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BUDGET 2019 HIGHLIGHTS

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On 01.02.2019, the leaving NDA government presented its last budget i.e. interim budget for the financial year 2019-2020 containing various tax benefits, rural benefits, defence benefits etc. This article decodes this budget of 2019 in primarily in tax terms i.e. what various tax benefits are given to tax payers & gives highlight of benefits to other areas as well like agriculture, defence, real estate, SMEs & MSMEs etc.

STANDARD DEDUCTION:

Earlier in 2018 budget the concept of standard deduction was reintroduced to the extent of Rs. 40, 000 on account of medical & travelling allowance. Now, this limit has been extended to Rs. 50, 000 per annum resulting in more tax free income for salaries class & pensioners.

NO NOTIONAL RENTAL INCOME FOR SECOND HOUSE:

Currently S. 23 provided that we can claim exemption only in respect of one self-occupied house but now S. 23 is amended to allow the exemption to the extent of 2 self-occupied houses means NIL annual value in respect of any 2 Self-occupied houses. 

EXEMPTION ON LONG TERM CAPITAL GAIN:

Where the capital gain on sale of house property is upto Rs. 2 Cr., the individuals or HUFs are now exempted from paying any capital tax when the sale proceeds are invested in upto 2 residential house property located in India instead of only one residential house property as earlier provided. This option can be exercised once in a lifetime.

TIME LIMIT FOR CLAIMING DEDUCTION U/S 80-IBA:

2019 Budget extends the time limit of claiming deduction to the extent of 100% of profits & gains derived from the business of developing and Building housing projects, from 31.03.2019 to 31.03.2020.

INCREASED TAX REBATE:

The significant proposal of 2019 budget is that tax rebate u/s 87A has been increased from Rs. 2, 500 to Rs. 12,500 for the assessee having total income upto Rs. 5 L instead of existing Rs. 3.50 L meaning thereby straight rebate of Rs. 12,500 for the assessees having annual income of Rs. 5 L from the beginning of next fiscal year. However, for people earning more than Rs. 5L annually, the old rates will continue to apply. 

This benefit is extended to people earning income Rs. 6.5 L per annum provided they invest Rs. 1.5L in specified investments such as PPF, insurances etc. 

TDS LIMIT U/S 194A:

On post office savings & Bank Deposits the TDS limit has been increased from existing Rs. 10,000 to Rs. 40,000. This relieves the individuals earning interest income upto Rs. 40,000 from filing return.

TDS LIMIT U/S 194 I:

TDS deduction limit on account of rental income (other than individual or HUF not subject to tax audit) has been increased from existing Rs. 1,80,000 to Rs. 2,40,000 per year. However, if the tenant is small taxpayer, then TDS will apply only if the rent payable is more than Rs. 50,000 per month.

EXTENDED PERIOD OF EXEMPTION FROM TAX ON NOTIONAL RENT:

Budget 2019 increased the time period of exemption from existing one year to two years from the levy of tax on notional rent of unsold inventory. This two year period will start from the end of the year in which the project is completed.

FAST RETURN & REFUND PROCESSING:

The income tax department is planning to process return in just 24 hours & processing of refunds simultaneously.

ELECTRONIC ASSESSMENT & VERIFICATION:

The income tax department also planned to conduct all the verifications & Scrutiny assessment of returns electronically within 2 years thereby eliminating face to face procedure between taxpayer & officials.

EXTENDED GRATUITY LIMIT:

The ceiling of payment of tax free gratuity been enhanced from Rs. 10L to Rs. 20L. The gratuity is payable to the employees on superannuation or resignation.

BENEFITS FOR SMEs, MSMEs, & TRADERS:

It is proposed that SMEs with earnings below Rs. 5Cr. may soon file GST returns only once in 3 months. Introduced scheme of sanctioning business loan upto Rs. 1 Cr. in 59 Minutes. GST Registered SME units will get 2% interest rebate on an incremental loan of Rs. 1 Crore. The requirement of sourcing from SMEs by Government enterprises has been increased to 25% with 3% reserved for women-owned SMEs.

GST RECOMMENDATION:

It is recommended to GST Council for reducing tax rates for home buyers.

OTHER AREAS:

Some of the budget highlights related to other areas is as follows:

- Rs. 60,000 allocated to MGNREGA.

- Providing cleaner fuel for rural women.

- Maternity leave of 26 weeks.

- Benefit to 10 Cr. workers in the unorganized sector as part of mega pension yojana.

- Rs. 500 Cr. allotted for pension schemes for individual in other sectors.

- MSP fixed at 50% more than the cost for all the 22 crops.

- Rs. 7500 allocated towards Pradhan Mantri Kisan Samman Nidhi for benefit of small & marginal farmers with a direct income support of Rs. 6000 annually.

- 2% interest subvention under kisan credit card scheme for farmers pursuing animal husbandry & fisheries with addition 3% interest subvention on account of timely payment of loan.

- Defence budget Rs. 3,00,000 Cr. for 2019-2020.

- 1L digital villages in next 5 years.

- Universal applicability of Aadhaar.

- Single window for approval of Indian film makers.

TAX SLAB RATES:

No change is proposed in slab rates for financial year 2019-2020 meaning thereby old tax rates will continue. They are as follows:

1. Tax Rates for an Individuals for the AY 2019-20:

Tax Rates for Individuals
Income Rates of Income Tax
Individual (Age less than 60 Years) Senior Citizen (Age above 60 Years) Super Senior Citizen (Age above 80 Years)
1. Up to Rs. 2,50,000 NIL NIL NIL
2. Rs. 2,50,000 to Rs. 3,00,000 5% NIL NIL
3. Rs. 3,00,000 to Rs. 5,00,000 5% 5% NIL
4. Rs. 5,00,000 to Rs. 10,00,000 20% 20% 20%
5.  Above Rs. 10,00,000 30% 30% 30%

*The above rates are exclusive of surcharge and cess. 

2. Tax Rates for Corporate Assessee for the A.Y. 2019-20:

Tax Rates* for Corporate Assessee for the A.Y. 2019-20
Status of Taxpayer Rates of income-tax
1. Firms/Local Authority 30%
2. Domestic Company 30%/25% #
3. Foreign Company 40%

# Tax rate is 25% if turnover or gross receipts of the domestic company in the previous year 2016-17 doesn't exceed Rs. 250 crore

*The above rates are exclusive of surcharge and cess.

3. Tax Rates* for Co-operatives Societies for the A.Y. 2019-20:

Tax Rates* for Co-operatives Societies for the A.Y. 2019-20
Income Rates of income-tax
1. Up to Rs. 10,000 10%
2. Rs.10,000 – Rs.20,000 20%
3. Above Rs. 20,000 30%

*The above rates are exclusive of surcharge and cess.

4. Rates of Surcharge:

Rates of Surcharge 
Particulars Taxable Income
50 Lacs to 1 Crore 1 Crore to 10 Crores Exceeding 10 Crores
1. Individuals/HUF 10% 15% 15%
2. Firm/ Local Authority/ Co-operative Society Nil 12% 12%
3. Domestic Company Nil 7% 12%
4. Foreign Company Nil 2% 5%
5. Co-operative Societies Nil 12% 12%

 * The health &education cess at the rate of 4% shall be computed on aggregate of Income-Tax and Surcharge.

CONCLUSION

This budget provided more benefit to lower middle class, small farmers rather than Rich class. The main objective was the inclusive & equitable growth in terms of social infrastructure, technology based system, various social security schemes etc. In nutshell, the budget was aimed at progressive development.