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.
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.Learn how to mange your money & create wealth, Download your FREE eBook now
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%.
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.
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.
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.
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.