July 5 2019 saw Finance Minister Nirmala Sitharaman present the Union Budget for the financial year 2019-2020 in the Parliament. This budget emphasized the goals the BJP government has for India wrt economic growth and national security. The budget has been created keeping the next ten years in mind with reforms in the fields of income tax, housing, transport, economy, banking, women empowerment, divestment, MSMEs, FDI, Tourism, and others.
Here are some of the main takeaways from it –
- Higher surcharge for the rich – While there were no changes in the income tax slabs and rates, those earning more than Rs 2 crore but less than Rs 5 crore and those earning more than Rs 5 crore will have to pay higher surcharge. Also, Individuals whose taxable income does not exceed Rs 5 lakh for the FY 2019-20 will continue to avail the tax-rebate and thereby will pay zero tax.*
- Encouraging Digital Transactions – From September 1, 2019 onwards, the Budget 2019 has proposed to impose tax deduction at source (TDS) at the rate of 2 percent if the total cash withdrawn in a financial year exceeds Rs 1 crore from a bank, post office or cooperative bank from a single account.
- PAN and Aadhar are now interchangeable – For more ease of tax payers, PAN card and Aadhar card will be interchangeable. This will allow those who don’t have PAN to file returns by quoting their Aadhar number. This may be done wherever they require to use PAN.
- Tax Free National Pension Scheme Withdrawal – As per the budget, those investing in the NPS will be able to make lump sum withdrawals at the time of maturity tax-exempt. NPS at the time of maturity allows the investor to withdraw 60 percent of the corpus as lump sum and the remaining 40 percent to be used to compulsorily buy annuity plan. As per current laws, 40 percent of the lump sum withdrawal is tax-exempt from the 60 per cent corpus.
- Additional tax-break for buying an affordable house – As announced in Budget 2019, an individual can claim additional deduction of Rs 1.5 lakh on interest paid on home loan under the newly introduced section 80EEA subject to certain conditions. The conditions are as follows:
a) The loan must be taken between April 1, 2019 and March 31, 2020;
b) The value of house property must not exceed Rs 45 lakh; and
c) Individual should not own any house on the date of sanctioning of loan.
- Mandatory ITR Filing – Budget 2019 has proposed to make income tax return (ITR) filing mandatory in order to widen the base of taxable individuals if:
a) Amount deposited in current account held with bank or co-operative bank exceeds Rs 1 crore in a financial year
b) Expenditure incurred on foreign travel exceeds Rs 2 lakh in a financial year;
c) If an individual incurs an electricity bills of Rs 1 lakh or more in a year; and
d) Claiming capital gains
- Credit to Public Sector Banks – Public sector banks to be provided 70,000 crore rupees to boost capital and improve credit.
- FDI – Government will invite suggestions for further opening up of FDI in aviation sector, media, animation AVGC and insurance sectors in consultation with all stakeholders. 100% FDI will be permitted for insurance intermediaries.
*Rebate up to Rs 12,500 is available for those whose net taxable income does not exceed Rs 5 lakh, thereby resulting in zero tax liability.
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