Of the many noteworthy decisions taken by Finance Minister, here are the key changes made to income tax rules in India, effective September 1, 2019.
Income Tax Slabs
There are no changes in the income tax slabs. People earning up to 5 lakhs a year will be paying zero tax in line with the tax rebate introduced in the interim budget.
Note: *Rebate is available upto 12,500 for citizens with net taxable income less than 5 lakh, which means zero liability of tax
However, a higher surcharge has been imposed on the super-rich. People with income between ₹2 crores and ₹5 crores will pay an effective tax rate of 39% while people with income exceeding ₹5 crores will pay an effective tax rate of 42.7%.
NPS withdrawal is now tax-free
According to Budget 2019-20, lump sum withdrawal from National Pension Scheme at maturity is now tax-free. Previously, only 40% of the lump sum withdrawal amount was exempted.
Additional tax break for affordable housing loan
Previously, a deduction of ₹2 lakhs was allowed on home loan interest paid under Section 24. As per new income tax rules in India, an additional deduction amounting to ₹1.5 lakhs has been introduced under Section 80EEA, with the following conditions:
- Loan should be availed between 1st April 2019, and 31st March, 2020.
- Value of the property cannot be more than ₹45 lakh.
- Individual must not own a house on date of loan being sanctioned
TDS on withdrawal of cash
Budget 2019-20 has proposed a Tax Deducted at Source at 2% to discourage cash transactions while encouraging digital ones, if the total amount of cash withdrawn from a single account in a bank or post office in a year is more than 1 crore.
TDS on life insurance
If annual premium on life insurance exceeds 10% (20% in case of insurance policies sold prior to April 2012) of sum assured, maturity amount is taxable. Previously, TDS was deducted at 1% on the amount received. As per Budget 2019-20, TDS at the rate of 5% will be deducted if the net income (total sum received - total amount of insurance premium paid) exceeds ₹1 lakh. This was done because deducting tax on gross amount was found to be inconvenient by assessees.
These are some of the key changes in income tax rules in India as per the latest budget. Apart from these, there is also another important change in the form of Aadhar Card being allowed for quoting instead of PAN Card in certain prescribed transactions. For a detailed analysis, one may go through the text of the full-year budget announcement.