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According to Budget 2019, an individual will only have to pay tax when the taxable income for the financial year crosses INR 5 lakh. However, certain specific cases can have an impact on this requirement. It is important to be aware of the changes that can influence financial planning for the year.
Remember these important changes in the financial year for effective financial planning.
1. No tax on taxable earnings till INR 5 lakh
No individual will be required to pay tax if the annual income for the financial year 2019-20 does not surpass INR 5 lakh, and individuals will get a complete tax rebate. The rebate under Section 87A has been hiked to INR 12,500 with effect from the financial year 2019-20. It is important to note that individuals will still be required to file their income tax return as per the laws if the total annual earnings crossed the minimum tax-exempted amount.
2. Standard deduction increased to INR 50,000
The Budget has raised the standard deduction from salary from INR 40,000 to INR 50,000. It is available to pensioners and salaried individuals.
3. No income tax on notional rent from the second self-occupied property
Individuals who own a vacant second home will not have to pay any income tax on the notional rent from the house. Earlier, individuals with an empty second house had to pay notional rent and a tax for that property.
4. Tax Deducted at Source (TDS) threshold increased to INR 40,000
5. External benchmark to decide the interest rate on loans
This is one of the most important tax changes in Budget 2019. The Reserve Bank of India (RBI) announced that a new floating rate for personal and retail loans would be linked to an external benchmark. Until now, they were linked to an internal benchmark.
6. No transfer of physical shares from April 1, 2019
This tax change will have an impact on individuals who invest in shares. From April 1, 2019, no individual can transfer shares in physical form.
7. New Goods and Services Tax (GST) rates and rules for the housing sector
There will be new GST rates for builders and developers. They can choose to charge GST at the rate of 12% with credit and 5% without an input tax credit for under-construction projects. The rates would be 8% along with input tax credit and 1% without input tax credit in case of affordable housing.
8. Investment of capital in two residential houses
Individuals who have sold a property now have the option to invest the capital gain in two houses rather than one to avoid paying capital gain tax. This facility can only be availed once in a lifetime if the capital profits do not surpass INR 2 crore.
9.Change in equity long-term capital gain
The long-term capital gain will attract a tax of 10% without any indexation benefit if the returns exceeded INR 1 lakh in 2018-19.
Keep these changes in mind for personal financial planning and file your income tax return on time.
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Ref. No. KLI/22-23/E-BB/492
