Budget analysis from a personal taxation perspective

By Archit Gupta

The much-awaited Union Budget 2019 has been announced by the Finance Minister, Nirmala Sitharaman today. There were many expectations and speculations on how things could be on the personal taxation front as it directly affects the individual taxpayers’ financial lives. Especially, small taxpayers such as salaried individuals, middle-class people, and pensioners would be curious to know the tax implications on their lives for the current financial year. 

Here is a list of budget amendments that are associated with personal taxation for the financial year 2019-20.

Interchangeability of PAN and Aadhaar: For the convenience of taxpayers, the government has proposed to make linking PAN and Aadhaar interchangeable. Those who do not have their PAN card can now file income tax returns by just quoting their Aadhaar number. 

Tax Slabs: Individual taxpayers having an annual income of up to Rs.5 lakh need not pay any taxes, which was laid out in the Interim Budget itself. Taxpayers with a taxable income above Rs.2 crore, high net worth individuals, have to pay more taxes in the financial year 2019-20. That is, people earning an annual income between Rs.2 crore to Rs.5 crore have to pay a surcharge of 25% from the current 15%. For people earning an annual income of above Rs.5 crore must pay a total surcharge of 37% from the current 15%. So higher taxes for the super-rich.




Taxable income

Present surcharge

Proposed surcharge

Rs 50 lakh to Rs 1 crore

10%

10%

Rs 1 crore to Rs 2 crore

15%

15%

Rs 2 crore to Rs 5 crore

15%

25%

Rs 5 crores and above

15%

37%

 Let’s see how will this increase affect high net-worth individuals having taxable income more than Rs 2 crore and Rs 5 crores:





Taxable Income 

Tax before Budget 2019 

Tax after budget 2019

Tax difference

Rs 2.5 crores

Rs 87,45,750

Rs 95,06,250

Rs 7,60,500

Rs 5.5 crores

Rs 1,95,09,750

Rs 2,32,42,050

Rs 37,32,300

House Property: In order to promote ‘Housing for all’, the government has introduced a new section 80EEA under the income tax act which will provide an additional deduction of up to Rs.1.5 lakh for interest paid on a home loan for the purchase of a house valued within Rs.45 lakh. This loan should have been taken within the current financial year. This has been incorporated to encourage affordable housing.

Capital Gains: The government has extended the tax exemption period of capital gains arising from the sale of a residential house where net proceeds are invested in start-ups under section 54GB until 31 March 2021. These proceeds must be utilised by startups for purchase of assets.

Faceless e-Assessment: The finance minister mentioned a scheme of faceless electronic assessment with no human interface. The scheme will be launched this year. This approach is introduced to eliminate certain undesirable practices followed by tax officials and to reduce the personal interaction involved in the scrutiny process. The proposed process will be launched in a phased manner. Cases will be distributed to various assessments units randomly without disclosing the name, designation, and location of the assessing officer.

Additional Deduction on Electric Vehicles: The government has already proposed a reduced GST rate from 12% to 5% to the GST Council. 

Also, a new section 80EEB has been introduced under the income tax act. Section 80EEB provides an income tax deduction of Rs.1.5 lakh per year on the interest paid on loan taken to purchase the electric vehicle from any financial institution, provided the loan is sanctioned between 1st April 2019 to 31st March 2023 and the individual does not own any other electric vehicle on the date of sanction of loan.

The table given below shows all changes made related to housing property by the Modi Govt:





Changes to House property

Budget year

Effective

Changes

Impact

Union Budget 2019-20

April 1st,2019

Introduction of new section 80EEA under the income tax act which will provide an additional deduction of up to Rs.1.5 lakh for interest paid up to 31 March 2020 for the purchase of a house valued within Rs.45 lakh.

Additional deduction for individuals having a home loan in certain cases.

Budget 2019-20 (Interim)

April 1st,2019

Two self-occupied house properties will be allowed as an exemption under “Income from House Property”.

No tax on the notional rent on owning second property which was assumed to be let out.

Budget 2016-17

April 1st, 2017

Introduction of section 80EE-

 

1. Additional exemption of Rs. 50,000 for housing loans up to Rs. 35 lakh, provided the cost of house is not above Rs. 50 lakh.

 

2. The loan should be sanctioned by the financial institution during the period- April 2016 to March 2017.

 

b. Limit under section 80GG was raised to Rs 5,000 from Rs 2,000.

Higher deduction for home loan interest in specific cases.

Budget 2014-15

April 1st, 2015

Deduction limit for Interest on house property was increased to Rs 2 lakh from Rs 1.5 lakh.

Higher house property loss, lower taxable income

The interim budget provisions will put a bit more money in the hands of the people with an annual income less than Rs.5 lakh. Also, it is likely that the income tax department will receive its target revenue as the higher net worth individuals will face a higher tax rate due to a surcharge.

Archit Gupta is the founder & CEO of ClearTax.

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