Every budget makes some changes related to tax structure, investments and processes. This was no different. In this post we list down the 19 highlights of the budget and how it would impact us.
- 1 Income Tax slabs remain unchanged
- 2 Surcharge increased for super-rich
- 3 PAN & Aadhar Interchangeable
- 4 Aadhaar card for NRIs without any waiting period
- 5 Additional Tax Deduction on home loans
- 6 Additional Tax Deduction on auto loans
- 7 CPSE ETFs to be eligible for Tax Benefit
- 8 New Pension Scheme for small shopkeepers
- 9 Mandatory Public Float Limit of listed companies to increase to 35%
- 10 Petrol/Diesel Prices to go up
- 11 Gold Prices to go up
- 12 TDS on cash withdrawal of more than 1 crore
- 13 ITR to be pre-filled
- 14 More conditions added for mandatory filing of ITR
- 15 Faceless assessment of tax returns
- 16 TDS on Property
- 17 New Coin series to be launched soon
- 18 Changes in NPS
- 19 Changes in Interim Budget (Feb 2019)
Income Tax slabs remain unchanged
The income tax slab remains unchanged in the budget. The last slab was changed in Budget 2017 when the lowest slab rate of 10% was changed to 5%.
Surcharge increased for super-rich
The surcharge on income tax increased for the super-rich. For people with net income between Rs 2 to 5 crore the surcharge increased from 15% to 25% and for people with income of more than Rs 5 crore the surcharge has increased to 37%. With this enhancement the effective highest tax rate becomes 42.74%.
PAN & Aadhar Interchangeable
In last one year there was a lot of pressure from government to link Aadhaar and PAN. A lot of people questioned why do we need two IDs. The government too feels the same and now either of PAN or Aadhaar can be quoted where you had to compulsorily quote PAN like tax returns or while high value transactions. This is good move and I think going forward PAN would be phased out.
Aadhaar card for NRIs without any waiting period
Until now NRIs had to wait for 180 days in India before they could apply for Aadhaar. Now this waiting period has been done away with. NRIs (with Indian Passport) are eligible for Aadhaar from their first day stay in India. This again was required as more and more services are being linked with Aadhaar and it was impractical for NRIs to wait for 6 months before they had their ID.
Additional Tax Deduction on home loans
Budget 2019 has introduced a new section 80EEA which would give additional tax deduction of Rs 1.5 lakhs on the interest paid on home loan to buy affordable home. This 1.5 lakh deduction is in addition to the deduction of Rs 2 lakh on home loan. If you fulfill the following:
- The home loan is taken from approved financial institutions between April 1, 2019 to March 31, 2020
- The stamp value of house is less than Rs 45 Lakhs
- The buyer does not have any other house in his name while buying this property
Total deduction on interest can be Rs 3.5 lakh (2 lakh u/s 24 & 1.5 lakh u/s 80EEA). This initiative is in line with government’s vision of “housing for all”
Additional Tax Deduction on auto loans
Budget 2019 has introduced a new section 80EEB. This section gives additional tax deduction of Rs 1.5 lakh on interest paid on auto loan for purchase of electric vehicles. This is to encourage the speedy adoption of electric cars. You can get more details about the section 80EEB here.
CPSE ETFs to be eligible for Tax Benefit
CPSE ETFs would be eligible for tax saving investment u/s 80C – in similar lines to ELSS (Tax Saving Mutual Funds). However, CPSE ETFs may not be great investment as its mainly bouquet of government owned PSUs and they are not great performers due to regular interference of government. ELSS is far better as its diversified and have given good returns in the past. More details awaited on the tax benefit on CPSE ETFs. (Know about Best ELSS (Tax Saving Mutual Fund) to Invest in 2019)
New Pension Scheme for small shopkeepers
Budget 2019 announced Pradhan Mantri Karam Yogi Maandhan Scheme – under which small shopkeepers with annual turnover of less than Rs 1.5 crore would be eligible for pension after the age of 60 years. More details awaited…
Mandatory Public Float Limit of listed companies to increase to 35%
Budget 2019 has proposed that it would recommend SEBI to increase the mandatory public float of listed companies from 25% to 35%. This is a good move as it would increase public ownership in good companies.
Petrol/Diesel Prices to go up
The excise duty on petrol and diesel has been increased which would make both costlier by more than Rs 2 per liter. This is nothing new and government has been tweaking the excise duty on fuel to keep most of the benefit of lowering of global oil prices with itself. The notion that fuel rates are market linked is not true as government most of times increases VAT or excise duty to take that benefit and customers end paying higher prices irrespective of lower global oil prices.
Gold Prices to go up
The custom duty on gold & other precious metals have been increased from 10% to 12.5% leading to increase in the prices of gold and other precious metals.
TDS on cash withdrawal of more than 1 crore
The government has always discouraged cash transactions. Budget 2019 has brought in additional law for the same. Banks would now deduct 2% TDS in case the cash withdrawal from one account is more than Rs 1 crore in one financial year. Frankly this is not going to be effective as people can easily beat this limit by opening multiple accounts. My take is in next few years, government would reduce the withdrawal limit for TDS.
ITR to be pre-filled
To make it easy and accurate for tax payers the income tax return forms would be prefilled with data from information already with income tax department like details of salary income, capital gains from securities, bank interests, dividends and TDS, etc
More conditions added for mandatory filing of ITR
Budget 2019 has added some condition and in case you fulfill those you have to mandatorily file income tax return irrespective of the income:
- if you have spent more than Rs 2 lakh on a foreign trip
- deposited Rs 1 crore during a year in a current account
- paid more than Rs 1 lakh as electricity bill during a year
- income becomes lower than maximum amount not chargeable to tax due to claim of rollover benefit of capital gains
These conditions were present before 2006 too but was removed henceforth. Budget 2019 has reintroduced these conditions.
Also Read: Everything about filing Income Tax Return
Faceless assessment of tax returns
In case of scrutiny of income tax returns, the interaction between income tax department and tax payer would be faceless. This means that the tax payer would not know who he is interacting with. This hopefully will bring down corruption in the department.
TDS on Property
Buyers have to deduct TDS of 1% in case the property price is more than Rs 50 lakh. However only the basic price was considered for TDS. With the new changes in Budget 2019 the price would consider other charges like club membership fee, car parking fee, etc in addition to the basic price for TDS.
New Coin series to be launched soon
New coins series of Re 1, Rs 2 Rs 5, Rs 10 and Rs 20 to be launched soon. This will have new security features and enable visually impaired to identify the coins.
Changes in NPS
Following changes about were already announced earlier but was reiterated in this budget:
NPS withdrawal up to 60% tax free
On maturity minimum 40% of NPS corpus has to be invested to buy annuity and the rest can be withdrawn in lump-sum. This lump-sum is now tax free. Earlier only 40% was tax-free and 20% was taxable.
Contribution increased in NPS to 14% for Government Employees
The employer contribution for government employees in NPS is exempted up to 14% of (Basic Salary + Dearness Allowance) u/s 80CCD(2).
The limit remains 10% of salary for all others.
I think this is regressive policy to differentiate between government & non-government employees. It just complicates rules and also government employees make rules which does not impact them!
NPS Tier II now under 80C (only for Central Govt employees)
Central Government employees can invest in NPS Tier II account to save tax u/s 80C. The lock-in period for the investment is 3 years. Other people’s investment in NPS Tier II is still not eligible for 80C deduction.
Changes in Interim Budget (Feb 2019)
Other than the above changes, we have also mentioned the changes that were done in the interim budget 2019 presented in February this year:
- Increased Tax Rebate u/s 87A
- Standard deduction increased from Rs 40,000 to Rs 50000
- No Tax on Notional Rental Income from Second House
- Capital gains exemption on reinvestment in two house properties
- TDS threshold increased from Rs 10,000 to Rs 40,000 on Bank Interest Income
Read the details: 5 Key changes in Income Tax Rules
All the above changes in the full budget on July 2019 & interim budget February 2019 would be effective from April 1, 2019 and applicable from FY 2019-20 (AY 2020-21) onwards.