Income Tax amendments in Budget explained in a Simplified manner


On First February of 2019, Honourable Interim Finance Minister CA. Piyush Goyal presented the budget in parliament for FY 2019-20. He also talked about various amendments that will take place in Income Tax Act from next financial year. In this article I tried to summarize and explain those amendments in simple manner. The following are the amendments that will take place in Income Tax Act:

1. No Change in Tax Slab Rates for the FY 2019-20 (AY 2020-21)

2. For Salaried Persons:

• Standard Deduction under Section 16 (ia) has been increased to Rs. 50,000 from existing Rs. 40,000 (Increase of Rs. 10,000)

• This increase in Standard Deduction will provide additional tax relief of Rs 2,080 and Rs 3,120 for Salaried Assessee falling under Tax slab rate of 20% and 30% respectively.

3. For Assessee having Income from House Property:

• Previously if Assessee had more than two Residential Houses and all are occupied by him for his residential use or one is occupied by him for his residential use and others are vacant, then assessee has to declare only one house as self occupied and others as Deemed let out. On the houses which are declared as Deemed Let Out houses, Assessee had to offer income as Notional Rent and had to pay taxes on the same.

Now an amendment has been carried out in Section 23, which allows Assessee to have Two Self occupied Houses. It means that If Assessee had more than two Residential Houses and all are occupied by him for his residential use or one is occupied by him for his residential use and others are vacant, now Assessee can declare two of such houses as Self Occupied and need not to offer any Notional Rent on such Self occupied houses for taxation purpose.

(Taxability of notional rent in respect of second self occupied house for Assessees having exactly two residential Houses still require clarifications)

• Deduction of House Loan Interest:

It has been clarified that the Limit of Deduction of House Loan Interest for Self occupied property under Section 24(b) will continue to exist at Rs. 2,00,000 in aggregate for both the Self occupied houses. It means that if Assessee had taken Loan for both Houses which are declared as Self Occupied by him, then maximum deduction in respect of House Loan Interest for the both houses put together cannot exceed Rs. 2,00,000.

• Extension of Time period for offering Notional Rent on Property held as Stock In Trade by Builders:

Previously if any builder has any Houses or flats ready for sale which are part of its business inventory, then he has to pay notional rent on the same after one year from the end of financial year in which the completion certificate for such property has been obtained. Now a relief has been given to builders, the time limit has been extended from one year to two years.

4. For Assessee having Capital gain from Residential House Property:

• Section 54 provides for exemption from Long Term Capital Gain arising from transfer of Residential House to the extent of amount invested in new Residential House. Previously this benefit can be availed only if the Capital Gain is invested in one Residential house, now a once upon a lifetime option is given to assessee to invest long term capital gain upto Rupees Two Crores in two residential Houses in India.

5. Extension of Time Limit for obtaining approval of affordable Housing Projects:

Previously Section 80IBA provides for tax benefit in respect of affordable housing projects undertook by developers if the approval for the same is obtained on or before 31.03.2019 subject to fulfillment of certain other conditions. Now this Tax benefit will be available to developers if the approval is obtained on or before 31.03.2020.

6. Increase in TDS threshold limit in case of interest paid by Banking Company, Co-operative society or Post office:

• Threshold Limit for deduction of TDS in case of Interest Paid by Banking Company, Co-operative Society or post office is increased to Rs 40,000 from existing Limit of Rs. 10,000

• It may also be noted that the Threshold Limit for deduction of TDS in case of other Deductors will continue to be Rs 5,000. (No change)

7. Increase in TDS threshold limit in case of Rent:

• Threshold Limit for deduction of TDS in case of rent is increased to Rs 2, 40,000 from existing Limit of Rs. 1,80,000

8. Rebate Under Section 87A:

• Assessee having net Taxable Income upto Rs. 5,00,000 will now get Tax Rebate of Rs. 12,500. This will effectively make their tax liability as zero.

• However it may also be noted that the assessee having income upto Rs. 5,00,000 may still have to pay taxes if his income includes any incomes which are subject to tax at special rate exceeding 5%.

• This rebate is not available to Assessees other than Resident Individuals.

9. Exemption limit for gratuity has been increased from existing Rs. 10,00,000 to Rs. 20,00,000.

The author of this article is practicing at Indore city and can also be reached at rohitjain3663@gmail.com

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CA Rohit Jain 
on 05 February 2019
Published in Union Budget
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