Taxation Impact – Union Budjet 2019-20

The important aspect of this interim budget is that it has tried to touch almost every segment of the economy. This article is focusing on the key highlights of the Budget 2019 in taxation aspects, the biggest relief has been provided to the salaried individuals by the increase in the rebate limit from Rs. 2.5 lakhs to Rs. 5 lakhs turned out to be the show-stopper. The ultimate benefit will rise to more than Rs. 9 Lakhs considering the fact that other available deduction in terms of investments, medi-claim, interest of loan taken for higher education etc, if any, have been left untouched. The budget has proposed tax advantages for the middle class and sops for farmers and millions of employees by enhancing tax benefits in the unorganized sector. The important highlights are briefly discussed below:

INCOME TAX PROCEEDINGS

  • Within 2 years, Tax assessment will be done electronically: Government is planning to have a complete online integration in to income tax proceedings. This will result in lesser personal interference from the assessee by meeting the Assessing officer. The mode they are planning to implement is complete change over from manual to computerized. The discussions, documentations and meetings with Income Tax Officers will meet the next level.
  • IT returns processing in just 24 hour: IT returns processing and refund will be issued with in a shot span of 24 hours.

INCOME TAX BENEFITS

  • Full Tax rebate upto 5 lakh annual income after all deductions: This is a happy news for small income groups. They can avail a rebate of Rs. 12500 if their income is less than 5 lakh. However, the moment the total income exceeds Rs. 5 lakhs, tax provisions will start taking effect @ 5% from Rs. 2.5 Lakhs- Rs. 5 Lakhs and @ 20% from Rs. 5 Lakhs - Rs. 10 Lakhs. In consequence to the enhancement of the exemption limit, there will be possible decline in the government revenue. Secondly, the recommendation has been made to the GST Council to provide the relief to the small traders.
  • Standard deduction has increase from 40000 to 50000: This move will bring more tax savings for the salaried class. The benefit of standard deduction from salary was introduced in Budget 2018. The deduction of Rs 40,000 was introduced in lieu of medical reimbursement and transport allowance. The latter two were common tax-exempt components of a person's salary structure till FY 2017-18.
  • Notional Rent not applicable on second self-occupied house: Since most people don’t have housing loans running on their self-occupied second house, this will benefit them.
  • Notional Rent not applicable for 2 years after completion of the House/Building: This provision is applicable to real estate developers where the house/ building is held in stock. In the present situation notional rent is not applicable only for the period of 1 year. It should be noted that as per the current provisions if it is rented out in that year, it will be taxable, this will continue to remain in applicability.
  • Benefit u/s 80IB has increased l to one more year i.e. 2020

INCOME TAX TDS

  • Ceiling Limit of TDS u/s 194A has increased from Rs.10,000 to Rs. 40,000: Currently the interest received from bank is subject to TDS at the rate of 10% if the amounts exceeds Rs. 10000. Finance Minister Sh Piyush Goyal has proposed in Budget 2019 to increase the threshold limit for TDS on Interest u/s 194A from Rs. 10,000 to 40,000 in respect of interest payments by banks/ post offices on term/ fixed/ recurring deposits from FY 2019-20/ Ay 2020-21. Accordingly, the words “ten thousand” appearing in Section 194A(3)(i) of the Income-tax Act, 1961 shall be substituted with the words “forty thousand” from FY 2019-20/ Ay 2020-21. This will benefit small depositors, housewives, senior citizens, pensioners, etc. who are dependent on interest income from smalls savings deposited with banks/ post offices.
  • Ceiling Limit of TDS u/s 194I has increased from Rs.1,80,000 to Rs. 2,40,000: In section 194-I of the Income-tax Act, in the first proviso, for the words “one hundred and eighty thousand rupees”, the words “two hundred and forty thousand rupees” shall be substituted.

INCOME TAX CAPITAL GAIN – BENEFITS ENHANCED

  • Section 54 of the Income Tax Act stipulates capital gains from residential real estate are exempt if used for buying another house. However, this is the case only when one house is bought, posing a problem to people who sold an ancestral home and split the proceeds among family members. To mitigate this problem, the interim budget proposed a two-way splitting or purchase of two houses. But this will be allowed only once in a lifetime and only in cases where the sale proceeds are below Rs 2 crore.

GST AND CUSTOMS DUTY

  • Minimum 14% revenue of GST to states by Central Govt
  • Custom duty has abolished from 36 Capital Goods: In the delivery of union budget Finance Minister Piyush Goyal said “Our government has abolished duties on 36 capital goods. A revised system of importing duty free capital goods and inputs for manufacture and export has been introduced, along with introduction of single point of approval under section 65 of the Customs Act,”
  • Recommendations to GST council for reducing GST rates for home l buyers
  • Businesses with less than Rs. 5 crore annual turnover, comprising of 90% of tax payers will be allowed to file GST returns quarterly. In the present scenario registered persons are required to file monthly / quarterly return according to the turnover limit of 1.5 crores. This will give big advantage In compliance area.
  • Finally, the recommendation has been made to the GST Council to provide the relief to the small traders. And the initiative to create the transparency in assessment of tax returns electronically has been proposed and is expected to be effective within two years.

MSME UNITS WHICH ARE GST REGISTERED – BENEFIT OF INTEREST SUBVENTION

  • 2% Interest relief for MSME GST Registered Person for loan up to Rs 1.00 crore: 2% Interest relief for MSME GST Registered Person for loan up to Rs 1.00 crore. "The government has taken many steps to support the MSME sector that provides jobs to crores of people in the country. We recently announced a facility to avail Rs 1 crore loan within 59 minutes," Finance Minister Piyush Goyal said while presenting the Interim Budget for 2019-20. "All MSME units registered with the Goods and Services Tax (GST) will now have 2 per cent interest subvention for loans up to Rs 1 crore," he said.

Conclusion

The interim budget focused on tax minimization rather than tax imposition in the hands of assessee. Low income groups who are paying less amount of tax are more benefited. However the government taken due care to extend the shadow of tax benefits to all kinds of assessees.

Disclaimer:"The information contained herein is only for informational purpose and should not be considered for any particular instance or individual or entity. We have obtained information from publicly available sources, there can be no guarantee that such information is accurate as of the date it is received or it will continue to be accurate in future. No one should act on such information without obtaining professional advice after thorough examination of particular situation."

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