Budget 2019 Highlights Pertaining To Direct Taxes

Individual Taxation

• No change in slab and tax rates. Present rate continue for the next financial year 2019-20.
• However, surcharge has been increased for Individual, HUF, AOP. etc having income between Rs. 2 crore and Rs. 5 crore to 25% of the income tax and income above Rs. 5 crore to 37%. The effective tax rate for Individual/ HUF/AOP accordingly is now 39% if income is between INR 2 – 5 crore and 42.7% if income exceeds INR 5 crore.

Jayesh Dadia 
Chartered Accountant

• Interest on housing loan for the purpose of affordable house will be deducted up to Rs. 1.5 lakh on loan taken from financial institution for acquisition of residential house property whose stamp duty does not exceed Rs. 45 lakh.
• New Section 80EEBB has been inserted to provide for deduction of Rs. 1.5 lakh in respect of interest on loan taken for purchase of an electrical vehicle from any financial institution.
• NPS benefits enhanced – The amount received by the employee on closure or opting out of National Pension Scheme is exempt upto 60% or withdrawal, vis-a-vis 40% earlier. Further, the contribution of the Central government scheme is now upto 14% of the total salary of the employee vis-a-vis 10% earlier.

Corporate taxation

• The threshold limit for lower corporate tax of 25% has been increased from Rs. 250 crore to Rs. 400 crore. Domestic companies (turnover/ gross receipts of the previous year 2017-18 not exceeding Rs. 400 crore) will be taxable at 25% plus surcharge plus HEC for assessment year 2020-21.
• Buyback of shares of listed company
Presently, unlisted company is liable to pay tax on buyback of its shares. This was introduced mainly to check practice of unlisted company resorting to buyback of shares instead of payment of dividend. In order to curb such tax avoidance practice adopted by the listed company, the existing anti-abuse Section 115Q pertaining to buyback of shares has been extended to listed companies on recognized stock exchanges.

Widening of tax base

• A new Section 194M has been inserted to require any individual or HUF (who is not liable to tax audit) to deduct tax at source from the sum paid to a contractor or professional if aggregate payment during the year exceeds Rs. 50 lakh. The tax can be deposited under this provision without any requirement to obtain TAN.
• As per Section 194-IA, a buyer is required to deduct tax at source from the consideration paid to buy an immovable property. An explanation has been inserted that ‘consideration for immovable property’ shall include all charges paid towards club membership fee, car parking fee, electricity and water facility fees, maintenance fee or any other charges of similar nature, which are incidental to transfer of the immovable property.
• Any sum of money paid or any property situated in India transferred on or after July 5, 2019, by a person resident in India to a person outside India, shall be deemed to accrue or arise in India under section 9. However, the existing provisions for exempting gifts provided in Section 56(2)(x) will continue to apply.

• Mandatory furnishing of return of income by certain persons
Furnishing of return of income shall be mandatory under section 139 if an individual has deposited Rs. 1 crore or more in the current account or he has incurred expenditure of Rs. 2 crore or more on foreign travel or he has incurred expenditure of Rs. 1 lkh or more on electricity consumption. Further, a person claiming deduction under section 54, 54B, 54D, 54E, 54F, 54G, 54GA, 54GB of the Act are required to furnish return before claim of the rollover benefit if his total income is more than the maximum amount not chargeable to tax. This amendment will take effect from April 1, 2020 and, accordingly, apply to assessment year 2020-21.

PAN and Adhar can now be used interchangeably. The person not having PAN can file his return of income by quoting Aadhar number. PAN allotted to a person shall be deemed to be invalid if he fails to intimate the Aadharnumber to the department.

Measure for promoting less cash economy
• Under the existing provision of the Act, there is a prohibition of cash transaction and payment or receipt was allowed only through account payee cheques/account payee drafts or through electronic clearing system through a bank account. The relevant provisions are such as Section 13A receipt of donation by political parties, Section 35AD, expenditure of capital nature, Section 40A certain cash expenditure in excess of Rs. 10,000 per day, Section 43(1) acquisition of fixed assets, Section 44AD presumptive taxation scheme, Section 80JJAA additional deduction of amount of 30% of additional employee cost, Section 269SS, Section 269ST, Section 269T.

In order to encourage other electronic mode of payment, it is proposed to amend the above sections so as to include such other electronic mode as may be prescribed, in addition to the already existing permissiblemode of payment. This amendment will take effect from April 1, 2020.

• A new section 194N has been inserted to require deduction of tax at source at 2% if the aggregate of cash withdrawal during the financial year from any account maintained with the bank or co-operative bank or post office exceeds Rs. 1 crore. However, it is proposed to exempt payments made to certain recipients such as government banking companies, co-operative society engaged in carrying on business of banking, post office, banking correspondents and white label ARM who are involved in handling of substantial amount of cash as part of their business operations.
• Every person having total turnover exceeding INR 50 crore shall compulsorily accept payments through prescribed electronic modes, failing which penalty of INR 5,000 per day shall be levied for the period of default. Such person cannot levy extra charges on customers for these transactions.

Boost to Start-ups India

• The exemption from angel tax earlier available to category I Alternate Investment Fund (AIF) has been extended to Category II AIF. Also, it is clarified that the Central government will notify certain class of companies from exemption of angel tax. Further, in the budget speech, it was also mentioned that establishing the identity of investor and source of fund will be resolved by putting in place a mechanism of e-verification.
• Provision of carry-forward and set-off loss has been relaxed by permitting start-up to claim carry forward and set-off of loss even if the same person beneficially hold 51% shares in the start-up. The sunset clause of claiming exemption of Long Term Capital Gain has been extended from March 31, 2019 to March 31, 2021.
• Start-ups and investors who file requisite declarations and provide information in their returns will not be subjected to any kind of scrutiny in respect of valuations of share premiums.

Tax administration

• Government to start new scheme for faceless scrutiny e-assessments which shall be randomly allocated to assessing officers.
• Prefilled returns to be made available by widening the scope of furnishing statement of financial transactions to ease filing of income tax return.
• Relaxation of Provision of Section 201 and 40 of the Income Tax Act in the case of payment to non-resident.
• Clarification with regard to power of assessing officers doing transfer pricing assessment • Provision for providing tax relief where salary, etc. is paid in arrears or in advance have been amended to give more benefits to salaried employees.
• It is also clarified that no TDS would be deducted on non-income portion of life insurance pay-out.

Budget 2019 Highlights Pertaining To Direct Taxes

• Now, non-resident can also be subject to Black Money and Imposition Act if such non-resident were resident in the year of acquisition of undisclosed assets and income aboard.

Benami Property Transaction Act has also been amended to give more power to assessing officers for properly implementing provisions to achieve the main object of the Act.