The Union Budget has not made any changes in the income tax rates for the upcoming fiscal year. However, a few important reliefs and limits have been announced by Finance Minister Nirmala Sitharaman as she presented the budget on Monday.
The income of up to Rs 2.5 lakh remains exempt from tax. Those earning up to Rs 5 lakh will also face no tax burden as Section 87A provides for a rebate of up to Rs 12,500.
The 10 per cent surcharge on income above Rs 50 lakh, 15 per cent for income above Rs 1 crore, 25 per cent for above Rs 2 crore and 37 per cent for above Rs 5 crore will continue.
There will also be a cess of 4% over and above the tax and surcharge.
Optional tax rates
According to Section 115 BAC that was added to the Income Tax Act in the last Budget, if the taxable income is less than Rs 15 lakh, then from the financial year 2020-21, one can opt for one of two types of rates. This benefit will continue. According to this section, those who forego deductions will have to pay taxes at a lower rate than those who avail of the deductions.
Business people cannot set off losses from the previous year. Those earning more than Rs 15 lakh will not have the option to choose from one of two rates.
As per the existing IT provisions those with a salary income will not get the Rs 50,000 standard deduction, but they can enjoy tax exemptions by way of HRA and tax deductions on home loan interest. Moreover, and under Section 80C deductions can be availed for investments of up to Rs 1.5 lakh in LIC policies, PF, etc.
Benefit to senior citizens
For those above 60 years of age, income up to Rs 3 lakh remains exempt from tax. For those who are 80 years old, it is up to Rs 5 lakh.
As per the latest budget, those aged above 75 years will not have to file IT returns, but this is subject to certain conditions.
The benefit will be available to only those who receive a pension from designated banks. (The government will issue a list of the designated banks.)
They should be earning interest from the same bank from which they get their pension. If they receive interest from any other banks, they will have to file returns.
The taxpayer has to give a declaration to the bank. On receipt of the declaration, the bank will calculate the tax, recover the amount and pay it.
Limit raised for trusts
The tax exemption limit on the total annual income of non-profit educational institutions and hospitals has been increased from Rs 1 crore to Rs 5 crore. This benefit will not be available if the cumulative income of all educational institutions functioning under a trust is more than Rs 5 crore. Earlier, the limit was applicable for each educational institution separately. Those earning more than Rs.1 crore are eligible for deductions subject to the conditions as per Sections 11, 12 and 13.
Treatment expenses
As per Section 11, corpus donations received by charitable organisations exempt from income tax do not have to be included under the head of income. Some have been claiming a rebate for the cost met with such donations. The income tax department has amended the law to prevent this.
Investments using such donations must be made in accordance with Section 11(5). There will be no deduction for expenses incurred for such investments. Adjusting the additional amount spent in previous years in subsequent years is also not allowed.
Tax at source
The budget proposes a 0.1% tax deducted at source (TDS) on transactions that involve purchases exceeding Rs 50 lakh per annum. This is as per section 194 Q. The TDS is applicable only if the buyer's turnover for the previous year is more than Rs 10 crore. This will be effective from July. As per law, since last October, the seller has been required to collect TCS (tax collected at source) of 0.1% on sale consideration from the purchaser under section 206 (1H). (For those without PAN, the TCS and TDS rates are 1% instead of 0.1%).
Reduced time limit
The time limit for income tax reassessment has been decreased from six years to three years. In tax evasion cases, the time limit continues to be 10 years. This time limit is applicable in cases where the fraud involves an income exceeding Rs 50 lakh. The returns will be processed electronically. The time limit for processing and sending notices has been reduced to nine months from the end of the financial year in which the return has been filed.
The deadline for settling income tax disputes under the ‘Vivad se Vishwas’ scheme has been extended till February 28.
Amendments in the GST Act
Goods and services sold to members of clubs will be treated as supplies under the GST Act. If GST is paid late in cash, it will incur an interest liability. This will have a retrospective effect.
The provision requiring reconciliation statements for audited accounts for those with a turnover of more than Rs 2 crore has been removed. It will be sufficient to self-certify the annual returns. The refunds will be linked to foreign currency for exports.
