Budget 2019 – How it affects your taxes

Here is a gist of provisions that may impact your tax outgo in the upcoming financial year  

• Rebate of up to Rs. 12,500 for taxpayers having taxable income up to Rs. 5 Lakhs. This rebate will only be available if the investor’s taxable income is below Rs. 5 Lakh. This rebate will not be available for those with taxable income of over Rs. 5 lakh. Taxable income is income after reducing deductions u/s 80C, 80D, and 80E and home loan interest u/s 24b.
• Standard deduction for salaried individuals increased from Rs. 40,000 to Rs. 50,000. This deduction is available only for income from salary.
• TDS (tax deducted at source) threshold on bank and post office deposits increased from Rs. 10,000 to Rs. 40,000. Banks will not deduct TDS if total interest income from all deposits is less than Rs. 40,000. Note that the interest income still remains taxable in the hands of the tax payer. There is no new exemption on interest income.
• Second self-occupied house property to be tax-free. Earlier if an assessee had two house properties, tax was required to be paid on the notional rent of any one of the house properties. This has now been changed such that an assessee has the option of not considering notional rent for up to two self-occupied properties.
• Exemption u/s 54 extended to two houses up to Rs. 2 crore. If a person sells a residential property, earlier they could avail the exemption by reinvesting the sales proceeds in another residential property. Now the assessee can invest capital gains up to Rs 2 crore in a maximum of 2 houses.
• Processing of I-T returns will be done in 24 hours for returns filed online. Refund will also be issued at the same time, if there is no dispute.
• Gratuity exemption increased from Rs. 10 Lakh to Rs. 20 Lakh. This exemption is available for people who receive gratuity at the time of retirement or switching their job. The exemption is total across the life of an assessee, in case they receive gratuity on more than one occasions.
• Threshold for TDS on rental income increased from Rs. 1,80,000 to Rs 2,40,000 per annum:  Rental income paid by non-individuals was subject to TDS if it exceeded Rs 1,80,000 per annum. The budget proposes to increase this to Rs 2,40,000.

As you can see, there are no wholesale changes anywhere. That said, if you have an income Rs. 5-7 lakh, you may be able to avail a benefit of up to Rs. 13,000 due to the tax rebate. You can do this by making investments in tax saving instruments like ELSS mutual funds to bring your income to the Rs 5 lakh threshold for tax rebate. For salaried individuals earning more than this, your benefit will be limited to Rs. 2080 (for people in 20% tax bracket) or Rs. 3120 (for people in 30% tax bracket) due to the increase in the standard deduction.

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