Friday, December 20 2019, Contributed By: NJ Publications

The last budget presented by the government was widely welcomed by everyone. There were many key measures taken for the benefit of taxpayers. Now that the new financial year: 2019-2020, has dawned upon us, let us look at these changes already in effect.

1. Key Tax Changes:

The important thing here to note is that the tax slabs have not changed and the earlier tax slabs will continue. However, there does exist a few benefits and concessions to the taxpayers.

Tax rebate: The tax rebate available earlier for individuals earning annual income up to Rs 3.5 lakh has been now increased. The total income threshold is now Rs.5 lakh which means an increase in the tax rebate from Rs 2,500 to Rs 12,500. However, this rebate is available only to persons having net taxable income up to Rs.5 lakhs and for others with higher net income, this benefit will not be applicable.

Standard Deduction: The Standard Deduction available to salaried employees has been increased from Rs.40,00 to Rs.50,000. With this change, there is an additional tax saving of up to Rs 3,120 for individual taxpayers earning between Rs.10 to 50 lakhs.

2. TDS Limits:

The Tax Deducted at Source (TDS) limits has been changed significantly for the current financial year. The important thing to note is that while the applicable tax does not change on the income, TDS limit extension does benefit small investors as it will reduce the hassles of claiming a refund where the annual income is below exemption limit.

Interest Income: The threshold for deduction of tax at source on interest earned from banks and post office deposits has been increased from Rs 10,000 to Rs 40,000.

Rental Income: The Rent Limit for deduction of tax has been increased to 2,40,000 from 1,80,000 in the previous year.

3. Real Estate:

Some pretty important changes were made related to real estate taxation norms. This will surely benefit a lot of owners and the real estate markets as well.

Notional Rent: From this year, you will not be required to pay income tax on notional rent from your 'second' house lying vacant. Effectively, 'self-occupied' definition is extended to two houses if the other is not let out. Earlier if an individual had more than one house property, he was required to treat anyone as 'self-occupied' and was required to calculate notional rent and pay tax on the other properties accordingly, irrespective of whether the property was on rent or not.

Capital Gains: This year onwards, a taxpayer can claim exemption from capital gains on the sale of house property if the sale proceeds are invested to purchase/construct up to 'two' house properties. This benefit was available to only one property earlier subject to conditions. This benefit shall only be applicable if (a) the long-term capital gains shall not exceed Rs 2 crore and (b) the benefit is claimed only once in the taxpayer’s lifetime.

New GST Rates: The GST is an important component for the housing sector and effective this year, the rates have been further rationalised. For on-going under-construction projects, there is now an option either to charge the GST at 12% with an input tax credit (ITC) or at the new rate of 5% without ITC. In the case of affordable housing, these rates will be 8% with ITC or 1% without ITC.

Popular tax saving avenues:

An important element of income tax rules and also tax planning process for investors is the tax saving provisions available to them. For the new financial year FY 2019-2020, let us have a look at the various options and limits available to us, most of which is a continuation of the previous year.

Section

Description *

Amount Limit *

24

Home loan interest payment

₹ 2,00,000

80C

80CCC

80CCD

Contributions to

# Life Insurance premium, ULIPs

# PPF, Employee's share of Provident Fund, NSC, Senior Citizen Savings Scheme, Sukanya Samridhhi Account, etc.

# 5 year Bank or Post office deposits

# ELSS

# Home loan principal repayment

# Tuition fees for 2 children

# Annuity plan by life insurer for pension

₹ 1,50,000

80CCD (1B)

Additional contribution to NPS

₹ 50,000

80D

Health Insurance Premium paid towards (a) Self & Family and (b) Parents up to ₹ 25,000 each in both cases. If, senior citizen then ₹ 50,000. Health check-up up to ₹ 5,000 within overall limit.

Note: Deduction also available for medical expenditure up to Rs.50,000 for Senior Citizen without cover.

₹ 25,000 – ₹ 1,00,000

80TTA

Interest on Savings Account. Only available to Persons below age 60 years. Does not cover interest from Time /Recurring /Fixed Deposits.

₹ 10,000

80TTB

Interest on Savings Account & all kinds of deposits. Only available to Senior Citizen & above.

₹ 50,000

Apart from the above popular tax saving avenues, there are also some important deductions available for rebate /eligible expenditure made which may not be applicable to all but is still widely used.  

Section

Description *

Amount Limit *

80DD

Expenditure on disabled dependent

₹ 75,000 / 1,25,000

80DDB

Medical expenditure on self or dependent for specified diseases

₹ 40,000 / 1,00,000

80E

Interest on Education loan

As per provisions

80G

Eligible Donations – 50% or 100% of amount

As per provisions

80GG

Deduction for the rent paid if HRA is not received.

₹ 60,000

80U

Own physical disability

₹ 75,000 / 1,25,000

87A

Tax Rebate for net income up to Rs.5,00,000

₹ 12,500

Note: The income tax details are indicative in nature. Please consult your financial advisor /tax expert for more details.

Imp.Note: We are registered NJ Wealth Partners and this interview published is sourced from NJ Wealth with due permissions. Reproduction of this interview/article/content in any form or medium by any means without prior written permissions of NJ India Invest Pvt. Ltd. is strictly prohibited.
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