Budget 2019-20 :
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Key highlights of the budget covering Direct and Indirect Tax proposals are given below :
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I. DIRECT TAX
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➢ Deposit taking and systemically important non-deposit taking NBFCs can now pay tax in the year they receive interest for certain bad or doubtful debts.
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➢ Companies up to an annual turnover of Rs.400 crores would qualify for the lower rate of tax of 25% (plus surcharge and cess).
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➢ Super Rich Taxation – Highest Individual Tax Rate increased from 35.88% to 42.744%. The highest surcharge rate has been proposed of 37% for those having total income exceeding Rs. 5 crores and at 25% for those having total income between Rs. 2 crores to Rs. 5 crores.
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➢ NPS Withdrawal Exemption limit hiked to 60% – Any payment from the NPS Trust to an assessee on closure of his account or on his opting out of the pension scheme, to the extent of 60% (earlier 40%) of the total amount payable to him at the time of such closure or on his opting out of the scheme, is exempt from tax
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➢ Re-incarnation of 1/6 Scheme – Mandatory furnishing of return of income by certain persons
Persons who enter into certain high value transactions have to furnish their return of income mandatorily for that relevant year. The transactions are:
- deposited Rs. 1 one crore or more in bank accounts
- incurred expenditure more than Rs. 200,000 for foreign travel
- electricity bill above Rs.100,000 or
- claiming any benefits of capital gains exemption on investment in a house or a bond or other eligible assets; or
- other prescribed conditions
- This is similar to the earlier scheme of mandatory filing of returns on fulfilment of certain criteria but which was subsequently withdrawn.
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➢ Deduction for interest on electric vehicles loan (Proposed section 80EEB)
With a view to improve environment and to reduce vehicular pollution, it is proposed to allow deduction in respect of interest on loan taken for purchase of one electric vehicle from any financial institution up to Rs. 150,000. This is subject to the condition that the loan is being taken during the period from 1 April 2019 to 31 March 2023 and the assessee does not own any other electric vehicle on the date of sanction of loan.
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➢ Deduction for interest on Housing loan (Proposed section 80EEA)
With a view to provide impetus on affordable housing, it is proposed to allow deduction in respect of interest on loan taken for purchase of an affordable house (worth not above Rs. 45 Lakhs) up to Rs. 150,000. This is subject to the condition that the loan is being taken during the period from 1 April 2019 to 31 March 2020 and the assessee does not own any other residential house on the date of sanction of loan. This is in addition to interest deduction of Rs. 200,000 which can be claimed as interest on self-occupied property.
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➢ Inter-changeability of PAN & Aadhaar and mandatory quoting in prescribed transactions
The Inter-changeability of PAN & Aadhaar and mandatory quoting in prescribed transactions or for filing or return is a very welcome move and would help to increase the tax base.
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➢ TDS on property scope widened to include all additional charges including the consideration.
For purpose of TDS on purchase of property @ 1%, it has been clarified that the consideration for immovable property” shall include all charges of the nature of club membership fee, car parking fee, electricity and water facility fees, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property. This would put additional compliance burden on home buyers for other residuary payments.
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➢ Tax Deduction at Source (TDS) on payment by Individual/HUF to contractors and professionals
It is proposed to insert a new section 194M in the Act to provide for levy of TDS at the rate of 5% on account of contractual work or professional fees by an individual or a Hindu undivided family, who are not required to deduct tax at source under section 194C and 194J of the Act, if such sum, or aggregate of such sums, exceeds Rs. 50,00,000 in a year. However, in order to reduce the compliance burden, it is proposed that such individuals or HUFs shall be able to deposit the tax deducted using their Permanent Account Number (PAN) and shall not be required to obtain Tax deduction Account Number (TAN).
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➢ TDS on cash withdrawal to discourage cash transactions
In order to discourage cash transactions and move towards less cash economy, it is proposed to levy TDS @ 2% on cash payments in excess of Rs. 1 crore in aggregate made during the year, by a banking company or cooperative bank or post office, to any person from an account maintained by the recipient.
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➢ Buy-back tax extended to listed companies
Any buy back of shares from a shareholder by a company listed on recognised stock exchange, on or after 5th July 2019, shall also be covered by the provision of section 115QA of the Act and have to pay tax @ 23.296%. This would be a barrier for the companies who have already made announcement for buy-back or are in process. The gains on buy-back would be exempt in the hands of the shareholders.
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➢ Proposal to give relief on levy of securities transaction tax
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➢ Section 35AD scheme would include units set up in the areas of solar photovoltaic cells, lithium storage batteries, solar electric charging infrastructure, computers servers, laptop etc.
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➢ Faceless and anonymous assessment system for income tax being rolled out this year in phases.
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