Amendment made in Finance Act, 2019

Amendment made in Finance Act, 2019

Income tax rate for company as well as for individual is same as of financial year of 2018-19.

a) Corporate tax rate is 30%, surcharge is 12%, Health and Education cess @ 4%. Effective tax rate comes to 34.944%. Company whose turnover / gross receipt does not exceed 250 crore in financial year 2016-17, corporate tax is 25%

b) Individual tax rate is as follow

Sr no. Where total income of Rs. Tax rate (tax amount)
1 Where total income does not exceed Rs. 2,50,000/- Nil
2 Where total income exceed Rs. 2,50,000/- but does not exceed Rs. 5,00,000/- 5% of the amount exceeding Rs. 2,50,000/-.
3 Where total income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-. Rs. 12,500 plus 20% of the amount exceeding Rs. 5,00,000/-.
4 Where total income exceed Rs. 10,00,000/-. Rs. 1,12,500/-plus 30% of the amount exceed Rs. 10,00,000/-.

In case of individual who is the age of sixty years or more but less than eighty years at any time during the previous year, total income upto Rs. 3,00,000/- tax is Nil.

In case of every individual who is at the age of eighty years or more at any time during the previous year, total income upto Rs. 5,00,000/- tax is Nil.

Surcharge @ 10% whose individual total income exceeds Rs. 50 lakh but does not exceed Rs. 1 crore and @ 15% whose individual total income exceeds Rs. 1 crore.

Above tax amount will increase by 4% for Health and Education Cess.

There is amendment u/s 87A – ‘rebate of income tax in case of certain individual’ where total income up to Rs. 5,00,000 (previous year Rs. 3,50,000), there will not be any income tax.

The change can be explained with the help of following comparative table :-

Resident individual
Taxable income Tax liability
(Pre – Budget)
Tax liability
(Post- Budget)
3,50,000 2500
5,00,000 12500
6,,00,000 32,500 32500
10,00,000 1,12,500 1,12,500

Note :If taxable income marginally exceeds the limit of Rs. 5 lakh , the tax liability increase considerably. As the slab rates have not been tinkered with and relief is provided by proposing amendment to section 87A, the tax payer would be at disadvantageous position.

c) Income under the head “Salary” :-

There is an amendment u/s 16(ia) where standard deduction is enhanced to Rs. 50,000/- (previous year Rs. 40,000/-). The benefit of increased standard deduction shall be available to salaries persons and pensioner.

d) Income from house property :-

There is an amendment in sec. 23 where tax payer is allowed to opt two house as a self occupied house (earlier it was allowed only one house) and balance he has to offer as let out. U/s 24, the tax payer, can now claim interest for both the house. However, the aggregate monetary limit for the deduction would remain the same ie Rs. 2,00,000/-.

Above amendment could be explained better with following example-

Mr. PQR, a salaried class tax payer, earns taxable salary income of Rs. 10 lakh in both financial year 2018-19 and 2019-20. He has two houses, one is at Delhi and another at Mumbai. For job purpose, he is staying at Delhi house. The tax liability for financial year 2018-19 and 2019-20 will be as follow-

Particulars Tax liability
Tax liability
income from salary 10,00,000 10,00,000
Less : standard deduction u/s 16 (40,000) (50,000)
Net salary 9,60,000 9,50,000
Income from House property
Notional rent from Delhi 3,60,000
Standard deduction u/s 24 (1,08,000)
Interest (2,00,000) (2,00,000)
Net income 52,000 (2,00,000)
Gross Total income 10,12,000 7,50,000
Less : Deduction Under Chapter VI-A
a) 80C (1,50,000) (1,50,000)
b) 80D (50,000) (50,000)
c) 80CCD (50,000) (50,000)
Taxable Income 7,62,000 5,00,000
Tax Thereon 64,900 12,500
Less : Rebaate u/s 87A 0 12500
Net tax payable 64,900 Nil
Add : Health and Education Cess @ 4% 2,596 Nil
Total tax payable 67,496 Nil

e) Capital gain :-

There is an amendment u/s 54 where any capital gain arising on sale of long term residential house and capital gain does not exceed Rs. 2 crore, tax payer is allowed to invest in two residential house in India (earlier it was allowed in one house) and capital gain will be taxed accordingly. This option is given once in life time to tax payer.

f) Deduction at source (TDS) :-

There is an amendment u/s 194A(3)(i) where interest limit is enhanced from Rs. 10,000/- to Rs. 40,000/- in case of payer is bank, co-operative society and post office. If the payee is senior citizen, the limit is Rs. 50,000.

There is an amendment u/s194-I Rent where monetary limit enhanced to Rs. 2,40,000/- from Rs. 1,80,000/-. Accordingly, if the rent payment does not esceed Rs. 2,40,000/- in a financial year, deductor is not require to deduct the TDS.

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