The Finance Bill 2019-20 has brought many Direct Tax reforms. These reforms are aimed at providing relief to the individuals who fall under the middle class income bracket. It brings a general relief by giving rebate and at the same time provides further relief to the salaried class by increasing the standard deduction.
Major Direct Tax proposals from Budget 2019-20
- Income upto Rs. 5 lakh exempted from Income Tax
- More than Rs. 23,000 crore tax relief to 3 crore middle class taxpayers
- Standard Deduction to be raised to Rs. 50,000 from Rs. 40,000
- TDS threshold to be raised from Rs. 10,000 to Rs. 40,000 on interest earned on bank/post office deposits
- Existing rates of income tax to continue
- Tax exempted on notional rent on a second self-occupied house
- Housing and real estate sector to get boost-
- TDS threshold for deduction of tax on rent to be increased from Rs. 1,80,000 to Rs. 2,40,000
- Benefit of rollover of capital gains increased from investment in one residential house to two residential houses for capital gains up to Rs. 2 crore.
- Tax benefits for affordable housing extended till 31st March, 2020 under Section 80-IBA of Income Tax Act
- Tax exemption period on notional rent, on unsold inventories, extended from one year to two years
Individual taxpayers having taxable annual income up to Rs.5 lakhs will not be required to pay any income tax. The Finance Minister said that persons having gross income up to Rs. 6.50 lakhs are not required to pay any income tax if they make investments in provident funds, specified savings and insurance etc. Additional deductions such as interest on home loan up to Rs. 2 lakh, interest on education loans, National Pension Scheme contributions, medical insurance and medical expenditure on senior citizens etc, are also provided for in the Interim Budget 2019-20. Thus tax benefit of Rs. 18,500 crore is proposed to be provided to an estimated 3 crore middle class and small taxpayers comprising self employed, small business, small traders, salary earners, pensioners and senior citizens. For salaried persons, Standard Deduction is being raised from the current Rs.40,000 to Rs.50,000. This will provide additional tax benefit of Rs. 4,700 crore to more than 3 crore salary earners and pensioners. Exemption on levy of income tax on notional rent on a second self-occupied house is also now proposed. Currently, income tax on notional rent is payable if one has more than one selfoccupied house. TDS threshold on interest earned on bank/post office deposits is being raised from Rs. 10,000 to Rs.40,000. 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. The Finance Minister says that the Government wants the GST burden on home buyers to be reduced and accordingly the GST Council was moved to appoint a Group of Ministers to examine and make recommendations in this regard at the earliest. Shri Goyal said that soon, businesses comprising over 90% of GST payers will be allowed to file quarterly return.
Clarification below with respect to change in 5 lac exemption limit. There is no change in the slab rate- the Rebate u/s 87A has been increased from Rs. 2500 to Rs. 12,500 and is applicable from 1st April 2020.