Taxation

Highlights Of Finance Bill 2019

By CA. Parul Gandhi    -   February 1, 2019

Thank You! Our Dearest Taxpayers! for contributing whooping Rs. 12 lakh crore from your incomes towards national development as income tax. Now see whats new in 2019.

Thank You! Our Dearest Taxpayers! for contributing whooping Rs. 12 lakh crore from your incomes towards national development as income tax.

Waited for reliefs in income taxes? Ohhh Well, we expected a larger bite for savings but government is always smart to lure small taxpayers by providing reliefs! 

Lets go one by one to see the impact of this budget on type of taxpayers!

Income Taxes:

Though there has not been much change in tax outflow for a high net worth individuals or businesses but a lot has been granted to small or medium individual taxpayers particularly those earning through salaries, self employed, small business, small traders, pensioners and senior citizens.

1. Tax slab rates and changes:

There is no change in the slab rate of income taxes. Hon’ble Piyush Goyal said that there is no tax if income is upto Rs. 6.5 lakhs, however the exemption is not through a change in rate but via rebate  which is conditional on income to be lower than Rs. 5 lakhs, else normal slab rates would apply. 

Slab rates for individuals (other than senior citizens) remain same as :

  • Income upto Rs 2.5 lakhs: Nil
  • 2.5 lakes to  Rs. 5 lakhs: 5%
  • Rs. 5 lakes to Rs. 10 lakhs: 20%
  • Above Rs. 10 lakhs: 30%

Similarly, for senior citizens and very senior citizens (above 80 years), slab rates are kept same. Similarly, for corporates and Partnership firms, there is no change in tax rate.

  • Partnership firms: Taxable @ 30%
  • Companies: Taxable @ 30%, however if turnover for FY 2016-17 is less than Rs. 250 cr, tax rate would be 25%.

2. Rebate u/s 87A: Earlier individuals whose total income for the year did not exceed R. 5 lakhs (after reducing deductions u.s 87A), rebate was allowed for Rs.2,500 which has now been extended to Rs. 12,500.

Remarks: This is expected to provide tax benefit of  Rs. 18,500 cr to an estimated 3 crore middle class taxpayers comprising self employed, small business, small traders, salary earners, pensioners and senior citizens.

3. Standard deduction for Salaried: For salaried persons, standard Deduction of Rs.40,000 has been raised to Rs.50,000, thereby saving flat tax of Rs. 3,000 (max).

4. Relief for owning one more house: Until now, income from owning one house is exempt from tax. Now this benefit has been extended on purchase of 2nd house as well. So, a new house can be purchased and no deeming of rental income will be applicable.

5. Benefit to purchase 2nd residential house: Investing capital gains from sale of a residential house in one residential house entitled a benefit of exemption from paying capital gain tax on sale of such house. Now, the benefit has been extended to 2nd house as well form 1 April 2020. However, such a benefit will be available only once in lifetime. The benefit will be available for 2nd house only if capital gains is less than Rs. 2 cr.

6. No TDS on interest upto Rs. 40,000: There was always a trade off between Income tax and assesses for the applicability of withholding tax on interest received from banking company since, TDS @10% was applicable on all interest received exceeding Rs. 10,000. Benefit has been giving by raising limit to Rs 40,000. 

7. No TDS on rent payment upto Rs. 2,40,000: With the rising commercial rentals, businesses were facing compliance issue for no reason. Now, to grant a leverage, the applicability of withholding tax @10% on rent expense on property has been raised to Rs 2,40,000 from Rs. 1,80,000.

Illustration: Assuming a person (25 years old) and earns gross income of Rs. 600,000. He has invested into PPF and LIC aggregating to Rs. 150,000. His tax liability for the years is as follows:

Particulars

Tax for FY 2018-19

Tax for FY 2019-20

Gross Total Income (A)

6,50,000

7,00,000

Less: Deductions (B)

 

 

         Provident Fund and LIC

1,50,000

1,50,000

Total taxable Income (A) - (B)

5,00,000

5,50,000

Gross Tax Liability (with cess)

12500

25000

Less: Rebate u/s 87A

12500

0

Net Tax Outflow (including cess)

0

26000

 

GST:

There have been no radical change in GST except cerain clarifications and small relief.

  • The Finance Minister says that the Government wants the GST burden on home buyers to be reduced and accordingly the GST Council was moved to appoint a Group of Ministers to examine and make recommendations in this regard at the earliest.
  • Businesses with less than Rs 5 crore annual turnover, comprising over 90% of GST payers, will be allowed to return quarterly returns.

 

Stamp Duty: To be Shared Soon.

 

Regards,

TheTaxTellers Team

Disclaimer: All the above updates are based on preliminary analysis of Finance Ministry's speech and Bill 2019. We will be coming out with detailed updates applicable after deliberation and analysis.

 

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