Income Tax Law as applicable for the first installment of advance Tax.

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Income Tax Law as applicable for the first installment of advance Tax.

First installment of the advance tax is due on 15th June. Taxpayers have to ensure payment of 15% of anticipated annual tax liability by 15th June. Notably, in the current scenario, rate of Interest on bank FDR & on loan availed from bank is comparatively cheaper as compared to the interest that can be charged by the Income Tax Department. It makes sense to pay the income tax well in time to avoid impact of interest. For correct working of the advance tax installment, one needs to work the tax liability keeping in view the laws as applicable from 01.04.2019. Let’s have quick look at few key changes from a personal tax perspective as carried out by Interim Budget 2019

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  1. Rebate under Section 87A:
    Earlier, there was a rebate available for individuals earning annual income up to Rs 3.50 Lakh  Tax rebate under Section 87A has been enhanced from Rs. 2,500 to Rs. 12,500/-. Further, it is available only to a resident individual whose total income does not exceed Rs. 5, 00,000/-. HUF is not eligible for any rebate u/s 87A.  Individual taxpayer with income up to Rs. 5 Lakh will not be liable for any income tax now. Lot many taxpayers have formed a wrong notion that the basic exemption limit has been increased to Rs. 5 Lakh. This is not at all true. The basic exemption limit & tax slab has not been changed at all in this interim budget – 2019. What has actually changed is a tax rebate u/s 87A if the income of any individual taxpayers does not exceed Rs. 5 Lakh.
  2. Standard deduction from salary
    Salaried taxpayer were eligible for standard deduction of Rs. 40,000/-. The limit of standard deduction for the salaried class taxpayers has now been increased from Rs. 40,000/- to Rs. 50,000/-. 
  3. Dilution in the concept of deemed to be let out property:
    If an individual owns more than one self-occupied house property for self occupation then only one house property of his choice is treated as self-occupied and its annual value is computed as nil. The other house property is deemed to be let-out (even if it is not actually let out) and is chargeable to tax on notional rent basis.
    Now, a person owning two house property then nothing would be liable for taxation on notional basis.  However, it must be carefully noted that there is no change in aggregate limit for deduction in respect of interest on housing loan of Rs. 2,00,000/-. 
  4. Long Term Capital Gain (LTCG) exemption under section 54 extended to two residential houses:
    Any LTCG arising to an Individual or HUF from the sale of residential house property is exempt from tax if such LTCG is invested in another residential house property. Taxpayers earlier were required to invest only in ‘one’ residential house in India to claim exemption under section 54. Now, from financial Year 2019-20, taxpayers are allowed exemption even if the LTCG is invested in two residential house properties in India. However, there is a rider.

Exemption is available only if the amount of LTCG doesn’t exceed Rs. 2 Cr. Exemption provision is not worded in such a way that exemption can be claimed up to Rs. 2 Cr in case LTCG amount exceeds Rs. 2 Cr. The proposed amendment in section 54 is drafted in such a way that the exemption would not be available even if LTCG exceeds Rs. 2 Cr marginally.

Further, this is a once in a life time offer. If taxpayer exercises this option once, he shall not be subsequently entitled to exercise the option for the same or any other assessment year, i.e., the assessee can exercise this option only once in a lifetime.

  1. TDS on interest income:
    Interest payment on bank FDR attracts Tax Deduction at Source (TDS) provision. Section 194A deals with deduction of TDS on interest income other than interest on securities like interest on Fixed Deposits. This section is now amended to provide relief to the senior citizens. The threshold limit of non applicability of TDS on interest from FDR has been increased from Rs. 10,000/- to Rs. 40,000/-.

 

  • TDS on rental income:
    Threshold limit for deduction of tax at source under section 194-I on rental income has been increased from Rs. 1,80,000 to Rs.2,40,000.

 

 

One should also keep all the above changes in mind while computing the tax liability & advance tax for the financial year 2019-20. However, this is subject to change by the Final Union Budget to be presented in the Parliament on 5th July 2019.

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