Personal taxation experienced many changes in 2019. Salaried individuals and pensioners benefited and saved more on income tax while the cream layer of the rich took a major hit. Let’s take a look at the top changes in 2019 on the personal taxation front.
No tax liability if your taxable income does not exceed Rs 5 lakh
This announcement was huge when it was made in the Interim Budget in February 2019 as it affects a large part of the new working class and first-time taxpayers. The announcement said that if your net taxable income does not exceed Rs 5 lakh, then there will be no tax liability because you can claim tax relief under section 87A. The relief had been hiked from Rs 2,500 to Rs 12,500. Taxpayers still had to file income tax return to avail this tax benefit.
Withdrawal from NPS becomes tax-free
This was really good news for citizens that invest in the National Pension Scheme (NPS) because the lump-sum amount that was withdrawn at the time of maturity became entirely tax-free. Previously, only 40% of the lump-sum amount of exempt from tax. As per NPS, individuals can withdraw a lump-sum amount up to 60% only, the remaining 40% is utilized to buy annuity.
PAN – Aadhaar interchangeability
In her maiden budget, FM Nirmala Sitharaman stated that Aadhaar number can be used in place of PAN wherever quoting PAN is mandatory. Post this announcement, the Central Board of Direct Taxes (CBDT) has amended over 100 forms. Now, taxpayers can use their Aadhaar number in forms like Form 15G, Form 15H and others.
TDS threshold hiked to Rs 40,000
Lower bracket taxpayers like housewives were given some relief when the tax deducted at source (TDS) limit was raised from Rs 10,000 to Rs 40,000. Due to this hike, small taxpayers will not be required to submit Form 15G if the total income from interest does not exceed Rs 40,000.
Investing capital gains from one house into two houses
Long terms capital gains accrued from the sale of one house are now allowed into two houses, with some conditions. This benefit can be availed only in the case where the capital gains from selling a house do not exceed Rs 2 crore and an individual can claim this benefit only once in a lifetime.
Hike in standard deduction to Rs 50,000
Standard deduction was raised to Rs 50,000 giving the salaried individuals another sigh of relief. Union Budget 2018 saw the introduction of standard deduction of Rs 40,000 instead of medical reimbursement and conveyance allowance. This deduction can be availed by pensioners if the pension amount is taxable under the head the salary.
TDS on withdrawal of cash
The government has been pushing for digitization and hence to discourage cash transactions, TDS at the rate of 2% has been imposed on cash withdrawals from banks, post office or a cooperative account from a single account if the withdrawal amount is above Rs 1 crore in one year.
Additional tax-benefit on buying affordable house
Furthermore, a tax benefit of Rs 1.5 lakh on the interest paid towards a housing loan was announced under section 80EEA of the Income Tax Act, 1961 with some conditions:
- The housing loan must be taken between April 2019 – March 2020.
- The house property should be evaluated at not more than Rs 45 lakh.
- The taxpayer cannot own any house at the time the loan was sanctioned.
This additional benefit is given on top of the tax benefit of Rs 2 lakh which can be claimed on the interest paid under section 24, bringing the total tax exemption up to Rs 3.5 lakh for FY 2019-20.
Mandatory ITR filing for some cases
Budget 2019 has made ITR filing mandatory for some stipulated cases. These are:
- If expenditure incurred on foreign travel is above Rs 2 lakh in a financial year
- If the taxpayer incurs an electricity bill of Rs 1 lakh or above in a year
- Claiming capital gains tax exemption on investment in house etc.
- Amount deposited in current account held with bank or co-operative bank exceeds Rs 1 crore in a financial year
Previously, ITR filing was mandatory if an individual’s total income was above the basic exemption level.
Higher surcharge for super rich
Budget 2019 also levied an additional surcharge of 25% on individuals earning between Rs 2 -5 crores and a surcharge of 37% on individuals earning more than Rs 5 crore. This surcharge will be applicable on income other than from capital gains. If the earning from capital gains is through the stock market, then the previous surcharge of 10% or 15% will apply. For all other sources of income like salary, income from interest or rent, the new charges will be applicable as per the income bracket.
Parking and other charges come under TDS range
Other payments like parking fees, club membership charges and so on while buying a house will also come under the TDS range. From September 1, 2019, such payments need to be disclosed to determine the TDS to be deducted. Formerly, only payments with regards to property would fall under TDS and other charges were not included.
TDS on payments made to contractors
When an individual makes a payment to a contractor, professional or commission above Rs 50 lakh in one financial year, they are mandated to deduct TDS at 5% at source. This deduction should be done at the time of credit or payment of the sum.
Almost all of these changes in income tax rules were really welcomed by the community. Here’s hoping that the budget in 2020 will bring some more ease and relief to the taxpayer community in India and increase our revenue base from tax.