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BUDGET PROPOSALS FOR FY 2019-20
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BUDGET 2019-20 AND PERSONAL FINANCE
PARTS OF FINANCE MINISTER'S BUDGET SPEECH DATED 05.07.2019 AFFECTING PERSONAL FINANCE
UPDATE ON 05.07.2019 : New Finance Minister Ms Nirmala Sitharaman presented fresh budget proposals to the parliament on 05.07.2019 . However there is no change in personal income tax slabs , rates and rebates except for the following :
1. Additional income tax deduction of 1.5 lakh on the interest paid on loans taken to purchase electric vehicles.
2. Additional deduction of up to 1,50,000/- for interest paid on loans borrowed up to 31st March, 2020 for purchase of an affordable
house valued up to 45 lakh. Therefore, a person purchasing an affordable house will now get an enhanced interest deduction up to 3.5 lakh.
3. Surcharge enhanced for individuals having taxable income from 2 crore to 5 crore and for persons with income of 5 crore and above so that effective tax rates for these two categories will increase by around 3 % and 7 % respectively.
4 . The business establishments with annual turnover more than 50 crore shall offer such low cost digital modes of payment to their customers and no charges or Merchant Discount Rate shall be imposed on customers as well as merchants. RBI and Banks will absorb these costs from the savings that will accrue to them on account of handling less cash as people move .
5. TDS of 2% on cash withdrawal exceeding 1 crore in a year from a bank account . Some business models, where large cash withdrawal is a necessity, are proposed to be exempted .
2. Additional deduction of up to 1,50,000/- for interest paid on loans borrowed up to 31st March, 2020 for purchase of an affordable
house valued up to 45 lakh. Therefore, a person purchasing an affordable house will now get an enhanced interest deduction up to 3.5 lakh.
3. Surcharge enhanced for individuals having taxable income from 2 crore to 5 crore and for persons with income of 5 crore and above so that effective tax rates for these two categories will increase by around 3 % and 7 % respectively.
4 . The business establishments with annual turnover more than 50 crore shall offer such low cost digital modes of payment to their customers and no charges or Merchant Discount Rate shall be imposed on customers as well as merchants. RBI and Banks will absorb these costs from the savings that will accrue to them on account of handling less cash as people move .
5. TDS of 2% on cash withdrawal exceeding 1 crore in a year from a bank account . Some business models, where large cash withdrawal is a necessity, are proposed to be exempted .
Apart from measures involving financial benefits / expenditures , FM announced following measures which will ease filing of IT returns and its assessments :
1. PAN and Aadhaar interchangeable and allow those who do not have PAN to file Income Tax returns by simply quoting their Aadhaar number and also use it wherever they are required to quote PAN
2. Pre-filled tax returns will be made available to taxpayers which will contain details of salary income, capital gains from securities, bank interests, and dividends etc. and tax deductions. Information regarding these incomes will be collected from the concerned sources such as Banks, Stock exchanges, mutual funds, EPFO, State Registration Departments etc. This will not only significantly reduce the time taken to file a tax return, but will also ensure accuracy of reporting of income and taxes
3. The existing system of scrutiny assessments in the Income-tax Department involves a high level of personal interaction between the taxpayer and the Department, which leads to certain undesirable practices on the part of tax officials. To eliminate such instances, and to give shape to the vision of the Hon’ble Prime Minister, a scheme of faceless assessment in electronic mode involving no human interface is being launched this year in a phased manner. To start with, such e- assessments shall be carried out in cases requiring verification of certain specified transactions or discrepancies.
4. Cases selected for scrutiny shall be allocated to assessment units in a random manner and notices shall be issued electronically by a Central Cell, without disclosing the name, designation or location of the Assessing Officer. The Central Cell shall be the single point of contact between the taxpayer and the Department. This new scheme of assessment will represent a paradigm shift in the functioning of the Income Tax Department
5. It is 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 or more than Rs. 1 lakh on electricity consumption in a year or who fulfils the prescribed conditions, in order to ensure that persons who enter into high value transactions also furnish return of income. It is also proposed to provide that a person whose income becomes lower than maximum amount not chargeable to tax due to claim of rollover benefit of capital gains shall also be required to furnish the return.
1. PAN and Aadhaar interchangeable and allow those who do not have PAN to file Income Tax returns by simply quoting their Aadhaar number and also use it wherever they are required to quote PAN
2. Pre-filled tax returns will be made available to taxpayers which will contain details of salary income, capital gains from securities, bank interests, and dividends etc. and tax deductions. Information regarding these incomes will be collected from the concerned sources such as Banks, Stock exchanges, mutual funds, EPFO, State Registration Departments etc. This will not only significantly reduce the time taken to file a tax return, but will also ensure accuracy of reporting of income and taxes
3. The existing system of scrutiny assessments in the Income-tax Department involves a high level of personal interaction between the taxpayer and the Department, which leads to certain undesirable practices on the part of tax officials. To eliminate such instances, and to give shape to the vision of the Hon’ble Prime Minister, a scheme of faceless assessment in electronic mode involving no human interface is being launched this year in a phased manner. To start with, such e- assessments shall be carried out in cases requiring verification of certain specified transactions or discrepancies.
4. Cases selected for scrutiny shall be allocated to assessment units in a random manner and notices shall be issued electronically by a Central Cell, without disclosing the name, designation or location of the Assessing Officer. The Central Cell shall be the single point of contact between the taxpayer and the Department. This new scheme of assessment will represent a paradigm shift in the functioning of the Income Tax Department
5. It is 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 or more than Rs. 1 lakh on electricity consumption in a year or who fulfils the prescribed conditions, in order to ensure that persons who enter into high value transactions also furnish return of income. It is also proposed to provide that a person whose income becomes lower than maximum amount not chargeable to tax due to claim of rollover benefit of capital gains shall also be required to furnish the return.
Other Notable proposals Made by FM
1. Interchangeability of PAN and Aadhaar: It is proposed to provide interchangeability of PAN and Aadhaar to enable a person who does not have PAN but has Aadhaar to use Aadhaar in place of PAN under the Act. The Income Tax Department shall allot PAN to such person on the basis of Aadhaar after obtaining demographic data from the Unique Identification Authority of India (UIDAI). It is also proposed to provide that a person who has already linked his Aadhaar with his PAN may at his option use Aadhaar in place of
PAN under the Act.
2. Consequences of not linking Aadhaar with PAN: Presently, the Act provides for making PAN invalid if it is not linked with Aadhaar within a notified date. In order to protect past transactions carried out through such PAN, it is proposed to provide that if a person fails to intimate the Aadhaar number, the PAN allotted to such person shall be made inoperative in the prescribed manner after the date notified for the said linking.
3. Widening the scope of SFT: In order to obtain more information to enable pre-filling of returns of income, it is proposed to widen the scope of furnishing of statement of financial transactions (SFT) by mandating furnishing of statement by the prescribed persons other than those who are currently furnishing the same. It is also proposed to remove the current threshold of Rs. 50,000 for
application of the provisions requiring furnishing of information, in order to ensure pre-filling of smaller amounts of transactions also. Further, for ensuring the accuracy of the information furnished, a suitable amendment to the relevant penalty provisions is also
proposed.
TO READ COMPLETE SPEECH , CLICK HERE
For the changes made by budget proposals by Mr Piyush Goyal on 01.02.2019 , Read Below
PAN under the Act.
2. Consequences of not linking Aadhaar with PAN: Presently, the Act provides for making PAN invalid if it is not linked with Aadhaar within a notified date. In order to protect past transactions carried out through such PAN, it is proposed to provide that if a person fails to intimate the Aadhaar number, the PAN allotted to such person shall be made inoperative in the prescribed manner after the date notified for the said linking.
3. Widening the scope of SFT: In order to obtain more information to enable pre-filling of returns of income, it is proposed to widen the scope of furnishing of statement of financial transactions (SFT) by mandating furnishing of statement by the prescribed persons other than those who are currently furnishing the same. It is also proposed to remove the current threshold of Rs. 50,000 for
application of the provisions requiring furnishing of information, in order to ensure pre-filling of smaller amounts of transactions also. Further, for ensuring the accuracy of the information furnished, a suitable amendment to the relevant penalty provisions is also
proposed.
TO READ COMPLETE SPEECH , CLICK HERE
For the changes made by budget proposals by Mr Piyush Goyal on 01.02.2019 , Read Below
BUDGET PROPOSALS FOR FY 2019-20 AND YOUR PERSONAL FINANCE
Mr Piyush Goyal , Finance Minister presented his budget proposals for the financial year 2019-20 on 1st Feb , 2019 . If implemented , following aspects of your personal finance :
1 . No change in Income tax slabs .
2. The existing rebate of Rs 2500 under section 87 A to the individuals earning up to Rs 5.00 lakhs is increased to Rs 12,500
3. Effectively there would be no tax burden up to income of Rs 5.00 lakhs
4. Standard deduction is increased to Rs 50,000 from Rs 40,000 on salaries / pensions
5. TDS threshold is increased to Rs 40,000 from Rs 10,000 for interest on Bank / post office deposits
6. Second self-occupied house is exempted from tax and there will be no notional rent .
7. 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 ` 2 crore. This benefit can be availed once in a life time.
1 . No change in Income tax slabs .
2. The existing rebate of Rs 2500 under section 87 A to the individuals earning up to Rs 5.00 lakhs is increased to Rs 12,500
3. Effectively there would be no tax burden up to income of Rs 5.00 lakhs
4. Standard deduction is increased to Rs 50,000 from Rs 40,000 on salaries / pensions
5. TDS threshold is increased to Rs 40,000 from Rs 10,000 for interest on Bank / post office deposits
6. Second self-occupied house is exempted from tax and there will be no notional rent .
7. 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 ` 2 crore. This benefit can be availed once in a life time.
BUDGET PROPOSALS FOR FY 2019-20 AND YOUR PERSONAL FINANCE
Interim Finance Minister announced in his budget speech that " Individual taxpayers having taxable annual income up to ` 5 lakhs will get full tax rebate and therefore will not be required to pay any income tax. "
The rebate is being given by way of proposal to amend the section 87A of Income Tax Act .
Presently Section 87A of Income Tax Act says " An assessee, being an individual resident in India, whose total income does not exceed 19[three hundred fifty thousand] rupees, shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to hundred per cent of such income-tax or an amount of 20[two thousand and five hundred] rupees, whichever is less. "
In order to give full rebate , Section is to be amended to cover income of Rs 5.00 lakhs with a maximum rebate of Rs 12,500 .
Once the bill is passed , all persons having taxable income up to Rs 5.00 lakhs will be exempted from income tax in the financial year 2019-20 . However others who have taxable income of more than Rs 5.00 lakhs will have to pay tax as hitherto without any benefit from the exemption
The rebate is being given by way of proposal to amend the section 87A of Income Tax Act .
Presently Section 87A of Income Tax Act says " An assessee, being an individual resident in India, whose total income does not exceed 19[three hundred fifty thousand] rupees, shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income with which he is chargeable for any assessment year, of an amount equal to hundred per cent of such income-tax or an amount of 20[two thousand and five hundred] rupees, whichever is less. "
In order to give full rebate , Section is to be amended to cover income of Rs 5.00 lakhs with a maximum rebate of Rs 12,500 .
Once the bill is passed , all persons having taxable income up to Rs 5.00 lakhs will be exempted from income tax in the financial year 2019-20 . However others who have taxable income of more than Rs 5.00 lakhs will have to pay tax as hitherto without any benefit from the exemption
ACTUAL EFFECT OF THE NEW PROPOSAL ON SALARIED , MIDDLE CLASS PERSONS AND PENSIONERS
1 . There is no change in tax slabs and tax rates proposed for Fy 2019-20
2. However the persons having income up to Rs 5.00 Lakhs need not pay income tax by claiming discount under 87A up to Rs 12,500 . For a salaried person below 60 years of age , the maximum savings will be Rs 13,000 ( inclusive of cess ) and a senior citizen / pensioner will be Rs 10,400 ( inclusive of cess ) compared to the year fy 2018-19 .
3. Persons having taxable income of more than Rs 5.00 lakhs will have no tangible benefit except reduction of Rs 2,080 by way of increase in standard deduction from Rs 40,000 to Rs 50,000 and savings for persons haviing more than Rs 10 lakhs is Rs 3,120 .
3. However to reduce the tax burden and to come under tax exemption category , one can use various rebates available and endaevour to save on taxes .
2. However the persons having income up to Rs 5.00 Lakhs need not pay income tax by claiming discount under 87A up to Rs 12,500 . For a salaried person below 60 years of age , the maximum savings will be Rs 13,000 ( inclusive of cess ) and a senior citizen / pensioner will be Rs 10,400 ( inclusive of cess ) compared to the year fy 2018-19 .
3. Persons having taxable income of more than Rs 5.00 lakhs will have no tangible benefit except reduction of Rs 2,080 by way of increase in standard deduction from Rs 40,000 to Rs 50,000 and savings for persons haviing more than Rs 10 lakhs is Rs 3,120 .
3. However to reduce the tax burden and to come under tax exemption category , one can use various rebates available and endaevour to save on taxes .
REBATES AVAILABLE TO REDUCE TAX LIABILITY
There is no change proposed in tax rebates for the year fy 2019-20 , except change in section 87A already discussed and increase in standard deduction from Rs 40,000 to Rs 50,000 for salraried persons and pensioners . .However following rebates which are already prevalent in year 2018-19 can be used to reduce the taxable income for the financial year 2019-20 :
SENIOR CITIZENS can use following rebates if their taxable income is more than Rs 5.00 lakhs and save tax on another Rs 5.00 lakhs :
SENIOR CITIZENS can use following rebates if their taxable income is more than Rs 5.00 lakhs and save tax on another Rs 5.00 lakhs :
TYPE OF INCOME / INVESTMENT /EXPENSES |
MAXIMUM REBATE ALLOWED IN RS |
INCOME TAX SECTION |
STANDARD DEDUCTION ON PENSION / SALARY |
50,000 |
16 |
INTEREST ON FIXED DEPOSIT FROM BANKS / POST OFFICES |
50,000 |
80 TTB |
INSURANCE PREMIA / PPF / POST OFFICE DEPOSITS / TUITION FEES ETC |
1,50,000 |
80C |
MEDICAL INSURANCE INCLUDING PARENTS |
50,000 + 50,000 |
80D |
INTEREST ON HOUSING LOANS |
2,00,000 |
24 |
Thus Senior Citizens can pay no income tax up to an income of Rs 10.00 lakhs , provided they have eligible income and investments .
Other than Senior Citizens can utilise following tax rebates to reduce the tax liability :
TYPE OF INCOME / INVESTMENT / EXPENSES |
MAXIMUM REBATES ALLOWED IN RS |
INCOME TAX SECTION |
STANDARD DEDUCTION ON SALARY / PENSION |
50,000 |
16 |
INTEREST ON SAVINGS BANK |
10,000 |
80TTA |
INSURANCE PREMIA / TUITION FEES / PPF / TUITION FEES |
1,50,000 |
80C |
MEDICAL INSURANCE FOR SELF AND PARENTS |
25,000 + 50,000 |
80D |
INTEREST ON HOUSING LOANS |
2,00,000 |
24 |
NATIONAL PENSION SCHEME |
50,000 |
80CCD |
So technically a person other than senior citizen can pay no income tax if he utilises the above rebates which will off-set Rs 5,35,000 of his income making total 10,35,000 income non-taxable .
EDITOR'S NOTE :
1. If taxable income crosses even by a rupee above Rs 5.00 lakhs , one will not be eligible for rebate under section 87A and he has to continue tax payment as hitherto .
2. Though one can utilise the rebates quoted above , all may not be able to take adavntage of all the rebates and hence there will be limitations on the utilisation .
3. One can try to use the maximum possible rebates to bring himself / herself to no tax bracket , but it may put strain on their lifestyle and spending capacity .
4. The new government elected in May 2019 may present a fresh budget for the year and hence all calculations here are provisional .
1. If taxable income crosses even by a rupee above Rs 5.00 lakhs , one will not be eligible for rebate under section 87A and he has to continue tax payment as hitherto .
2. Though one can utilise the rebates quoted above , all may not be able to take adavntage of all the rebates and hence there will be limitations on the utilisation .
3. One can try to use the maximum possible rebates to bring himself / herself to no tax bracket , but it may put strain on their lifestyle and spending capacity .
4. The new government elected in May 2019 may present a fresh budget for the year and hence all calculations here are provisional .
HIGHLIGHTS OF BUDGET SPEECH BY MR PIYUSH GOYAL , CLICK HERE
FOR FULL LIST OF TAX REBATES AVAILABLE FOR FY 2018-19 , CLICK HERE
TAX PLANNING FOR FY 2018-19 ( AY 2019-20 )
Comprehensive Article on Income tax changes in Rules, Rates , Slabs , Rebates and Estimation
CLICK HERE TO READ
Comprehensive Article on Income tax changes in Rules, Rates , Slabs , Rebates and Estimation
CLICK HERE TO READ
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