Various changes have been inflicted by the Central Government which can hugely impact the personal finance of individual taxpayers 1st April onwards. This is why it is extremely important to gain a clear understanding of the same before planning your taxation in the current fiscal.
- Nil Tax On Taxable Income Ranging Up To 5 Lakh INR
Individual assesses having taxable income within 5 lakh INR, won’t be required to pay any tax in the financial year 2019-20 other than a few selected cases. These individuals can claim a complete tax rebate which in turn can nullify their tax requirements for a particular fiscal. The amount of tax-rebate has increased to 12500 INR u/s 87A from 2019-20 onwards.
In spite of that, assesses will be required to fill their tax return if their taxable income crosses over the minimal exemption limit. Individuals whose taxable income crosses over this limit can also avail the deductions u/s 80 along with allowances on Leave Travel, House rent etc. However, if your taxable income crosses over 5 lakh INR after claiming all the tax-deductions, then you will be required to pay the tax according to the existing rates.
- No Tax Levy On Rent Received From Other Non-Residential House
The interim budget announced that you will not have to pay nominal rent on the second house which is held by you provided the same is self-occupied. Presently, the second house of a taxpayer is deemed to be let-out and tax is levied on the same in the manner of non-occupational rent.
- Standard Deduction Increased To 50K
The amount of standard deduction from salary which was previously reduced to 40000 INR by the Central Government has been subsequently raised to 50000 INR in the Interim Budget of 2019. Standard deduction was introduced for the very first time in the Budget 2018 to replace medical reimbursement and transport allowance. All classes of pension holders as well as salaried employees can claim this deduction at the time of filing their income tax return.
- Increase In TDS Limits
Taxpayers having income under the minimum taxable limit were previously required to submit Form 15G to avoid TDS levy on bank interest. TDS limit has been increased to 40000 from the previous limit of 10000 INR as a means of providing relief to these tax payers. This change is bound to reduce the paperwork of people belonging to lower income group category without adequate knowledge about the intricacies of taxation.
However, this should not be confused with tax levy on interest income earned from banks. Interest income shall still be taxed as per current tax laws although no TDS shall be deducted by banks on interest income ranging up to 40000 INR. Individual assesses can claim tax deduction u/s 80TTA for interest income arising in savings account held at post office or bank. However, interest income on fixed deposits with banks will be taxed in accordance with earlier regulations.
- No Transfer Of Physical Shares From 1st April 2019
The transfer of physical shares was prohibited by the Securities Exchange Board of India from 5th December 2018. This deadline was extended till 1st April 2019 considering the large number of shareholders holding physical shares. SEBI made alterations in the Listing Obligations and Disclosure Requirements (LODR) Regulations in June. 2.3% of the entire market cap of listed companies was found to be in physical form. Keeping these things in mind, the transfer of shares from 1st April onwards will be allowed in dematerialised form as per SEBI order. Thus, all investors will have to switch over their physical shares into demat form for transferring or selling the same.
- Interest Rate On Loans To Be Decided By An External Benchmark
It was announced by our central banker in its bi-monthly monetary policy meet organised on 2018 December that floating rate of retail or personal loans like auto, housing etc. shall be linked to an external benchmark. The benchmark prime lending rate (BPLR), prime lending rate (PLR) and marginal cost of funds based lending rate (MCLR) were considered as internal benchmark of linking the loans till then.
A statement released also pointed out that the linkage with external benchmark will take place from 1st April 2019 onwards. However, the final guidelines are yet to be issued by the central banker. Once this step is taken, rate changes are expected to become much more transparent.
- Fresh GST Rules & Rates For The Housing Sector
The brand-new rates of GST shall be applicable from 1st April 2019 onwards on real estate. Developers of on-going projects can charge GST @ 12% with input tax credit or @ 5% without input tax credit. Developers of affordable housing can charge GST @ 8% with input tax credit or 1% without input tax credit. All new constructions starting from 1st April 2019 will have to charge GST as per the latest tax slab.
The council has also clearly defined the category of houses which will fall under the affordable housing segment. According to the new definition, a residential flat/house having carpet area ranging up to 60 square meter in metro cities and 90 square meter in non-metro town or cities valued within 45 lakh INR shall be considered to fall under the affordable housing segment. Chennai, Bengaluru, Kolkata, Delhi NCR and Mumbai are considered as metro cities. You will thus be required to check the GST rate levied by the developer while buying a house in an ongoing real estate project.
- Alterations In Equity LTCG Taxation
Budget 2018 made the first announcement of LTCG tax levy on equity-oriented mutual funds as well as equity shares. You will thus be required to pay tax on similar units sold in FY2018-19. These transactions shall also have to be reported while filing the tax return of FY18-19. LTCG tax @ 10% shall be levied without indexation benefit on gains exceeding 1 lakh INR in the 2018-19 fiscal.
- Capital Gains Benefit Arising Out Of Simultaneous Investment In Two Residential Houses
Taxpayers can avoid the levy of LTCG taxation by investing the proceeds arising out of selling their house property in two houses instead of just one. However, this benefit can be availed just once in the lifetime of an assessee and provided his capital gain does not cross 2 crore INR.
The changes listed out above need to be properly considered while conducting your tax planning and even while filing your tax returns of 2019-20.