Key changes proposed in the Income Tax Act – 1961 by recent Union Budget – 2019 [Finance (No. 2) Bill, 2019]
- Income Tax Rates of tax – No change in tax rates and basic exemption limit
Tax rates for all persons, other than domestic companies, would continue to be the same for A.Y. 2020-21 as applicable for A.Y. 2019-20. Further, there would be no change in the basic exemption limit applicable for individuals, HUFs, AOPs, BOIs and artificial juridical persons. However, Surcharge @ 25% of tax payable is proposed to be levied on individuals/HUFs or AOPs or BOIs or artificial juridical person whose total income exceeds Rs. 2 crores but does not exceed Rs. 5 crore and @ 37% where total income exceeds Rs. 5 crores. Surcharge @15% would continue to be applicable in cases where total income exceeds Rs. 1 crore but does not exceed Rs. 2 crores.
The concessional rate of tax@25% for A.Y.2020-21 is proposed to be extended to domestic companies whose gross receipts or total turnover does not exceed Rs.400 crores in the P.Y.2017-18. In respect of other domestic companies, the income-tax rate would continue to be 30%.
- Tax Deduction at Source (TDS) on payments by Individual/HUF to contractors and professionals
TDS net is proposed to be widened to all the categories of taxpayer even in respect of personal nature of payment. New section 194M proposed to be inserted w.e.f. 1.9.2019 to provide for tax deduction at source @5% by individual or HUF (other than those required to deduct tax under section 194C and 194J) at the time of payment or credit, whichever is earlier, of any sum to any resident for carrying out any work in pursuance of a contract or by way of fees for professional services during the financial year if such sum, or aggregate of such sums, exceed(s) Rs. 50 lakh in a year.
- TDS on transfer of immovable property
Section 194-IA provides for levy of TDS @1% on the amount of consideration paid or credited to a resident for transfer of an immovable property other than agricultural land. However, no deduction shall be made under section 194-IA where the consideration for the transfer is less than 50 lakh. For this purpose, it is proposed to include all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property;’ in the term “consideration for immovable property”.
- Increase in TDS rate on non-exempt portion of life insurance pay-out on net basis
A controversial is proposed to be resolved in section 194DA. Under section 194DA, tax is required to be deducted @1%, at the time of payment of any sum paid to a resident under a life insurance policy, which is not exempt under section 10(10D).
At present, tax is deducted at source on gross amount and not on net income (i.e after deducting the amount of insurance premium paid by him from the total sum received) on which assessee has to pay tax. Section 194DA is now proposed to be amended to provide for tax deduction at source @ 5% on income component of the sum paid by the person.
- TDS on cash withdrawal
New section 194N proposed to be inserted to provide for levy of 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.
- Additional deduction of interest on housing loan:
New deduction by introducing new Section 80EEA is proposed whereby an additional deduction of up to Rs. 1,50,000 will be available to individual towards interest on loan taken from any financial institution for purchase of residential house. Condition for claiming deduction:
a] Loan is sanctioned in the financial year 2019-20;
b] stamp duty of the house does not exceed Rs. 45 lakhs; and
c] Assessee does not own any residential house property on the date of sanction of loan.
- Deduction in respect of purchase of electric vehicle
To promote electric vehicle, Section 80EEB is proposed to be inserted to provide deduction of up to Rs.1,50,000/- to an individual for interest on loan payable to financial institution for purchase of electric vehicle where such loan is sanctioned during the period 1.4.2019 to 31.3.2023.
- Tax on distributed income of listed companies on buy back of listed shares:
Additional income-tax (distribution tax) @25% leviable under section 115QA on companies not listed on a recognised stock exchange at the time of buy-back of shares from shareholders is proposed to be extended to all companies including companies listed on recognised stock exchange with effect from 5th July 2019. Consequently, exemption under section 10(34A) would be extended to shareholders of listed companies on consideration received on account of buy-back of shares.
- Mandatory furnishing of return of income by certain persons
Section 139 is proposed to be amended to require mandatory filing income-tax return on or before the due date by any person who, during the previous year,
– has deposited an amount or aggregate of the amounts exceeding Rs.1 crore in one or more current accounts maintained with a banking company or a co-operative bank;
– has incurred expenditure of an amount or aggregate of the amounts exceeding Rs. 2 lakh for himself or any other person for travel to a foreign country; or
– has incurred expenditure of an amount or aggregate of the amounts exceeding Rs. 1 lakh towards consumption of electricity;
– fulfils such other conditions as may be prescribed
Further, an Individual, HUF, AOPs, BOIs or artificial juridical person whose total income before giving effect to the provisions of Chapter VI-A as well as section 54 or section 54B or section 54D or section 54EC or section 54F or section 54G or section 54GA or section 54GB exceeds the basic exemption limit, is also required to file income tax return mandatorily.
- Inter-changeability of PAN and Aadhaar for ITR and transactions requiring mandatory quoting of PAN
To ensure ease of compliance, it is also proposed to provide for inter-changeability of PAN with the Aadhaar number for return filing and transactions requiring mandatory quoting of PAN in prescribed documents.
- Other electronic mode of payments permitted:
In order to encourage electronic modes of payment, it is proposed to amend sections 13A, 35AD, 40A, 43(1), 43CA, 44AD and 80JJAA so as to include such other electronic mode as may be prescribed, in addition to the already existing permissible modes of payment in the form of an account payee cheque or an account payee bank draft or the electronic clearing system through a bank account.
- National Pension Scheme (NPS):
Limit of exemption in respect any payment from the NPS Trust to an assessee on closure of his account or on his opting out of the pension scheme, proposed to be increased from 40% to 60% of the total amount payable to him at the time of such closure or on his opting out of the scheme.
- Mandating acceptance of payments through prescribed electronic modes:
New section 269SU proposed to be inserted to provide that every person, carrying on business, has to provide facility for accepting payment through prescribed electronic modes, in addition to the facility for other electronic modes, of payment, if any, being provided by such person, if his total sales, turnover or gross receipts, as the case may be, in business exceeds Rs. 50 crores during the immediately preceding previous year. New section 271DB is also proposed to be inserted to provide that the failure to provide such facility for electronic modes of payment would attract penalty of Rs. 5,000, for every day during which such failure continues.
Further, consequential amendment is proposed in Payment and Settlement and Systems Act, 2007 so as to provide that no bank or system provider shall impose any charge upon anyone either directly or indirectly for using the modes of electronic payment prescribed under section 269SU.
- Limit of tax payable increased for proceeding prosecution proceeding for failure to furnish return of income:
Section 276CC as of nowinter alia, provide that prosecution proceedings for failure to furnish returns of income against a person shall not proceeded against, for failure to furnish the return of income in due time, if the tax payable by such person, not being a company, on the total income determined on regular assessment does not exceed Rs. 3,000. The threshold of tax payable is proposed to be increased from Rs. 3,000 to Rs. 10,000.
- Penalty for under-reporting or misreporting of income in case a return of income is furnished for the first time under section 148:
The provisions of section 270Ado not contain the mechanism for determining under-reporting of income and quantum of penalty to be levied in a case where the person has under-reported income and furnished return of income for the first time under section 148. Section 270A is proposed to be amended to provide for manner of computing the quantum of penalty in a case where the person has under-reported income and furnished his return for the first time under section 148.