Budget 2019: Ten Important Proposals of Income Tax and Their Impact

The Indian union budget of 2019 has not only incorporated revisions in the slabs of the income tax but revised the income tax rates. However, some proposals can be of interest to the taxpayers to make their life easier concerning taxes. Moreover, in this union budget, a taxpayer will get more options to select instruments of tax-saving or as well as save more on the taxes. Mentioned below are ten important proposals of income tax and their impact on taxpayers

The Life Insurance Policy’s TDS is increased:

Here’s a rundown to the increment in TDS of Life Insurance Policy

The Proposal

In budget 2019, it is proposed that the limit of TDS for Life Insurance policies will increase from one percent to five percent of the amount that is to be paid by the insurance providers if the policy is not satisfying the Section 10D of the IT Act. The proposal is to deduct the tax over the net salary so that the salary according to the deductor's TDS return can easily be matched with the income return that is filed by the assessee.

The Current Condition

As per Section 19DA of the IT Act, 1961, any amount that is received through the policyholder of the life insurance from the insurance provider is subject to TDS of one percent, if the maturity is not exempted u/s 10D of the IT Act. In the life insurance plans, if the Sum Assured is not more than 10 times the premium amount, then the proceeds of the policy will not be free of tax u/s 10D. In the present time, the TDS is on the gross amount.

Affect

The TDS amount will automatically come down as compared to the earlier position even after the rate has become higher.

What Should a Taxpayer Do?

In such a condition where the sum assured is less than 10 times the paid premium is most of the time a case of insurance policy that is of single premium. Generally, these types of policies have an option to select five to ten times the sum assured. Therefore, choosing a sum assured that is tax-free is advisable.

The CPSE ETF Will Get Same Tax Benefits as ELSS:

Under Budget 2019, the CPSE ETF is likely to get the same tax benefits as that of ELSS

The Proposal

It is proposed that the investments made towards Central Public Sector Enterprise Exchange Trade Fund (CPSE-ETF) should be extended to get more benefit u/s 80C.

The Current Condition

Equity Linked Savings Scheme is the only tax saver in the market linked category with a lock-in period of three years. NPS, ULIPs are some other tax savers but have a longer lock-in period.

Affect

Now the taxpayers will have an additional market-linked investment for tax savings to select from.

What Should a Taxpayer Do?

The CPSE-ETF has a much diversified investment portfolio. They have stocks from various stocks; however, of it comprises of the stocks of PSU, and then it makes it exposure for specific stocks of the companies. In this way, selecting carefully in such a case for saving tax is more important.

Added Tax Benefit on Purchasing Affordable Housing:

Here’s a brief to the added tax benefit on buying affordable housing

The Proposal

The deduction of a maximum of Rs. 1.5 Lakh is given on the interest payment of housing loan as per the new Section 80EEA.

The Current Condition

Over the properties that are self-occupied interest paid for a home loan, as per Section 24, is a deductible maximum of Rs.2 Lakh in one year.

Affect

The benefit of tax u/s 80EEA in additional to Section 24. Therefore, the total advantage can go up to 3.5 Lakh Rupees. On the other hand, the same interest amount will not be available in both sections.

What Should a Taxpayer Do?

There are some conditions before a person can avail of the benefits of tax as per the new section like the assessee should not have any residential property on loan sanction date. The loan must be sanction in the financial year 2019-20. The cost of house registration should not be more than 45 lakh Rupees, etc.

Interchangeability of PAN and Aadhar:

Below is a brief related to the interchangeability of PAN and AADHAAR card

The Proposal

It is proposed that there will be interchangeability between Aadhar and PAN. This will allow those who don’t own PAN to file the Income Tax Return as per their Income Tax Slab.

The Current Condition

Currently, it is not possible to file an Income Tax Return without having a PAN card. It is necessary to file the ITR as per the Income Tax Rates if the gross total salary of an individual is greater than the maximum amount that is not chargeable to tax.

Affect

In case this proposal is passed, one can file ITR by using his/her Aadhar.

What Should An Individual Do?

In case a person does not have a PAN, now can easily file ITR by using Aadhar.

The ITR Will Come Pre-Filled:

In case the Income Tax Returns come pre-filled

The Proposal

For better and easier compliance, a pre-fill ITR will be introduced.

The Current Condition

Presently, a taxpayer has to provide the information by self on losses and gains incurred in different classes of assets. This information must be sourced by payers of tax from mutual fund providers, banks, etc.

Affect

The process of ITR filing will become easier, quicker and more compliant. The chances of missing some information will be lesser.

What Should a Taxpayer Do?

It is suggested to link all the investments with the PAN. Although, in most cases it is mandatory.

TDS over Cash Withdrawals

Here’s the case with TDS over cash withdrawals

The Proposal

The cash withdrawals made from bank accounts for payments of business will bear 2% TDS for the amount that exceeds Rs.1 Crore in one year.

Affect

As much as possible, businesses should opt for digital payments.

Surcharge for People Falling Under Super-Rich Category:

While talking about the surcharge for people who fall under super-rich category, here’s the deal

The Proposal

Under this proposal, the people falling under the super-rich category will fall under a new income tax slabs in India. A higher surcharge for people falling in the category of income between Rs.2 Crore to Rs.5 Crore and for the people earning more than Rs.5 Crore.

Affect

There will be an increment in the effective rate of tax by 3.12 percent and 6.86 percent, respectively.

The Current Condition

Presently, those who have income more than Rs.50 lakh, there is an additional payout as a surcharge. If the net salary is more than 50 Lakh Rupees, but less than 1 Crore Rupees, a surcharge of ten percent on the income tax amount should be levied. For net salary that is more than Rs.1 Crore, a 15% surcharge on the income tax amount should be levied. In these cases, the Education and Health cess of 4% will be levied over the amount of.

Deduction on Buying Electric Vehicle:

The Proposal

The deduction of the income tax of up to Rs.1.5 Lakh over the paid interest on the loans taken to buy electric vehicles is proposed in the budget.

Affect

This new proposal will be of benefit to the people who want to opt for electric vehicles. The benefit becomes even more advantageous when it is taken together with a low GST rate on electric vehicles.

No Merchant Discount Rate or Additional Charges:

The Proposal

The Merchant Discount Rate or additional charges will not be imposed either on merchants or customers and the business establishments having a yearly turnover greater than Rs.50 Crore.

Affect

Some merchants impose charges of approximately 2% on a swipe of credit/debit card upon purchase from them. Going forward, as there will not be MDR, these merchants will not charge anything extra from the customers.

NPS Advantage

The advantage corpus of NPS is proposed to be made free of tax. Upon maturity at the age of 60 years maximum of 60% can be withdrawn.

Summing It Up

These are some of the important proposals of Income Tax and their impact on the taxpayers. These will be of use for most of the people but for few they can be of no use. However, the actual effect can be seen only when they will be live in the system.

Disclaimer: The data in the article above has been taken from the official website of the Income Tax Department of India. Please refer the official website for further details and changes.

Helpful Resources: Online Income Tax Calculator