Budget(s) 2019

Interim budget 2019 was presented in Feb'19 and final budget post election was presented on 5 July 2019 by India's first woman Finance Minister and Tamil nadu's very own Smt.Nirmala Sitharaman. This blog attempts to capture the budget updates relevant to personal taxation.

Key Highlights from both budgets
Some of the key highlights on personal taxation for FY2019-20/AY2020-21 include:

1. PAN & Aadhar are now interchangeable, allowing one to use Aadhar to file her/his income tax returns.
2. Cash withdrawal in excess of Rs.1 crore will attract TDS of 2% (Tax Deduction at Source)
3. ONE NATION ONE CARD - based on RuPAY to be introduced / used across bus travel, tolls, parking & retail across the country.

Tax on Total Income

1. For assessees with income in the range of Rs.2.5L to Rs.5L p.a, complete tax rebate is offered u/s 87A. This means zero tax for income upto Rs.5L. However, assessee must file Income Tax returns if income exceeds Rs.2.5L to claim this rebate. Note that this rebate is applicable only to RESIDENT individuals.
2. Standard deduction on salary is increased from Rs.40k to Rs.50k
3. Tax free gratuity limit increased by Rs.10L to Rs.30L and withdrawal limit increased by Rs.10L to Rs.20L
4. For assessees earning income between Rs.2cr & Rs.5cr, surcharge on tax is increased to 25%
5. For assessees earning income above Rs.5cr, surcharge on tax is increased to 37%

TDS thresholds

1. TDS threshold on interest increased from Rs.10k to Rs.40k - which means your bank/post office would now deduct TDS only if your interest exceeds Rs.40k
2. TDS threshold on rent increased from Rs.1.8L to Rs.2.4L p.a - which means your tenant will have to deduct TDS on the rent s/he pays you only if the annual rent exceeds Rs.2.4L

Housing & Home Loans
A number of changes have been put forth in the housing category, they include:

1. Notional rent on second self-occupied property abolished/exempt - this is an important change as second property held by an individual and not let-out was deemed as let out, a notional rent imposed and tax was charged on the same prior to FY2019-20.
2. Upto two houses can now be considered as self-occupied. However, if you own more than one house, you must file ITR-2.
3. U/s 24b - for self-occupied property, maximum deduction on home loan interest allowed is Rs.2L  and for let-out property, entire interest paid is allowed as deduction.
4. U/s 80EE - first time home buyers with property value less than Rs.50L and loan amount less than Rs.35L can claim additional home loan interest deduction upto Rs.50k.
5. U/s 80EEA - interest deduction of Rs.1.5L over and above 24(b) allowed on self-occupied property provided home cost is less than Rs.45L. Also, assessee should not have availed 80EE and loan must be sanctioned between 01.Apr.19 to 31.Mar.20.
6. Under construction property for more than 5 years can claim only a maximum of Rs.30k as interest deduction u/s 24(b)
7. Pre-construction interest can be claimed as before for up to 5 years from the year of construction completion.

Capital Gains exemption on Home Sale

• Prior to FY2019-20, capital gains from sale of a residential property can be re-invested only in 1 house to claim tax exemption u/s 54. This section is now amended to allow re-investment in TWO properties if sale proceeds is less than Rs.2 Crores. However, this benefit can be availed by an assessee only once in a lifetime. Nevertheless this is a big relief to large/prime home owners.

80C

• Investment in CPSE ETFs are now allowed to be claimed u/s 80C upto a maximum of Rs.1.5L p.a

Summary
As always, tax laws and their applicability keeps changing every year. So, ensure all documentation is obtained to aid accurate filing of your income tax returns. Also preserve the relevant documents for up to 7 years after filing so as to readily respond to any compliance notice from the department. Happy tax filing!