February 1, 2019

Budget 2019 Highlights – 7 changes you must know

The budget for FY 2019-20 is now tabled. Let us see the Budget 2019 Highlights and what are the points that will affect to us individually.

Budget 2019 Highlights – 7 changes you must know

1. The BIG change in Individual’s Income Tax Slab Rates

Your tax liability if your income is up to Rs.5 lakh will turn to be ZERO. However, there is no tax slab changes from the Budget 2019.

Latest Income Tax Slab Rates for FY 2019-20 (AY 2020-21)

You notice that there is no change in Income Tax Slab Rates for FY 2019-20. Then how can be it is judged that there is no tax on an individual whose income is up to Rs.5,00,00?

The reason is the change in Sec.87A in Budget 2019. Earlier the limit under Sec.87A was up to Rs.3,50,000 and the deduction permissible was Rs.2,500. Now it is increased to Rs.5,00,000 and the deduction available is Rs.12,500. Refer my latest post in this regard (Revised Tax Rebate under Sec.87A after Budget 2019 ) and also (Latest Income Tax Slab Rates FY 2019-20 (AY 2020-21) ).

How to calculate Income Tax on your net or total income?

Now we understood the Latest Income Tax Slab Rates FY 2019-20 (AY 2020-21) . However, how to calculate the tax on our total income and how much is the tax benefits from Budget 2019 changes?

Let us take few examples and calculate the income tax amount.

# If you are under 30% Tax Slab and below 60 years of age

Let us say your next taxable income (after all deductions like Sec.80C and all) Rs.15,00,000.

Up to Rs.2,50,000-NIL

Rs.2,50,001 to Rs.5,00,000-Rs.12,500  @5%.

Rs.5,00,001 to Rs.10,00,000-Rs.1,00,000 @20%

Rs.10,00,001 and above (in this case Rs.15,00,000)=Rs.1,50,000 @30%.

So total tax will be Rs.12,500+Rs.1,00,000+Rs.1,50,000=Rs.2,62,500.

# If you are under 20% Tax Slab and below 60 years of age

Let us say your next taxable income (after all deductions like Sec.80C and all) Rs.7,00,000.

Up to Rs.2,50,000-NIL

Rs.2,50,001 to Rs.5,00,000-Rs.12,500 @5%.

Rs.5,00,001 to Rs.7,00,000=Rs.40,000 @20%

Therefore, the total tax will be Rs.12,500+Rs.40,000=Rs.52,500.

# If you are under 10% Tax Slab and below 60 years of age

Let us say your income is Rs.4,00,000

Up to Rs.2,50,000-NIL

Rs.2,50,001 to Rs.4,00,000-Rs.7,500 @5%.

However, using Sec.87A of IT Act, your tax liability will be ZERO.

An individual who is resident Indian and whose total income does not exceed Rs. 5,00,000 is entitled to claim rebate under section 87A up to Rs.12,500.

You noticed that there is no change in tax slabs. However, how can be it is zero tax for those who fall under up to Rs.5 lakh income? It is as below.

However considering the revised amendment to Sec.87A, your tax liability up to Rs.5,00,000 turn to be zero.

2. Standard Deduction for Salaried individuals and pensioners increased from existing Rs.40,000 to Rs.50,000

In the last year budget, Government introduced Rs.40,000 standard deduction available for all salaried individuals in lieu of the present exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses.

Now this limit is raised from Rs.40,000 to Rs.50,000.

3. TDS Limit on Bank FDs and Post Office Schemes raised from Rs.10,000 to Rs.40,000

Earlier the TDS limit on the interest you earn was Rs.10,000. Now this limit is raised to Rs.40,000.

This seems to be the biggest relief to many of us. BUT keep one thing in mind that AVOIDING TDS does not mean AVOIDING TAX.

3. Pradhan Mantri Shram-Yogi Maandhan

Finance Minister announced the Pradhan Mantri Shram-Yogi Maandhan for the unorganized sector workers with monthly income upto Rs.15,000. This pension yojana shall provide them an assured monthly pension of Rs.3,000 from the age of 60 years on a monthly contribution of a small affordable amount during their working age. An unorganized sector worker joining pension yojana at the age of 29 years will have to contribute only Rs.100 per month till the age of 60 years.

A worker joining the pension yojana at 18 years, will have to contribute as little as Rs.55 per month only. The Government will deposit equal matching share in the pension account of the worker every month. It is expected that at least 10 crore labourers and workers in the unorganized sector will avail the benefit of ‘Pradhan Mantri Shram-Yogi Maandhan’ within next five years making it one of the largest pension schemes of the world.

Do you think this is a BIG game changer? I don’t think so. Assume that someone going for this product and his age is 35 years. Then he will start to get Rs.3,000 a month from his 60 years of age. Assuming the inflation rate of 6%, then what he receive Rs.3,000 a month at his age will be today’s Rs.698 or Rs.700. For how many days today the same person can survive with this Rs.700 a month pension?

It seems to be a election gimmick. Rather than rationalizing the Atal Pension Yojana or NPS, they launched this scheme to garner some publicity.

4. Your Income Tax Returns and Refunds will be processed within 24 hours

The government has now approved a path-breaking, technology-intensive project to transform the Income-tax Department into a more assessee friendly one. All returns will be processed in twenty-four hours and refunds issued simultaneously. Within the next two years, almost all verification and assessment of returns selected for scrutiny will be done electronically through anonymized back office, manned by tax experts and officials, without any personal interface between taxpayers and tax officers.

5. Income tax on notional rent on a second self-occupied house abolished

Currently, income tax on notional rent is payable if one has more than one self-occupied house. Considering the difficulty of the middle class having to maintain families at two locations on account of their job, children’s education, care of parents etc. The government proposed to exempt levy of income tax on notional rent on a second house self-occupied.

6. TDS threshold for deduction of tax on rent increased

TDS threshold for deduction of tax on rent is proposed to be increased from Rs.1,80,000 to Rs.2,40,000 for providing relief to small taxpayers.

7. Benefit of rollover of capital gains under section 54 of the ITax Act raised

The benefit of rollover of capital gains under section 54 of the Income Tax Act will be increased from investment in one residential house to two residential houses for a taxpayer having capital gains up to Rs.2 Cr. This benefit can be availed once in a lifetime.

26 Comments

  1. Thank you Sir…

    Reply
  2. sir my mother got a plot in 2009 by lottery system of IDA and initially she paid some lumsum amonut and rest amount paid in instalments as per their rules and Ida did registry of plot in april 2016.now she wants to sell.now how we calculate long term capital gain

    Reply
    • Dear Prakash,
      It is the date of registration to the date of selling.

      Reply
  3. Simply superb. Why I did not come across this site earlier is my only regret. God bless you.

    Reply
  4. Your Excellent explanation, in such a brief and to the point write up, has provided me, an Income Taxpayer, the much needed clarity in understanding the Budget 2019. Well Done and Keep it up.

    Reply
  5. Hello Basavaraj,

    There is something on the limit on rent received as well. From 1.8 lakkhs to 2.5 lakhs or something like that. Please clarify on that as well. What and how it impacts house owners who have given house for rent. Thanks.

    With Regards
    Ullas

    Reply
  6. hello sir, i am staying in a rented flat (Rs. 15000 pm rental). I own a house in the same city (rental amount received Rs. 3500 pm, No homeloan). please let me know whether i am eligible for deduction to the extent of net rental amount ( Rs 11,500 pm) if i produce rent receipt or bank statement? thank you.

    Reply
    • Dear Harish,
      If your staying in the rental home is valid and acceptable to your IT AO, then yes you can claim HRA.

      Reply
  7. Hello Sir,
    Can you pls explain no 5 and 6 Income tax on notional rent on a second self-occupied house abolished and TDS threshold for deduction of tax on rent increased.

    Can u pls explain with example.
    If i let out in another city , and if rent im getting below 2.40lac is it non taxable as per point of 6?

    Reply
    • Dear Brundaban,
      Wait for few days. I am writing a detailed post on those two points.

      Reply
  8. Dear Basu

    Your post was dropped in my INBOX exactly at 15.38PM and again you have shown the world that you are the fastest blogger than TAXGURU, SIMPLE TAX INDIA and others. You were first to say what others said very much later.

    Kudos and Cheers.

    Reply
  9. STD deduction increased from 40 to 50 k, is it available for pension , other than employer pension e.g. EPFO pension EPS95; PMVVY or Jeevan Suraksha of LIC?

    Reply
    • Dear Rajinder,
      Yes. Because such pension income is also considered as salary income for taxation purpose.

      Reply
  10. Sorry , I have Not taken into account Sec 87A Amendment.
    Then It is perhaps O.K.

    Reply
  11. Table on ” Latest Income Tax Slab Rates for FY 2019-20 ( AY 2020-2021)”
    given at the Top of this Article is NOT Correct. Please Rectify the Same.

    Reply
    • Dear Nath,
      There is no change in income tax slabs. But change in Sec.87A limits.

      Reply
  12. Hello

    For the individual tax rates – can you please confirm if it is a tax slab rate change or is it that a rebate will be given only for people upto income of 5 lakhs?

    There have been few articles which state that this move only benefits those whose final taxable income is below 5 lakhs – if your final taxable income is more than that – then no such rebate is provided.

    Thanks
    Sagar

    Reply
    • Dear Sagar,
      Yes, there is actually no change in slab rate. Due to the increased limit in Sec.87A, the tax liability turn to be zero. My error in interpreting the same. I checked Finance Bill and corrected the same.

      Reply
  13. he hasnt changed the tax slabs.. 2.5 -5 still 5 % tax

    Reply
    • Dear Neil,
      Yes, there is actually no change in slab rate. Due to the increased limit in Sec.87A, the tax liability turn to be zero. My error in interpreting the same. I checked Finance Bill and corrected the same.

      Reply
  14. Has exemption limit gone up? I think it’s just going to benefit those up to 5 lakhs income

    Reply

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