India Budget 2019 – Personal income tax implications

The interim Union Budget 2019 has made some changes which could be beneficial for small tax payers, we try to summarize the changes in simple terms, hope this helps you understand the implications to your personal income tax liability

Net taxable income up to ₹ 5 Lakh would have zero tax liability

There is no increase in the exemption limit for Income tax, the benefit is being given by way of rebate under sec 87A, which has been increased to 12.5k for annual net taxable income upto 5 lakh after all deductions.

Tax payers having gross taxable income up to ₹ 6.5 lakh will also have to pay no tax if they utilise the maximum benefit of ₹ 1.5 lakh available under section 80C.

 

Standard deduction has increased from ₹40,000 to ₹50,000.

Standard deduction reduces taxable income which reduces the tax liability for salaried individuals and pensioners.

The proposed 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).

 

Exemption on notional rent has been extended to two self-occupied houses.

Currently if a home owner has 2 house properties which are self-occupied, the notional rent from one of the house properties is taxable. Both houses have to be self-occupied to avail this benefit.

 

Threshold limit on TDS on Interest on Bank or post office deposits has been increased from ₹10,000 to ₹40,000.

This means interest income on bank/post office deposits up to ₹40,000 will not be subject to TDS.

However the tax liability on the Interest on Bank or Post office deposits will have to be included as per the income tax slab of the individual for that financial year.

 

Long term capital gains tax exemption u/s 54 has been extended to re-investment to two residential houses if the Long term Capital Gain does not exceed 2 Crores.

So if you sell one house and the capital gains from the sale is upto 2 Crores, the amount of re-investment of the Capital Gains can now be split between 2 residential houses instead of just one house to claim exemption u/s 54. This exemption can be availed once in a life time.

 

Threshold limit on TDS on annual rental income has been increased to ₹2.4 lakh from the current ₹1.8 lakh for small taxpayers who have given property on rent to non-individuals.

 

IN SIMPLE WORDS

if you are a …

Salaried Individual / Pensioner

Net taxable Income *:

  • upto 5 Lakhs – Tax liability zero
  • above 5 lakhs – No change to previous tax liability calculations

Standard Deduction increased by 10,000

Interest income on bank/post office deposits up to ­ 40,000 will not be subject to TDS – Earlier was ­10,000

 

* Considering deductions under: ­

  • Section 80C (eligible Investments such as ELSS, Insurance premiums, Pension Funds etc)­
  • Section 80CCD ( National Pension Scheme)­
  • Section 80D ( Medical / Health Insurance)­
  • Section 80E (educational loans)­
  • Section 80G (Contribution to charitable institutions)­
  • Other eligible sections

Home Owner

If more than 1 self occupied houses, then notional rent on 2 houses is not taxable -earlier only 1 self occupied house was exempt. Notional rent taxable on more than 2 self occupied houses.

Long term Capital Gains upto ­ 2 crore from Property Sale can be re-invested in two house properties -earlier was 1 property only

If property is rented to non-individuals (typically corporates/ business tenants), then TDS will not be deducted by your tenant if your annual rental income is upto 2.4 lakhs – earlier was ­ 1.8 lakhs

 

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