Changes in Income Tax Rules in 2019

The 2019 budget proposed certain changes in the income tax rules. The higher standard deduction, overall tax exemption, flexibility of income tax rates, tax benefits on buying affordable houses and many more changes have been proposed while introducing the interim budget. The following changes in the income tax rules have been suggested in the year 2019.

Taxable income limit increased from 2.5 lakh to 5 lakh

• Individuals above 80 years of age with net taxable income less than Rs. 5 lakh will not have to pay any income tax. Earlier, households, where the annual taxable income exceeded 2.5 lakh, were required to pay income tax.

• Rebate under Section 87A of the Income Tax Act, 1961 has been increased to Rs. 12,500 from Rs. 2500.

• Income tax rate slabs for different age groups have been given below.

For individuals below 60 years of age-

For individuals between 60-80 years of age-

For individuals above 80 years of age-

NPS investment is tax-free

• Every individual making an investment in the National Pension Scheme (NPS) is not required to pay income tax on the amount of income invested in the scheme.

• No income tax will be levied on the entire amount invested in the NPS. Earlier only 40% of the amount invested in the NPS was exempted from the income tax.

Increase in threshold limit of TDS

• The threshold limit for the tax deducted at source (TDS) has been increased from Rs 10,000 to Rs. 40,000. 

• If the interest on income deposited in the banks or post offices is less than Rs. 40,000 then, no tax will have to be paid on the income received as interest on deposits. 

• Also, TDS at the rate of 2% is deducted on cash transactions exceeding 1 crore in a year from banks, post offices or cooperative accounts. 

 Filing of ITR mandatory

• It is mandatory to file income tax returns in the following cases:

1. When expenditure on foreign travel has exceeded Rs 2 lakh in a financial year

2. When an individual pays more than Rs 1 lakh electricity bill in a financial year

3. Where an individual claims capital gains tax exemption and 

4. When in a financial year an amount exceeding Rs 1 crore has been deposited in the current account.

Increase in the standard deduction

• The standard deduction is a certain portion of income on which it is not necessary to pay income tax. It can be shown in the form of medical reimbursement or conveyance allowance.

• The standard deduction amount for salaried people has been increased from Rs 10,000 to Rs. 40,000.

Benefits on sale and purchasing of houses

• Earlier, it was necessary to pay income tax on long term capital gains on selling one of the two houses. However, individuals can now avail the benefit of long term capital gains once in a lifetime provided that the capital gains acquired by selling the property is not more than Rs 2 Crore.

• Also, individuals can claim an additional tax benefit of Rs 1.5 lakh under the Pradhan Mantri Awas Yojana (PMAY). The tax benefit can be availed on the interest paid on the housing loan. 

• It is also not necessary to pay income tax on the second house property that is lying vacant. Earlier, only the self-occupied property was exempted from tax.

• The aforementioned changes in income tax rules are applicable for the financial year 2019-2020. 

Author:

eStartIndia Team