6 Income Tax changes announced in Interim Budget 2019-2020

6 Income Tax changes announced in Interim Budget 2019-2020

Finance Minister  Mr. Piyush Goyal in Interim Budget 2019-20 proposed many changes in income tax rules for the year 2019-20.

Interim Budget 2019 -20:

Here are 6 changes proposed on the personal income tax front

 1.     Standard Deduction for Salaried individuals and pensioners increased from existing Rs.40,000 to Rs.50,000

 Standard deduction increased from Rs.  40,000 to Rs. 50,000. A standard deduction reduces your taxable income, thereby reducing your tax liability. Standard deduction was re-introduced last year. This increase of ₹10,000 in standard deduction will result in tax savings of ₹3,000 for individuals in the 30% tax bracket (excluding surcharge and cess).

2. The benefit of enhanced tax exemption of up to  Rs. 5 lakh 

The change in Section 87A in Budget 2019 -20. Earlier the limit under Section 87A was up to Rs.3,50,000 and the deduction permissible was Rs.2,500. Now it is increased to Rs.5,00,000 and the deduction available is Rs.12,500. 

It is only applicable for those with net taxable income of up to Rs. 5 lakh. A rebate is the amount of tax the taxpayer is not liable to pay. So in the next fiscal year, if an assessee has a net taxable income of up to Rs. 5 lakh, he / she is allowed to claim the entire tax payable as tax rebate.

For instance, if an assessee has a gross income of Rs.  6.5 lakh for the financial year 2019-20, and makes an investment of  Rs. 1.5 lakh under Section 80C, his / her net taxable income comes down to Rs.  5 lakh, on which his / her tax liability will be Rs. 12,500 (5% of Rs. 2.5 lakh), excluding cess (income up to Rs.  2.5 lakh is exempt from tax).  Against this, a rebate of Rs. 12,500 will be available and, thereby, the net tax will come down to zero.

 The benefit of enhanced tax exemption of up to  Rs. 5 lakh has been provided in the form of a rebate and will only benefit resident taxpayers having total income up to Rs. 5 lakh.

Other taxpayers in higher income slabs will have to settle with a meagre increase of Rs.10,000 in standard deduction.

(3) Income tax on notional rent on a second self-occupied house abolished

In the Budget, the finance minister proposed exemption from notional rent in respect of 2 self-occupied house properties. Currently, if a person has 2 properties which are self-occupied, deemed rent from one of the house properties is taxable.

(4) Benefit of rollover of capital gains under section 54 of the ITax Act raised

 The finance minister also proposed to extend the one-time benefit of capital gains exemption on reinvestment in 2 house properties. This benefit will apply where capital gains are Rs.2 crore or less. Currently, the exemption is applicable only against one house property.

5. TDS Limit on Bank FDs and Post Office Schemes raised from Rs.10,000 to Rs.40,000

 The threshold on TDS on interest from bank or post office deposits has been increased to Rs. 40,000, from current limit of Rs. 10,000. This means interest income on bank/post office deposits up to Rs. 40,000 will not be subject to TDS. 

6. TDS threshold for deduction of tax on rent increased from Rs.1,80,000 to Rs.2,40,000

TDS threshold for deduction of tax on rent is proposed to be increased from Rs.1,80,000 to Rs.2,40,000 for providing relief to small taxpayers.

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