On 5th July 2019, union finance minister Nirmala Sitharaman presented the maiden budget in the parliament of India. Usually the budget is presented in march, but the changes in income tax come into force from April, however sine the budget for FY 2019-20 was presented in July after the general elections, the changes are made effective from September 1st, 2019. Among them, some changes have a direct bearing on the common man’s wallet relate to tax deducted at source (TDS). Here are those main changes in income tax laws:
TDS at the time of purchasing an immovable property:-
As per the amendment 194-IA of Income Tax Act, the TDS will continue to be deducted at the rate of 1% if a person purchases an immovable property of Rs. 50 lakh or more (excluding agriculture land). This amount will include payment made for the other services or amenities such as club membership fee, car parking fee and so on. The primary reason for this stem was the fact that ‘consideration for immovable property’ was not defined properly in the income tax act.
TDS on payment made by individuals or HUFs to contractors and professionals:-
The new section 194N has been inserted in the Income Tax Act, under which an individual or HUF (Hindu Undivided Family) is required to deduct 5% TDS if payment made by them to contractor and professional exceeds Rs. 50 lakh in aggregate per annum. It means, If The payment for a house renovation, wedding function or any other personal/professional reason exceeds the limit of Rs.50 lakh, 5% TDS will be charged while making payment. This may help check tax evasion but may lead to a higher burden of compliance for the payer.
TDS on the non-exempt portion of life insurance proceed:-
All the taxable life insurance maturity proceeds will be deducted TDS at the rate of 5% on the net income portion. The net income portion is the difference between the total sum received and insurance premium paid. Proceeds received at the Maturity of life insurance are exempted if the annual premium paid does not exceed 10%
TDS on cash withdrawal over Rs 1 crore:-
In yet another attempt at promoting cashless economy and to discourage cash transactions, is, the government has introduced section 194N which says if cash withdrawals exceeding Rs. 1 crore on aggregate during the year from Bank, Cooperative bank or post office, the withdrawals will attract TDS at 2% on the aggregate amount.
PAN-Aadhaar link:-
As per current laws PAN would become invalid if not linked with Aadhaar by a specified deadline, it means in case person’s PAN becomes invalid, it would be treated as if the person never had a PAN card, however, to protect the validity of previous transactions, PAN will become inoperative but not invalid if not linked with Aadhaar by specified deadline.
Interchangeability of PAN and Aadhaar:-
According to Budget 2019, Aadhaar can be quoted in place of PAN only for certain prescribed transactions. For example, taxpayers who don’t own PAN can file IT returns using Aadhaar card also. Though this law is implemented from September 1, 2019, the Govt is yet specifying the ‘certain prescribed transaction’.
Banks and FIs can be asked to report even small transactions:-
Till now banks and other financial institutions were required to report specified financial transactions if the amount exceeds the threshold limit i.e. Rs. 50000 or more, however in Budget 2019 the Govt has removed this minimum limit of Rs.50000 which means now all banks and FLs can be asked to report even small transactions to the tax department which in turn can use the data to check your ITR.
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