Interim Budget 2019-20: A Bold Budget

The Finance Minister Piyush Goyal presented a very bold interim budget of the Modi government on February 1, 2019. This is the first time aFinance Minister has given concession in the direct tax provisions in the interim budget. The interim budget has given relief to farmers, poor persons, unorganized sector, salaried employees and middle class families. Some of the major proposals are discussed as under: 

Jayesh Dadia 
Chartered Accountant 

(a) Salary income 

Standard deduction available to salaried employees, which was introduced in the last budget, has been increased from Rs 40,000 to Rs 50,000with effect from April 1, 2019. This will benefit all the salaried employees and pensioners. 

(b) House property income 

At present, an individual is entitled to claim exemption in respect of one self- occupied house property. In this budget, it is proposed that an individual will be entitled to exemption in respect of two residential houses. Further, for anassessee who is holding the house property as a stock-in-trade such as builders, developers, etc., it has been provided that such assessee will have to pay tax on the basis of notional income of the house property which is not let out after two years from the date of completion of the construction. Earlier, it was provided only for one year. 

(c) Interest on housing loan 

Interest up to Rs 2,00,000 shall be allowed as deduction in respect of two houses, which are claimed to be for self-use and not let out. Earlier, only one house was entitled for deduction of interest. 

(d) Capital Gain 

At present, Section 54 of the Income Tax Act provides for exemption in respect of Long Term Capital Gain (LTCG) on sale of any residential house by an individual or HUF. This exemption is available if such assessee sells any residential house and reinvests the capital gain for purchase of another residential house within two years of sale or constructs such residential house within three years of such sale. This section is now amended effective from financial year 2019-20 to provide that if the LTCG does not exceed Rs 2,00,00,000, the individual or HUF can purchase or construct two houses within the prescribed time limit to claim exemption from tax. However, this concession will be available once in a lifetime. 

(e) Affordable Housing Projects 

Tax incentive under section 80IBA of the Income Tax Act for developers of affordable housing scheme has been extended by one year for projects registered upto March 31, 2020. 

(f) Withholding tax 

The threshold limit for deduction under section 194A of the Income Tax Act for interest on bank deposit, deposit with co-operative bank and post office deposit has been increased from Rs 10,000 to Rs 40,000. Therefore, there will be no TDS on fixed deposit if the interest does not exceed Rs 40,000. Also, the threshold limit for tax deduction under section 194I of the Income Tax Act for payment/credit of rent has been increased from Rs 1,80,000 to Rs 2,40,000.Thus, no tax will deductible if the yearly rent is less than Rs 2,40,000 from April 1, 2019. 

(g) Rebate in computing income tax 

Section 87A of the Income Tax Act, at present, provides that if the total income of a resident individual does not exceed Rs 3,50,000, he shall be entitled to a deduction from tax on his total income of Rs 2,500 or the actual tax payable on such income, whichever is less. This section is now amended to provide that if the total income of an individual does not exceed Rs 5,00,000, he shall be entitled to a rebate of Rs 12,500 or the actual tax payable on such income, whichever is lower. This amendment is effective from the financial year 2019-20. The effect of this amendment can be explained by the following illustrations. 

(h) Administrative - 

Process of all Income Tax Returns within 24 hours of uploading with refund (being issued immediately). - No personal interface between the assessee and the assessing officer in the case of scrutiny assessment