How will Union Budget 2019-20 impact your finances | My Money Sage

Finance Minister Nirmala Sitharaman’s maiden budget provides a road map for moving from a $2.7 trillion economy to a $5 trillion economy in the next five years. The budget shows that the government’s focus is on widening the tax base and improving tax compliance.Union Budget 2019-20

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People hope that the union budget will reduce their tax burden and make life easier for them. However, the Union Budget 2019 kept the tax slabs intact and offered no significant tax breaks for individual taxpayers. Instead of providing relief, the budget raised the surcharge for those who earn more than Rs. 2 crores per year.

Union Budget 2019 balances populism with prudence, but it does not mention the challenges to economic growth and the shortage of jobs. There was no change in the standard deduction and the tax deducted at source (TDS) threshold. Investors who were hoping for relief from the Long Term Capital Gains (LTCG) tax were also disappointed.

The budget reduced the fiscal deficit estimate for Financial Year 20 to 3.3% from 3.4%, which was a positive surprise. The government’s focus on fiscal prudence and a supportive inflation rate would have a positive impact on the bond market.

The budget raised the annual turnover limit for paying a lower corporate tax rate of 25% to Rs. 400 crore from Rs. 250 crore. At present, the corporate tax rate is 30%. With this change, only 0.7% of the companies will remain outside the 25% corporate tax bracket.

The budget proposes to raise the minimum public shareholding from 25% to 35%. This change will affect over a thousand companies from all categories. Here we will look at how Union Budget 2019 will affect your finances.

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1. Annual Income Tax exemption limit of 5 lakh remains

The Rs. 5 lakh minimum Income Tax exemption limit that was announced in the Interim Budget 2019 remains.

2. Higher Income Tax surcharge for the wealthy

The tax surcharge for those who earn between Rs. 2 crores and Rs. 5 crores per year has gone up from 15% to 25%. For people who make more than Rs. 5 crores per year, the surcharge has gone up from 15% to 37%.

3. GST simplified for small businesses

GST taxpayers who have a yearly turnover of less than Rs. 5 crores can now file quarterly returns. The GST process will be simplified further.

4. GST on electric vehicles reduced

The GST rate that applies to electric vehicles will drop from 12% to 5%.

Also Read: All about Goods & Services Tax (GST) & its Implications

5. Income Tax break on interest on loans for electric vehicles

The government has proposed an extra Income Tax deduction of Rs 1.5 lakh on interest paid on loans taken to buy electric vehicles.

6. Pension scheme for small shopkeepers and retail traders

A new pension scheme will benefit retail traders and small shopkeepers who have a turnover of less than Rs. 1.5 crore per year.

7. Excise Duty on petrol and diesel raised

Excise duty on petrol and diesel will go up by Rs. 2 per liter each.

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8. Piped water supply for all rural homes by 2024

The new Jal Shakti ministry’s “Har Ghar Jal” scheme will provide piped water to all rural homes by 2024.

9. Electricity and LPG connection for all rural families by 2022

All rural families will get electricity and LPG connections by 2022.

10. Extra tax deduction on interest paid on loans for affordable homes

A home buyer can get an additional deduction of Rs 1.5 lakh on interest paid on a home loan for a self-occupied affordable house (value of up to Rs. 45 lakhs). This benefit is beside the current tax deduction on interest of Rs. 2 lakhs.

11. The entire amount withdrawn from the NPS will be tax-free

The full amount withdrawn from the NPS on retirement will now be tax exempt, bringing it under the exempt, exempt, and exempt (EEE) tax regime.

12. Tax deduction for NPS Tier-2 investments under Section 80C

Central government employees who invest in NPS Tier-2 accounts will get a tax deduction under Section 80C. The budget also specifies a lock-in period of three years for Tier-2 investments. There is still no clarity on tax payable on returns from these accounts.

Also Read: 10 NPS(National Pension Scheme) withdrawal rules that you should know 

 13. TDS @ 2% on cash withdrawals of over Rs. 1 crore

The budget proposes a tax deduction @ 2% if a person withdraws more than Rs. 1 crore in cash from a bank account in a year.

 14. STT only on the difference between settlement price and strike price

Securities Transaction Tax (STT) will apply only to the difference between the settlement price and the strike price.

 15. TDS @ 5% on payment of over Rs. 50 lakhs to contractor / interior designer

A person who buys a house and pays a contractor or interior designer more than Rs. 50 lakhs will have to withhold tax @ 5%.

Also Read: Understanding TDS, Form 16/16A & Form 26AS

 16. Filing of IT return to be mandatory for those who make large payments

Those who deposit more than Rs. 1 crore in a bank account, or buy foreign exchange worth more than Rs. 2 lakhs, or pay an electricity bill of more than Rs 1 lakh will have to file Income Tax returns.

 17. Use either Aadhaar card or PAN card to file IT returns

If you don’t have a PAN card, you can use your Aadhaar card to file your income tax return. The PAN card and Aadhaar card will be interchangeable, and this will also make mutual fund investments a lot easier.

 18. Tax breaks for investments in CPSE ETFs

Income tax benefits under section 80C, which apply to Equity Linked Savings Scheme (ELSS) funds, will also apply to the CPSE and Bharat-22 ETFs.

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 Union budget 2019 does not provide any new tax breaks for the middle class. The existing minimum Income Tax exemption limit of Rs. 5 lakh per year remains. It raises the tax surcharge for those who earn more than Rs. 2 crores per year. All rural households will get electricity and LPG connections by 2022, and all rural families will get piped water by 2024. PAN cards and Aadhaar cards will be interchangeable, and you can use them to file income tax returns and invest in mutual funds.

About the author

KishorKumar Balpalli, believes that financial literacy and discipline is the key to one’s financial freedom. KishorKumar is a Certified Financial Planner, Personal Finance Blogger & the Founder of an award-winning Wealth Management platform. myMoneySage simplifies investing for individuals and amplifies business growth for Registered Investment Advisers by leveraging Artificial intelligence and machine learning. The AI of the machine plus the intellect of the human advisor enables comprehensive & client-centric advice at a fraction of the cost of a conventional adviser. is an award winning personal finance platform. It helps you aggregate all your personal finance accounts like FD, Equity, Mutual Funds, PPF EPF, NPS including, Credit Cards & Loans etc. It's one place where you can track, plan and invest seamlessly. empowers you to invest in zero commission direct plans of mutual funds thereby helping you generate higher on investments. The best part is it comes with a lifetime Free plan.

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