30% of the income exceeding Rs.10 lakhs
(Note: There is also a surcharge of 10% for income between Rs.50 lakhs to 1 crore and 15% if the income exceeds Rs.1 crore)
In other words, there is no tax "exemption" on the income up to Rs.5 lakhs.
Instead, a tax "rebate" of Rs.12,500 (u/s 87A) is allowed for persons whose 'taxable income' for the year is Rs.5 lakhs or less. So, if your taxable income is less than Rs.5 lakhs, the entire tax liability, as assessed based on the aforesaid slab rates, will be waived off.
(By the way: Earlier, the section 87A granted a rebate of Rs.2500 for taxable income up to Rs.3.50 lakhs)
2. Increase in Standard Deduction
Last year the Govt. had reintroduced the concept of Standard Deduction after many years. The amount of Standard Deduction allowed was Rs.40,000.
Of course, the benefit of the same was not much because it merely sought to replace the tax deductions permitted under Medical Reibursement (max Rs.15,000) and Travelling Allowance (max Rs.19,200)... addding up to Rs.34,200.
In the interim budget, this Standard Deduction has been hiked from Rs.40,000 to Rs.50,000. This benefit is available to all tax payers.
3. Increase in TDS limit for interest and rental income
Income from Bank Fixed Deposits, Post Office Schemes, etc. is liable for Tax Deduction at Source (TDS), if the interest amount exceeds Rs.10,000.
Given that the limit was too low, it was causing unnecessary hardships to those who were not liable to pay tax. So, they had to either submit Form 15G or claim the TDS deducted as refund in their Income Tax Returns.
To ease this compliance burden, henceforth the TDS will be deducted only if the interest income exceeds Rs.40,000.
Very Important: This does not result in any reduction in overall tax liability. That remains the same. Only change is that the bank or post office will not deduct tax, but you have to pay the same.
Likewise, the TDS limit on rental income has been increased from Rs.1.80 lakhs to Rs.2.40 lakhs.
4. No notional rent on 2nd self-occupied property
Suppose you have two properties and both are occupied by you and your family or lying vacant.
Then, as per present tax laws, you can declare one of them as self-occupied. And the 2nd property is considered for taxation purposes, wherein the notional rent that you would otherwise earned if rented out, is treated as your income and taxed accordingly.
This was creating undue tax burden for many who had to maintain two houses for self / family use on account of their job, children’s education, care of parents etc.
From FY 2019-20 this problem will vanish. Now, you will be able to maintain two houses as self-occupied and not be taxed on the notional rent on one them. In other words, henceforth two self-occupied properties will be exempt from tax.
5. Sec 54 capital gains exemption now for two houses
As per Sec 54, presently you can save tax on long term capital gains from sale of a residential property if you invest the gains in another residential property. The property has to be purchased within a specified time frame and within India.
This tax benefit is now being extended to investment of capital gains in "two" residential properties; subject to the following conditions:
- This benefit can be availed once in a lifetime, and
- The amount of capital gains does not exceed Rs 2 crore.
This is a great relief for many who, for various reasons, wish to invest into two properties.
Meanwhile, the present Govt. took the opportunity to make some key changes in the tax laws.
Listed below are some the salient aspects of the same.
1. Tax rebate on income up to Rs 5 lakh
There is no change in the tax slab rates. Accordingly, for an individual of age less than 60, the tax rates continue to be the same as under:
a) Income upto Rs.2.50 lakhs: Nil
b) Income between Rs.2.50-5 lakhs : 5% of the income exceeding Rs.2.50 lakhs
c) Income between Rs.5-10 lakhs : Rs.12,500 + 20% of the income exceeding Rs.5 lakhs
d) Income above 10 lakhs : Rs.1,12,500 + 30% of the income exceeding Rs.10 lakhs
(Note: There is also a surcharge of 10% for income between Rs.50 lakhs to 1 crore and 15% if the income exceeds Rs.1 crore)
In other words, there is no tax "exemption" on the income up to Rs.5 lakhs.
Instead, a tax "rebate" of Rs.12,500 (u/s 87A) is allowed for persons whose 'taxable income' for the year is Rs.5 lakhs or less. So, if your taxable income is less than Rs.5 lakhs, the entire tax liability, as assessed based on the aforesaid slab rates, will be waived off.
(By the way: Earlier, the section 87A granted a rebate of Rs.2500 for taxable income up to Rs.3.50 lakhs)
2. Increase in Standard Deduction
Last year the Govt. had reintroduced the concept of Standard Deduction after many years. The amount of Standard Deduction allowed was Rs.40,000.
Of course, the benefit of the same was not much because it merely sought to replace the tax deductions permitted under Medical Reibursement (max Rs.15,000) and Travelling Allowance (max Rs.19,200)... addding up to Rs.34,200.
In the interim budget, this Standard Deduction has been hiked from Rs.40,000 to Rs.50,000. This benefit is available to all tax payers.
 |
| Tax benefits in Budget 2019 leave extra cash in your wallet. |
3. Increase in TDS limit for interest and rental income
Income from Bank Fixed Deposits, Post Office Schemes, etc. is liable for Tax Deduction at Source (TDS), if the interest amount exceeds Rs.10,000.
Given that the limit was too low, it was causing unnecessary hardships to those who were not liable to pay tax. So, they had to either submit Form 15G or claim the TDS deducted as refund in their Income Tax Returns.
To ease this compliance burden, henceforth the TDS will be deducted only if the interest income exceeds Rs.40,000.
Very Important: This does not result in any reduction in overall tax liability. That remains the same. Only change is that the bank or post office will not deduct tax, but you have to pay the same.
Likewise, the TDS limit on rental income has been increased from Rs.1.80 lakhs to Rs.2.40 lakhs.
4. No notional rent on 2nd self-occupied property
Suppose you have two properties and both are occupied by you and your family or lying vacant.
Then, as per present tax laws, you can declare one of them as self-occupied. And the 2nd property is considered for taxation purposes, wherein the notional rent that you would otherwise earned if rented out, is treated as your income and taxed accordingly.
This was creating undue tax burden for many who had to maintain two houses for self / family use on account of their job, children’s education, care of parents etc.
From FY 2019-20 this problem will vanish. Now, you will be able to maintain two houses as self-occupied and not be taxed on the notional rent on one them. In other words, henceforth two self-occupied properties will be exempt from tax.
5. Sec 54 capital gains exemption now for two houses
As per Sec 54, presently you can save tax on long term capital gains from sale of a residential property if you invest the gains in another residential property. The property has to be purchased within a specified time frame and within India.
This tax benefit is now being extended to investment of capital gains in "two" residential properties; subject to the following conditions:
- This benefit can be availed once in a lifetime, and
- The amount of capital gains does not exceed Rs 2 crore.
This is a great relief for many who, for various reasons, wish to invest into two properties.