Budget 2019 can be said as a boon to middle class tax payers if they plan their tax well in advance. The budget has brought some major changes to small tax payers , salaried tax payers and also a has some favourable impact on real estate sector in view of changes in house property income and capital gain exemptions.

1. REBATE U/S 87A INCREASED FROM RS. 2500/- TO RS. 12500/-. 

The basic understanding is that the rebate is increased to Rs.12, 500/- if the net taxable income does not exceed Rs.5, 00,000/- to resident individual taxpayer. The following conditions are to be satisfied to avail this rebate:

a. The assessee must be a resident individual

b. His net taxable income (after availing all standard deductions, Deductions under chapter VIA) must not exceed Rs.5, 00,000/-

c. Rebate is restricted to tax payable or Rs. 12, 500/- , whichever is less.

Inference:

1. This amendment has nothing concerned with the tax slab/basic exemption limit. This is not an adhoc exemption available to all tax payers. Rebate is available only to tax payers whose net taxable income does not exceed Rs. 5L.

2. Rebate is available only to resident individuals. This rebate is not applicable to non residents.

2. NO NOTIONAL RENT ON SECOND HOUSE PROPERTY:

Earlier the benefit of self occupied (Annual value – Nil) was available to only one house property.

The second house property in the name of same assessee which was self occupied (either by him or his family) was to be taxed by arriving at a notional rent under the head income from house property.

This budget considering the social and employment needs of the citizens has provided that no notional rent has to be arrived and be taxed for the second self occupied property. This means that an individual assessee can claim two properties in his own name as self occupied. From now on the assessee along with spouse and children can use one house as self occupied and he can have his parents/relatives in another house and claim the benefit of self occupied for the second property also.

This apart the deduction for interest on housing loan is also extended to second self occupied property. The assessee can start claiming interest on housing loan incurred for the second self occupied property. However the claim of interest for both the properties shall be restricted to 2 lacks which has not been changed.

3. STANDARD DEDUCTION INCREASED FROM RS. 40, 000/- to 50,000/-.

This standard deduction is available only to those Assessee’s who has salary income. There was a standard deduction for conveyance and medical expenses for Rs. 40,000/- till AY 2019-20.This standard deduction is proposed to increase to Rs.50,000/-.This deduction can be claimed without any proof or supporting bills for such expenses.

4. TDS LIMITS FOR RENT AND BANK INTEREST: 

The following are the changes in TDS limits for rent and bank/post office interest (including interest on deposits):

Nature of income Limits applicable for TDS Rate of TDS
FY 2018-19(AY 2019-20) FY 2019-20(AY 2020-21)
1. Interest paid by bank/post office
Other than senior citizens 10,000 p.a 40,000 p.a 10%
Senior citizens 50,000 p.a 50,000 p.a 10%
Note: This increase in threshold limit shall not be applicable to payers other than banking or co-operative society. The limit is Rs.5000/- for any other payers
2. Rent from immovable property FY 2018-19(AY 2019-20) FY 2019-20(AY 2020-21) Rate of TDS
Other than senior citizens 1,80,000 p.a 2,40,000 p.a 10%
Senior citizens 1,80,000 p.a 2,40,000 p.a 10%

5. RELIEF IN SECTION 54 EXEMPTION:

Section 54 provides exemption for long term capital gains arising out of sale of residential house property. This exemption is available if such capital gains are invested in another residential property.

Budget 2019 has brought an amendment to this section 54. Now the assessee is allowed to invest in two residential house properties provided the capital gain arising out of the sold property is up to Rs. 2 Crores. This exemption by investing in two residential house properties is a one time opportunity and can be exercised only once in a life time.

Inference:

The assessee may not be in a position to invest in a single residential property at a huge value and claim exemption. To provide relief to the middle class assesses, the government has allowed the assessee to invest in two different residential properties and claim exemption, provided the capital gain is up to 2 Crores.

If the capital gain exceeds 2 Crores, then this two houses exemption is not available. The assessee can invest in single residential house to claim exemption under Section 54.

This budget is really an advantageous one to all small tax payers who need not pay tax till 8L to 9L of their income if they plan their deductions and exemptions well in advance which is depicted as follows:

Gross income(salary ,house property and others) 9,50,000
Standard deduction for salary ( 50,000)
Interest on housing loan (2,00,000)
Deductions under 80C (1,50,000)
Deductions under 80D (50,000)
Deductions under 80CCD(NPS) (50,000)
Net taxable income 4,75,000
Tax there on 11,250
Rebate under 87A 11,250
Net tax payable Nil

Author Bio

Qualification: CA in Practice
Company: N SIVA PRASAD ASSOCIATES
Location: Chennai, Tamil Nadu, IN
Member Since: 18 Feb 2019 | Total Posts: 1
Vignesh is a chartered accountant practising in the field of Audit and taxation. Job profile includes Representation before tax authorities,Audit planning,implementation,coordination &finalisation,Consultancy in Income tax,GST and other company law matters etc., View Full Profile

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One Comment

  1. RKM says:

    In Budget 2019, the assessee is allowed to invest in two residential house properties provided the capital gain arising out of the sold property. From which date on wards this exemption is applicable. if I sell a property in Feb 2019, is this benefit applicable or is this only valid for sale happening from Apr 2019 (next FY on wards)?

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