CA Ajay Joshi
The Government on 1.2.2019 unveiled an interim budget with mega announcements for middle class, rural citizens, farmers and unorganised sector workers. The government made a slew of announcements to keep everybody happy with tax sops for salaried class, direct income for farmers and other social sector schemes.
Mr. Piyush Goyal, Union Finance Minister, presented much awaited Interim Budget 2019 in Parliament on Friday. An Interim Budget usually doesn’t list out new schemes or doesn’t unveil any policy measures. The government will present the vote on account for the next four-to-five months. A full-fledged Budget will be presented when the House reassembles after the general election. Mr. Piyush Goyal was appointed interim finance minister on 23.01.2019.
No change in tax slab, FM announces full tax rebate on annual income up to Rs 5 lakh – No tax will be there for those whose taxable income is less than Rs 5 lakh. Finance Minister has proposed that individuals with income upto Rs 5 lakh will not be required to pay any income tax for FY2019-20.
In the previous budgets also, the Government had provided tax relief to taxpayers. In Budget 2014, the minimum tax-exemption limit was raised from Rs. 2 lakh to Rs. 2.5 lakh, along with, limit under section 80C hiked by Rs 50,000 to Rs 1.5 lakh and deduction on interest paid on a housing loan to Rs 2 lakh.
Currently, income up to Rs 2.5 lakh for resident individuals (age below 60 years) is exempt from tax. Similarly, for senior citizens aged 60 years and above but below 80 years, income up to Rs 3 lakh is exempt from tax. Income up to Rs 5 lakh is exempt from tax for super senior citizens (age 80 years and above).
In Budget 2017, the tax rate were slashed for income between Rs 250,001 and Rs 500000 lakh to 5 per cent from 10 per percent earlier. This rate cut gave a tax relief of Rs 12,500 to every tax payer.
For senior citizens (aged 60 years or above but less than 80 years), income up to Rs 3 lakh is exempt from tax. Income from Rs 300,001 to Rs 5 lakh is taxed at 5 per cent, from Rs 5 lakh to Rs 10 lakh at 20 per cent and above Rs 10 lakh at 30 per cent.
For super senior citizens, aged 80 years and above, income up to Rs 5 lakh is exempt from tax. Income from Rs 500,001 to Rs 10,00,000 is taxed at 20 per cent and above Rs 10,00,000 lakh is taxed at 30 per cent.
Standard deduction limit raised to Rs 50,000 from Rs. 40,000 – In a move that may cheer the salaried class, Finance Minister Piyush Goyal on Friday hiked standard deduction limit to Rs 50,000 from Rs 40,000, at present.
Reforms in Income Tax Returs Filing
Since the Income Tax Department now functions online and returns, assessments, refunds and queries are all undertaken online, all returns will be processed in 24 hours and refunds will be issued simultaneously. Last year, 99.54% of the income-tax returns were accepted as they were filed. Government has now approved a path breaking, technology intensive project to transform the IT Department into a more assessee-friendly one. Within the next two years, almost all verification and assessment of returns selected for scrutiny will also be done electronically through anonymised back office, manned by tax experts and officials, without any personal interface between taxpayers and tax officers.
Benefit of rollover of capital gains tax increased from one residential house to two houses – The benefit of rollover of capital gains under section 54 of the IT Act will be increased from investment in one residential house to two residential houses for a tax payer having capital gains up to Rs 2 crore. Earlier, this investment could have been made only in one residential house. This benefit can only be availed once in lifetime.
Notional rental income from more than one self-occupied house property – Notional rental income from second self-occupied house property will now be exempt. Notional rental income to be taxable from third self-occupied house property onward. 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. it is proposed to exempt levy of income tax on notional rent on a second self-occupied house.
TDS threshold on interest earned on bank/post office deposits – Finance Minister in his interim budget speech, has proposed to raise the limit of TDS threshold for interest earned on bank and post office deposits from Rs. 10,000 to Rs 40,000. This will benefit small depositors and non-working spouses. This will be a huge relief to those taxpayers who invest their money largely in bank fixed deposits and various post office deposit schemes. For taxpayers, this would mean that no TDS will be deducted from the interest income up to Rs 40,000. Currently, for Hindu Undivided Families (HUFs) and individuals aged up to 60 years, interest up to Rs 10,000 earned on a savings account, whether held with a bank (nationalised or co-operative) or post office is allowed as a deduction in a single financial year.
This, however, does not make the interest income exempt from tax. One has to show this amount as ‘income from other sources’ in their income tax returns and then claim it as deduction from gross total income under Section 80TTA of the Income-tax Act.
There had been expectations that the interim budget might increase the deduction limit under section 80TTA or expand the scope to include interest from bank fixed deposits under its ambit.
In Budget 2018, the Finance Minister had introduced a new section, 80TTB in the Income-tax Act for senior citizens. According to this newly inserted law, deduction of maximum of Rs 50,000 is available for senior citizens on the interest income earned from the deposits held with bank, post office or co-operative society engaged in banking. The ambit of this interest income includes interest earned from savings accounts, fixed deposits, deposits in schemes such as Senior Citizens Savings Scheme, Post Office Monthly Income Scheme and so on.
TDS threshold for deduction of tax on rent – The 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.
Measures announced to revive lagging real estate sector – Finance Minister made announcements to revive the lagging real estate sector. Among the many measures, the government extended the benefits under Section 80-IBA of the IT Act for one more year. It applies to the projects approved till 31.03.2020.
Reactions on Interim Budget:
In a series of tweets Mr. Chidambaram said: “Thank you Interim FM for copying the Congress’ declaration that the poor have the first right to the resources of the country,”he added in response to the government’s announcement assuring minimum income support for farmers.”
As I had warned, Government misses Fiscal Deficit target for 2018-19. Another red flag rises: CAD is 2.5 percent,”- P Chidambaram