The Union Budget for 2019-20 was placed before Parliament on 05.07.2019. Some of the significant proposals related to Income Tax Act, 1961 are as under:

Sr. Topic / Section Proposed Provisions Existing Provisions Effective From
1. New rate of surcharge on income tax  for Individual / HUF / BOI / AOP / AJP
Taxable Income Surcharge
Rs > 50 lacs to 1 Cr 10%
Rs >1 crore to 2 Cr 15%
Rs >2 crore to 5 Cr *25%
> Rs 5 Cr *37%
*These two slabs introduced as per the budget amendment. Now the surcharge is proposed to be increased to 37%.
Taxable Income Surcharge
Rs > 50 lacs to1 Cr 10%
Rs >1 Cr 15%

 

(AY 2020-21)
2. Investment in NPS attractive now A taxpayer has been allowed to withdraw 60% of total corpus from NPS as tax free withdrawal at the time of retirement

Now the scheme is said to be attractive as assesse has already taken exemption up to the 35% at the time of contribution and 60% at the time of retirement which makes the scheme almost tax free.

Currently, the tax exemption is allowed only up to 40% of the total corpus.

 

(AY 2020-21)
3. TDS rate increased on maturity of Insurance proceeds U/s 194DA Maturity proceeds received under a life insurance policy are exempt from tax. However, the tax benefit is not extended to policies where the annual premium exceeds 10% (20% in case of policies sold prior to April 2012) of the sum assured. In such cases TDS is deducted @5% on income component of the sum paid by the person. TDS applicable  @1% of maturity value. 01.09.2019
4. Introduction of Faceless e-Assessment of return. Introduction of “Faceless Assessment”, which means that there will be no human intervention while scrutinizing the ITR. The aim is to cut down the interaction between the taxpayer & ITO and processing would be technology driven. No such provision exists. Phased manner
5. Relief u/s 89 to be considered for determining advance tax liability and  interest u/s 234A/234B/234C Relief u/s 89 is to be considered for computation of Assessed tax (for Advance Tax liability ):

Total Tax liability xxxxx

Less: TDS xxxxx

Less: Relief u/s 89   xxxxx

Assessed Tax
xxxxx

Note: This is very big benefit (Retrospectively)  to the employees taking relief u/s 89 for considering the determination of Advance Tax liability.

Relief u/s 89 is not to be considered for computation of Assessed tax (for Advance Tax liability ) –

Total Tax liability xxxxx

Less:TDS

xxxxx

Less: Relief u/s 89  Not allowed Assessed Tax xxxxx

AY 2007-08
6. Threshold limit for prosecution for Non-filing of ITR increased. In case of failure to file ITR, the prosecution proceedings are initiated under Section 276CC, if the tax payable by the assessee is Rs. 10,000 or more. In case of failure to file an Income-tax return, the prosecution proceedings are initiated under Section 276CC, if the tax payable by the assessee is Rs. 3,000 or more. (AY 2020-21)
7. Filing of return through Aadhaar. ITR can be filed using Aadhaar Number, if a person hasn’t been allotted PAN. However once ITR is filed based on Aadhaar, the person will be allotted PAN suo moto. No Such provision exist. 01.09.2019
8. Additional deduction of Rs.1.50 Lakhs for Interest on loan for acquisition of affordable house (New Section 80EEA) 1. Section 80EEA has been inserted to provide for deduction of Rs. 1.50 lakhs for interest on loan taken from any financial institution for acquisition of a residential house property with the three conditions-

1. Whose stamp duty value does not exceed Rs. 45 lakhs.

2. Assesse does not own a residential house on the date of sanction of loan.

3. Loan has been sanctioned during FY 2019-20.

No Such provision exist. (AY 2020-21)
9. Incentive for moving to Electric Vehicle 2. Section 80EEB has been inserted to provide for a deduction of Rs.1.5 lakhs in respect of interest on loan taken for purchase of an electric vehicle from any financial institution. No Such provision exist. (AY 2020-21)
10. Mandatory Filing of Return by high spending  Individual Furnishing of return of income by Individual shall be mandatory under Section 139 even his taxable income is less than the maximum amount not chargeable to tax –

1. Has deposited Rs.1 crore or more in current account or

2. Has incurred expenditure of Rs. 2 lakhs or more on foreign travel or

3. Has incurred expenditure of Rs. 1 lakh or more on electricity consumption.

4. Has claimed the benefit of capital gain exemptions u/s 54, 54B, 54D, 54EC, 54F, 54G, 54GA and 54GB of the Act.

No Such provision exist under section 139. (AY 2020-21)
11. Increase in threshold limit of turnover for reduced rate of corporate tax. A domestic company whose total turnover or the gross receipt in the previous year 2017-2018 does not exceed Rs. 400 crore shall be taxable at the rate of 25%. A domestic company whose total turnover or the gross receipt in previous year 2017-2018 does not exceed Rs. 250 crore is taxable @ 25%. (AY 2020-21)
12. TDS deduction by Individual for payment to Contractors & Professionals (New section 194M). New Section 194M has been inserted to require any individual or HUF (who is not subject to audit u/s 44AB) to deduct TDS from sums paid to a contractor (194C) or professional (194J), if aggregate payment during the year exceeds Rs. 50 lakh. The tax can be deposited without any requirement to obtain TAN. No Such provision exist. 01.09.2019
13. TDS for cash withdrawal from bank (New section 194N). New Section 194N has been inserted to require deduction of TDS @ 2% if aggregate of cash withdrawn during the financial year from any account maintained with a banking company or cooperative bank or post office exceeds Rs.1 crore. No Such provision exist. 01.09.2019
14. Scope of TDS on purchase of immovable property (u/s 194IA) increased As per Section 194-IA, a buyer is required to deduct TDS @1% from the consideration paid to buy an immovable property, If consideration for the property is Rs.50 Lakhs or more.

Now the explanation is inserted to include the following items in consideration such as charges paid towards club membership fee, car parking fee, electricity and water facility fees, maintenance fee, or any other charges of similar nature, which are incidental to transfer of the immovable property.

No Such explanation exists 01.09.2019
15. Relief of section 201 (Assesse in default) extended to Non resident A deductor shall not be deemed to be an assesse in default even if he fails to deduct TDS  from sum paid to a non-resident, if such  non-resident discloses such income in his return of income and pays tax due on such Income and a certificate from a CA is furnished to this effect. Such provision exists only if sums paid to residents and the amended provision in the Budget will apply to non-residents also. 01.09.2019
16. Relief of section 40 (Dis allowance of expenditure) extended to Non resident Non deduction of TDS or after deduction, non-deposit of the same will have the impact of disallowance of expenditure to the extent of 30% of such expenditure. 

Currently such disallowance was only 30% for payment made to residents. Now the amendment has made the provision at par with the residents.

Currently the disallowance is to the extent of 100% of expenditure for non- resident. 01.09.2019
17. Additional Income Tax on Buyback of shares by listed companies Section 115QA which requires payment of tax @ 20% on distributed income in case of buy-back of shares of Listed companies too. Only unlisted company were covered. 05.07.2019
18. Online Application u/s 195 for determination of TDS to be deducted from sums payable to non-residents. Process of seeking determination of tax to be deducted at source on payment to non-residents u/s 195 will be made fully online in an effort to improve effectiveness of tax administration and to reduce time. Such application is made manually 01.11.2019
19. Accepting payment through other prescribed electronic modes of payment. To promote cashless economy every person carrying on business and having turnover or gross receipts exceeding Rs.50 Crores in the preceding year is required to provide a facility for accepting payments through prescribed electronic modes apart from current system of accepting payment through account payee cheque, account payee DD or ECS through a Bank. Presently accepting payment through account payee cheque, account payee draft or ECS through a Bank. 01.11.2019
20. Extension of Deduction in r/o investment of Capital gain on residential property. Deduction u/s 54GB is available for investment of the proceeds of LTG arising from transfer of a residential property by subscribing to the equity shares of an eligible Company. The deduction available up to 31.03.2019 is extended by another two years i.e. up to 31 March 2021. This deduction was available up to 31st March 2019.

 

(AY 2020-21)

Author can be reached at : deepakjauhari@powergridindia.com

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One Comment

  1. Krithika Ramanathan says:

    You have said”However, the tax benefit is not extended to policies where the annual premium exceeds 10% (20% in case of policies sold prior to April 2012) of the sum assured. In such cases TDS is deducted @5% on income component of the sum paid by the person.” Does it mean that tax at 5% is deductable on the entire maturity proceeds or on the maturity proceeds minus the premium paid .
    Kindly clarify

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