Finance Minister Nirmala Sitharaman presented the Union Budget 2019 along with the Finance Bill (No. 2), 2019 on 5th July 2019 in the Parliament to amend the Income Tax Act, 1961. The main highlights of Income Tax provisions in the Union Budget 2019 for taxpayers are listed in this article. This is her first maiden Union budget since the formation of the new government in May 2019.
The Union Budget 2019 proposed various new income tax provisions and amendments in the existing provisions through Finance Bill (No. 2), 2019. The tax proposals are aimed to stimulate growth, incentivize affordable housing, and encourage start-ups by releasing entrepreneurial spirits. It will also be geared towards promoting the digital economy. The aim to simplify tax administration and bring greater transparency of her government is continued in Budget 2019 too.
The Finance minister in her Budget Speech did not forget to thank the taxpayers who performed their duty by paying their taxes. She acknowledged that it is because of taxpayers valuable contribution that the Government is able to work for the collective dream of inclusive and all-round development of the nation.
The main highlights of the Union Budget 2019 related to the income tax provisions are listed under-
1. The income tax benefits given to the taxpayers by the Interim Budget 2019 have been continued.
2. For the convenience of taxpayers, PAN and Aadhaar made interchangeable. If PAN card not available, one can file Income Tax returns using his or her Aadhaar number. Further, under the income tax rules, there are certain transactions in which a person is required to quote his PAN. Now, he can quote his Aadhaar Number wherever they are required to quote PAN, if he does not have a PAN.
3. For the convenience of taxpayers, Pre-filled tax returns will be made available to taxpayers which will contain details of salary income, capital gains from securities, bank interests, and dividends etc. and tax deductions. For this purpose, information regarding these incomes will be collected from the concerned sources such as Banks, Stock exchanges, mutual funds, EPFO, State Registration Departments etc. This will not only significantly reduce the time taken to file a tax return but will also ensure the accuracy of reporting of income and taxes.
4. Nationwide Faceless Income Tax Assessment in electronic mode to be launched soon in phases. No human interface and personal interaction are allowed in the faceless assessment which will reduce taxpayers' trouble and the undesirable practices of the tax officials. The cases selected for scrutiny will be handled by a Central Cell in an anonymous manner.
5. Tax collection increased by over 78% from Rs. 6.38 lakh crore in Financial Year 2013-14 to around Rs. 11.37 lakh crore in Financial Year 2018-19.
6. To boost affordable housing, the Interim Budget 2019 extended the benefit under section 80-IB to the housing projects approved till 31st March 2020. The benefit was from the builders' or developers' perspective. The Union budget has extended the benefit to the buyers of affordable houses. An additional deduction up to Rs. 1.50 lakh will be provided for interest paid on loans borrowed up to 31st March, 2020 for purchase of an affordable house valued up to Rs. 45 lakh.
7. Relief in levy of Securities Transaction Tax (STT) is provided. The Securities Transaction Tax (STT) is proposed to be restricted to the difference between settlement and strike price in case of exercise of options.
8. The phase-wise reduction in corporate taxes is continued in the Union Budget 2019. All companies having an annual turnover up to Rs. 400 crore will have to pay taxes at a lower rate of 25 per cent instead of 30%. This will cover 99.3% of the companies and only 0.7% of companies will remain outside this lower rate of tax. The turnover limit is increased from Rs. 250 crore to Rs. 400 crore in the Union budget 2019.
9. To boost the manufacturing of Electric Vehicles in the country, Additional income tax deduction of Rs. 1.50 lakh on the interest paid on loans taken to purchase electric vehicles or e-vehicles.
10. Surcharge on individuals having taxable income from Rs 2 crore to Rs 5 crore and Rs. 5 crore and above has been enhanced. The effective tax rates for these two categories will increase by around 3% and 7% respectively. The tax burden on small and medium-income earners earning annual income up to Rs. 5 lakh are not required to pay any income tax. However, those earning a higher income needs to contribute more to the Nation’s development and thus the additional surcharge is levied.
11. To resolve the Angel Tax Issue in case of start-ups, the start-ups and their investors who file requisite declaration & provide information in their return will not be subjected to any kind of scrutiny in the valuation of share premiums. Start-ups are not required to justify the fair market value of their shares issued to certain investors including Category-I Alternative Investment Funds (AIF). This benefit is now extended to Category-II Alternative Investment Funds. Valuation of share market will be beyond Income tax scrutiny. In order to give relief to start-ups, in case of pending assessments, no inquiry or verification can be carried out by the Assessing Officer without obtaining approval of his supervisory officer. Funds raised by start-ups will not require any kind of scrutiny from the Income Tax Department. The period of exemption of capital gains arising from the sale of residential house for investment in start-ups extended up to 31st March, 2021. The conditions for carry forward and set off of losses in the case of start-ups has been relaxed.
12. To promote digital payments and to discourage the practice of making business payments in cash the Union Budget 2019 proposed to levy TDS of 2 per cent on cash withdrawal of more than Rs 1.0 crore in a year from a bank account. This will reduce circulation in the economy and promote the digital economy.
13. The benefit of interest on certain bad or doubtful debts is allowed to be offered to tax in the year in which this interest is actually received to deposit-taking as well as systemically important non-deposit taking NBFCs. Presently, this benefit is available to scheduled banks and other financial institutions
14. Tax incentives are given to an IFSC including 100 % profit-linked deduction under section 80-LA in any ten-year block within a fifteen-year period, exemption from dividend distribution tax from current and accumulated income to companies and mutual funds, exemptions on capital gain to Category-III AIF and interest payment on loan taken from non-residents.
Also Read:
Union Budget 2019 - Income Tax announcements in Budget Speech
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