Finance Bill,2019 has proposed amendments to  Standard deduction, Notional Income of two self-occupied property, Interest on capital borrowed for acquisition / construction of two self occupied  House properties, Exemption under Section 54, Interest on capital borrowed for acquisition / construction of two self occupied  House properties, Tax Rebate under Section 87A for Taxable Income up to Rs. 12,500 and increase in TDS threshold limit on Housing Rent and Interest from Bank and Post office.

Executive Summary Of Finance Bill, 2019 related proposed Direct Tax changes is as follows:-

Clause (S) Of Finance Bill, 2019 Particulars Of Amendments  

Section

Amendment   / Newly Inserted  

Applicable W.E.F.

Brief Of Amendment
3 Amendment in Section 16 16 (ia) Substitution 01/04/2020 The Standard deduction has been increased from Rs.40,000/- to Rs 50,000/-.
4 Amendment in Section 23(4) 23(4) Substitution 01/04/2020 Notional Income of two self occupied property will Now be taken to be Nil. Para 91 of the Budget Speech  throws light on this amendment and is as under: –

“91.     Currently, income tax on notional rent is payable if one has more than one self-occupied house. Considering the difficulty of the middle class having to maintain families at two locations on account of their job, children’s education, care of parents etc. I am proposing to exempt levy of  income tax on notional rent on a second self-occupied house.”

The above amendment upholds the decision of  Hon’ble High Court of Delhi in CIT v. Mr. Justice Avadh Behari Rohtagi [1986] 157 ITR 441 wherein it was held that where a person owns a house property in a city and resides at another house in the same city by virtue of his employment, exemption u/s 23(2) of the Income Tax Act, 1961 shall be available in respect of the house owned too.

4 Amendment in Section 23(5) 23 (5) Substitution 01/04/2020 Presently the property consisting of any building or land appurtenant thereto which is held as stock in trade and such property is not let out then the annual value of such property for the period upto one year from the end of the F.Y in which certificate of completion of construction of the property is obtained is not taken to be deemed to be let out. The relevant provisions were inserted by Finance act 2017 w.e.f A .Y 2018-19.

The reference of the period of one year is sought to be substituted/ extended by  two years which means that hence forth the unsold stock in trade consisting of building or land appurtenant thereto and which is not let out for the period upto two year from the end of the F.Y in which certificate of completion of construction of the property is obtained shall not taken be deemed to be let out.

5 Amendment in Section 24 2nd Proviso to Sec 24(b) Substitution 01/04/2020 Interest on capital borrowed for acquisition / construction of two self occupied  House properties(earlier the same was available only as regards to one self occupied property) shall now be admissible as deduction, subject to the existing overall ceiling of Rs 2,00,000 p.a.
6 Amendment in Section 54(1)(ii) Insertion of proviso New Insertion 01/04/2020 Presently an assessee being an individual or a HUF is entitled to claim of deduction as regards Long term capital gains arising from transfer of a residential house property provided such capital gains are invested in ‘One residential House property’.

The above restriction of one residential house property is proposed to be extended to two residential properties, subject to the following conditions: –

a. The overall long term capital gains do not exceed Rs. 2 crores &

b. This deduction shall not be available to the assessee subsequently for the same or any other assessment year [ie this option shall be once in a life time deduction].

Thus the benefit of the above amendment shall not be available in the following cases: –

a. Where the long term capital gains exceed Rs.2 crore. In that case, an assessee can still claim deduction by making investment in only one residential HP exceeding Rs. 2 crores.

b. Where the long term capital gains exceeds Rs.2 crore and the assessee has invested such LTCG in Two properties then in such a case, an assessee cannot claim deduction upto Rs.2 crores.

7 Amendment in Section 80-IBA Sub Clause 2(a) Substitution 01/04/2020 The deadline for specified housing projects for exemption u/s 80-IBA is proposed to be extended to 31st March 2020 from the existing deadline of 31st March 2019.
8 Amendment in Section 87A Substitution 01/04/2020 Rebate of 12500 is proposed to be allowed provided the total income after deduction under chapter VI-A doesnot exceed Rs 5,00,000/-.

It is pertinent to note that the persons  to whom this rebate is inadmissible will be liable to pay advance tax u/s 208 of the IT Act 1961 as NOW his minimum tax liability will come to Rs 13001/- [ie Rs.12501/-  +  4% as Cess].

It may be noted that there is no change in the existing tax slab rates as would as be evident from para 88 of the Speech of the Finance Minister [refer infra] as well as the Finance Bill.

“88.        …………. Hence, while for the present the existing rates of income tax will continue for FY 2019-20, I propose the following:”

9 Amendment in sec 194A Sub clause 194A(3)(i)(a)/(b)/(c) Substitution 01/04/2019 No requirement of deduction of TDS on income paid / credited in the nature of interest from banks, banking cooperative society, deposit with post office upto Rs Rs.40,000/-. Earlier this limit was Rs 10,000/-.
10 Amendment in sec 194-I Proviso to sec 194-I(b) Substitution 01/04/2019 No tax shall be required to be deducted on Rent payments made for use of any land or building or furniture or fittings incase the aggregate of such rental income donot exceed Rs 2,40,000/- pa. Earlier this limit was Rs 1,80,000/- p.a.

(**) Disclaimer : the authors disclaims any liability for any reliance placed on the contents of the above infancy provisions. The analysis has been made by the authors as per their own understanding and interpretation of the Existing as well as proposed Taxation Laws. Any unauthorized or unintended use must be avaoided and the authors whose details are appearing per infra, must be informed and their approval must be sought before placing any professional reliance on the above discussions. The above discussion is meant only for circulation amongst professional and is neither an expression of opinion nor cannot be so construed. The authors disclaims any liability whatsoever to any one.

CONTRIBUTIONS MADE BY :

NAME M.NO. OF ICAI PHONE NO.
CA Sidharth 099165 9810418700
CA Vijay Kumar Gupta 088169 9868826026
CA Ajesh Aggarwal 087781 9811164339
CA Swati Jain 503118 9810418578
CA Gautam Paliwal 528460 9899101235
CA Ashish 528499 9654517917
CA Sonal Jain 416664 8744061124
CA Himanshu Jain 537834 9968706959
CA Ankur Jain 537835 9899945634
CA Sachin Garg 537836 9599032343
CA Rashi Almal 548483 8218054638

Analysis by Team SPREAD (Society for Promotion Research, Education and Dissemination of Tax Laws)

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Posted Under

Category : Income Tax (28798)
Tags : Budget (2027) Budget 2019 (68) section 194I (54) section 194J (83) section 54 (163) TDS (1166)

12 Comments

  1. Bipin Chandarana says:

    If an assessee has taxable income of Rs.4,99,000/-, whole tax of Rs.12,450/- will be adjusted as rebate u/s.87-A. This mean he has the total income i.e. Rs.4,99,000/- in his hands for spending.
    But the assessee having taxable income of Rs.5,01,000/- will pay tax of Rs.12,700/-. Thus he will be having 4,88,300/- i.e. Rs.10,700/- less compare to the assessee who has earned only Rs.2,000/- less.

    How this can be resolved?

  2. S KRISHNAN says:

    No TDS should be made applicable even forthe interests earned for FDs with
    private companies , non-banking companies etc.upto Rs.40,000/- for general public
    and Rs.50,000/- for senior citizens.;

    senior citizens should also get standard
    deduction benefit of rs.50,000/- not
    only the salaries employees , and pensioners

  3. Abdul Azeez says:

    effective date of various benefits are mentioned as 1.4.2020 from Sl No. 1 to 8 above. Is it correct or a typographic error. Please clarify.

  4. TIRU C NARAYAN says:

    Clause 9 above shows “No requirement of deduction of TDS on income paid / credited in the nature of interest from banks, banking cooperative society, deposit with post office upto Rs Rs.40,000/-. Earlier this limit was Rs 10,000/-.”

    I have two questions:
    1) If the interest paid exceeds Rs.40,000, will the TDS be deducted only on the excess?
    2) If the interest paid is less than Rs.40,000 does that mean it need not be reported as income?

    1. CA Padma Balakrishnan says:

      1. If int exceeds 40000/- TDS will be deducted on entire amount .e.g If int is 45000/- then TDS would be 4500/- but if interest is 39000/- no TDS
      2. All interest to be reported as income however there is a deduction available upto Rs 40000/- to a Senior ciizen for interest on bank deposits etc

  5. Deepak Dang says:

    What is about benefit available to Senior citizens as additional non-taxable income, Interest upto Rs.50000/= and various others. Prima facie it appears to be withdrawn. Moreover, anyone if having total taxable income of Rs.500000/= he will be charged on same rates as earlier. Please clarify.

  6. Ashish Madaan says:

    Date of Applicability mentioned is 01/04/2020 in each case except last two amendments, where it is mentioned as 01/04/2019. Here is some confusion. We understand that 01/04/2020 is as per A.Y. but whether 01/04/2019 is as per AY or FY.
    Can your good self clarify. We shall be highly obliged.
    Regards.

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