5 Key changes in Income Tax Rules from April 1, 2019 that you must Know

Finance Minister Piyush Goyal has proposed many changes in tax rules in Budget 2019. We present you 5 key changes that would impact all income tax payers.

Increased Tax Rebate u/s 87A:

While making the budget speech, Finance Minister said that people with taxable income of Rs 5 lakh would get full tax rebate. Many people thought that he has changed the tax slab. But once the Budget document was out, the change was made in the Section 87A. From FY 2019-20 for individuals with taxable income of Rs 5 lakh or less the tax rebate would be lesser of tax liability or Rs 12,500 whichever is lower. Below is the calculation:

FY 2019-20FY 2018-19
Taxable Income5,00,0005,00,000
Income Tax12,50012,500
Tax Rebate u/s 87A12,5000
Health & Education Cess @ 4%0500
Total Tax Payable013,000

This would only benefit people with taxable income below Rs 5 lakh. Had there been reduction in the tax slab it would have benefited every tax payer.

Also Read: All about Section 87A Tax Rebate

Standard deduction increased from Rs 40,000 to Rs 50000:

The standard deduction available to Salaried & Pensioners have been increased from Rs 40,000 to Rs 50000. This would reduce the tax liability up to Rs 3,558 in the highest tax slab.

No Tax on Notional Rental Income from Second House:

Until this year, if someone had more than one house, he could show one house as self-occupied while all other houses have to be either classified as rented (if it was actually rented) or deemed to be rented (if vacant or self-occupied). In case of “deemed to be rented” the tax payer had to show notional rental income from those houses and pay taxes on the same. From next financial year FY 2019-20, now you can have two houses as self-occupied. This is good move as many people have to maintain two houses, one for self and other for dependents including parents, children or spouse.

However, in case of more than 2 houses, notional income would still hold.

Download: Income Tax Calculator for FY 2019-20 [AY 2020-21]

Capital gains exemption on reinvestment in two house properties

Tax payers can save on Long term capital gains arising from sale of house by buying another house under section 54. In Budget 2019, the tax payers can now buy two houses on sale of 1 house if the capital gains are less than Rs 2 crore. This benefit can be availed only once in lifetime. This was good move as many people had to sell one house and buy multiple property to bequeath to their heirs.

Learn: How to Save Long Term Capital Gains Tax from Property?

TDS threshold increased from Rs 10,000 to Rs 40,000 on Bank Interest Income

Threshold of deducting TDS on interest income from Bank, Post Office or co-operative deposit has been increased from Rs 10,000 to Rs 40,000. Assuming interest rate of 8%, you can deposit Rs 5 lakh in Bank Fixed Deposit and not worry about TDS. I think this is great move as many people had to unnecessary go through TDS and file Income tax returns of fill Form 15G/H. But do remember, that no TDS does not mean no tax. You still need to show the interest income and pay tax if required.

Key changes in Tax Rules in Budget 2019Key changes in Tax Rules in Budget 2019
Key changes in Tax Rules in Budget 2019

All the above changes would be effective from April 1, 2019 and applicable from FY 2019-20 (AY 2020-21) onwards.

8 thoughts on “5 Key changes in Income Tax Rules from April 1, 2019 that you must Know”

  1. paramjeet singh sawhney

    Exhibition of slabs was impressive but it would have been more intelligible if some illustrations had been quoted.

  2. Amit, you are a genius. For years I have been trying to understand India Income Tax and this is the first and best site that I have come across!! Your SAVE TAX PPT is awesome 👌. Thank You so much for helping us ordinary citizens understand Indian Income Tax structure. You rock Amit 👍 👍

    1. Thank you so much for appreciation. These words get me more motivated 🙂

      DO remember to share this and forthcoming slides with your friends and family.

  3. It means individuals with taxable income up to Rs 5 lakh will pay zero tax. The income tax rates will remain same for all others.

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