Income Tax Law in India in 2019

In this article, we want to share with you about Income Tax Law in India in 2019.

The interim budget got announced in January by Finance Minister Piyush Goyal had seem to have bought series of changes in Tax Rules. The changes can be seen from a full rebate on personal income up to ₹ 5 lakh in a year to a 25% hike in standard deduction threshold.

Income-Tax-Law-India-2019

He was quoted saying, “This is not just an interim budget, this is a vehicle for the developmental transformation of the nation.”

Making a bold move, the government proposed a full tax rebate to individual upto ₹5 lakh income/year. The move made to benefit “the great Indian middle class” in words of Arun Jaitley will cost Government ₹18, 500 crore.

Income Tax Act: The provisions of income tax are contained in the Income Tax Act, 1961 which extends uniformly to the whole of India and has been effective since 1962. The act contains provisions for determining taxable income, tax liability, procedure for assessment of penalties, etc.

1. Annual Amendments – Since the Income Tax Act is a revenue law, it requires amendments whenever the government wants to make changes in it. Under the annual amendment of existing revenue generation requirements, the Government proposes its finance bill, which directly decides the threshold limits for various tax rates which are commonly referred to as Income Tax.

2. Income – Income in broad terminology is defined as any receipt in the form of money or money’s worth which occurs with a certain regularity or expected regularity from a definite source.

key takeaways from the income tax changes proposed in budget 2019-20:

1. “Straight” income tax rebate of Rs. 12,500

The most breaking announcement has been the Government’s decision to full rebate to individuals with annual income up to ₹5 lakhs/ annumn.

Though the income-tax slab applicable to other individuals remain same.

Government has clarified its stance as to the move was made to strengthen the purchasing power of the middle-class who holds the key to India’s future.

According to existing income tax rules, applicable till Assessment Year 2019-20, personal annualincome up to ₹2.5 lakh is exempt from Income Tax. Section 87A of the Income Tax Act provides option for a rebate to individuals on income up to a certain limit.

The Income Tax Department will give a ‘straight rebate’ of ₹12,500 to those having an annual income of ₹5 lakh from the beginning of next fiscal year. It will nullify their tax-liability.

CBDT clarifies that for those earning more than ₹5 lakh annually, the oldtax rates will continue.

Here is an example to explain what the income tax proposals mean for assesses below 60 years of age:

Budget 2019 tax calculation examples

Taxable annual income in rupees (after adjusting deductions) 3,50,000 4,00,000 5,00,000 10,00,000
Tax 5,000 (@ 5% on 1,00,000) 7,500 (@ 5% on 1,50,000) 12,500 (@ 5% on 2,50,000) 1,12,500 (@5% on 2,50,000, 20% on 5,00,000)
Rebate under Section 87A of I-T Act 5,000 7,500 12,500 NA
Tax liability 0 0 0 1,12,500
Cess @ 4% 0 0 0 4,500
Tax payable (after cess) 0 0 0 1,17,000

 

2. Standard deduction hike

The second change that was talked about is that standard deduction limit in which employees & pensioners are given a straight relief from taxable income – from ₹40,000 to ₹50,000in a year.

As per the new rules prevailing in assessment year 2019-20, persons having gross income up to ₹6.5 lakh may not be required to pay any income tax if they make investments in provident funds, specified savings, insurance etc.

Taxable income will be derived by adjusting all exemptions & deductions applicable under the income tax laws against the gross income.

Besides deduction available under Section 80C of the Income Tax Act, which provides for tax relief against a variety of investments – such as life insurance and savings scheme Sukanya Samriddhi , Section 80D (medical insurance), Section 80E (education loan) and Section 80TTA (savings account interest) provide for a range of deductions to the assesses.

3. TDS (tax deducted at source) relief

The interim Budget 2019-20 also proposed a four-fold increase in the limit for TDS applicable on interest income (from post office/bank deposits) to ₹40,000 per annum. The move is calculated to benefit Senior Citizens and small depositors who depend on interest income from deposits in banks and post offices.This will benefit small depositors and non-working spouses.

4. Hike in TDS threshold on rent

The Government proposed to increase the TDS limit applicable to rental income by 1/3rd to ₹2.4 lakh, compared to the existing threshold which means households earning income in form of rent are likely to benefit, say financial advisors.

According to current rules applicable in assessment year 2019-20, the lessee – or tenant – is required to deduct TDS on annual rent above ₹1.8 lakh. This tax is applicable to lessees other than individuals or Hindu Undivided Families (HUF), unless the entity is subject to tax audit.

5. Relief on notional rent

Government proposed to allow house owners to claim relief on a second property as self-occupied. This means the assesses will not have to pay tax on the second property on the basis of notional rent. As per current rules applicable in assessment year 2019-20, assesses having more than one house have to pay income tax on the basis of notional rent.

6. Long-term capital gains relief

The Government proposed to allow a profit of up to ₹2 crore from sale of residential property to be invested in not one but two properties to avoid paying tax on capital gains, subject to certain conditions.

The benefit of rollover of capital gains under Section 54 will be increased from investment in one residential house to two residential houses for a taxpayer having capital profits up to ₹2 crore.

According to the current rules applicable in assessment year 2019-20, individuals are allowed to utilize the gains from sale of property on purchase or construction of one new property to avoid tax.

7. Easy processing of income tax refunds

Making the conclusion out of the budget speech it is very clear that Income tax refunds will be processed within 24 hours and released immediately.

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