Tax Management March 2019

Pellentesque erat arcu

In the Budget 2019, Basic exemption limit is kept unchanged for individuals and HUFs at Rs2.5 lakh, Rs3 lakh for senior citizens and Rs5 lakh for very senior citizens. Slab rates also remain the same. There are a few key changes: 

1) Current law: If the total income of an individual resident does not exceed Rs. 3,50,000, there is deduction of Rs. 2500 or 100% of Income tax whichever is less. 

Changes: The rebate under Section 87A of the Income tax Act, 1961, has been raised to Rs12,500. It is only applicable for those with net taxable income of up to Rs.5 lakh. A rebate is the amount of tax the taxpayer is not liable to pay. So in the next fiscal year, if an assessee has a net taxable income of up to Rs.5 lakh, he/she is allowed to claim the entire tax payable as tax rebate. For instance, if an assessee has a gross income of Rs.6.5 lakh for the financial year 2019-20, and makes an investment of Rs.1.5 lakh under Section 80C, his/her net taxable income comes down toRs.5 lakh, on which his/her tax liability will be Rs.12,500 (5% ofRs.2.5 lakh), excluding cess (income up to Rs.2.5 lakh is exempt from tax). Against this, a rebate of Rs.12,500 will be available and, thereby, the net tax will come down to zero.

Applicable date: 01.04.2020

2) Current law: Under Income chargeable under the head salaries, there is standard deduction of Rs. 40,000 in lieu of transport allowance and medical reimbursement of Rs.15,000 or the amount of salary, whichever is less.

Changes: Standard deduction increased from Rs. 40,000 to Rs. 50000. A standard deduction reduces your taxable income, thereby reducing your tax liability. Standard deduction was re-introduced last year. This increase of Rs. 10,000 in standard deduction will result in tax savings of Rs. 3,000 for individuals in the 30% tax bracket (excluding surcharge and cess).The benefit of enhanced tax exemption of up to Rs. 5 lakh has been provided in the form of a rebate and will only benefit resident taxpayers having total income up to Rs. 5 lakh. Other taxpayers in higher income slabs will have to settle with an  increase of Rs. 10,000 in standard deduction. 

Applicable date:01.04.2020 

3) Current law: If there is more than one self-occupied property, the annual value of one house property is taken to be Nil and the other property is deemed to be let out.

Changes: In the Budget, the finance minister proposed exemption from notional rent in respect of two self-occupied house properties. Currently, if a person has two properties which are self-occupied, deemed rent from one of the house properties is taxable.

Applicable date:01.04.2020

4) Current law: Reinvestment of long term Capital gain out of sale of one house can be done only in a single house in India

Changes: The finance minister also proposed to extend the one-time benefit of capital gains exemption on reinvestment in two house properties. This benefit will apply where capital gains are Rs.2 crore or less. Currently, the exemption is applicable only against one house property. The government has particularly focussed on providing tax sops in the real estate sector covering benefit both under the head house property and capital gains. It has also realised the growing needs of urban families wherein people moving to different cities for jobs or business need to support their families in the home city.

Applicable date:01.04.2020.

5) Current law: If any income is credited to an Individual or HUF by way of Interest other than interest on securities, tax is to be deducted @ 10%.However, no tax is to be deducted if: Income does not exceed Rs. 10,000 where interest is paid by any banking company, co-operative society engaged in banking business, post office. If Income does not exceed Rs. 5,000 in any other case.

Changes: The threshold on TDS on interest from bank or post office deposits has been increased to Rs. 40,000, from current limit of Rs.10,000. This means interest income on bank/post office deposits up to Rs.40,000 will not be subject to TDS

Applicable date:01.04.2019

Apart from the above,  anew technology platform is being developed to process income-tax returns within 24 hours and issue refunds. Limit to deduct TDS on Rent under Section 194I has been increased from Rs 1,80,000 to Rs. 2,40,000

(Shubham is a Chartered Accountant and MBA (Finance). She is on the forum of “Economic Times” experts on Taxation.   She specialises in Individual Taxation and Taxation of Freelancers & Small businesses. She can be reached on for answering your tax related questions.)

Please mention “My Powai-Query” in the subject line of the email