Allowance of Standard Deduction on Salary Income
The standard deduction under clause (ia) to section 16 for persons having income under the head “Salary” has now been increased from INR 40,000 to INR 50,000.
Relief on second self-occupied property
Earlier, an individual owning more than one self-occupied property was required to offer to tax the notional rent in respect of such additional property/ properties. The notional rent on a second self-occupied / vacant property has been exempted.
The limit to claim house property loss in respect of interest on loan taken for both the properties in aggregate will continue to be INR 2,00,000. Hence, maximum INR 2,00,000 loss can be claimed in respect of such properties in one financial year
Exemption under section 54 extended to investment in two house properties
Currently, exemption under section 54 in respect of long-term capital gains arising on sale of residential property is available where the individual invests such capital gains to purchase/ construct one residential property in India (subject to other conditions).
The exemption will now be available even if such capital gain is invested to purchase/ construct two residential properties provided the capital gains do not exceed INR 2,00,00,000.
This exemption can be claimed by the individual taxpayer once in a lifetime.
Section 10(12A) – Increase in exemption limit in case of payments from National Pension System Trust
It is proposed to increase the exemption limit in respect of the total amount payable to an assessee from National Pension System Trust at the time of closure or his opting out of this scheme from 40% to 60%.
This amendment will apply with effect from 1st April, 2020 i.e. AY 2020-21.
Section 80C and 80CCD – Incentives under National Pension Scheme
It is proposed to amend section 80C to provide that deduction under this section shall be available for any amount paid or deposited by a Central Government employee as a contribution to a specified account of the pension scheme referred to in section 80CCD –
- for a fixed period of not less than three years; and
- which is in accordance with the scheme as may be notified by the Central Government in this behalf,/li>
It is proposed to amend sub-section (2) of section 80CCD to increase the limit for deduction of contribution made by Central Government from 10% of salary to 14% of salary.
These amendments will take effect from 1st April, 2020 (i.e. A.Y. 2020-21).
Section 80EEA – Tax incentive for affordable housing
It is proposed to insert a new section 80EEA to provide for deduction of interest up to Rs. 1,50,000 paid/payable on loan taken from any financial institution for the purpose of acquisition of a residential house property where an assessee being an individual is not eligible to claim deduction under section 80EE.
Such deduction shall be subject to the following conditions:
- the loan has been sanctioned by the financial institution during the period 1st April, 2019 to 31st March, 2020;
- the stamp duty value of residential house property does not exceed Rs. 45,00,000;
- the assessee does not own any residential house property on the date of sanction of loan.
It is also proposed that where a deduction under this section is allowed for any interest, deduction shall not be allowed in respect of such interest under any other provisions of the Act for the same or any other assessment year.
This amendment will take effect from 1st April, 2020 (i.e. A.Y. 2020-21)
Section 80EEB – Tax incentive for electric vehicles
To boost the adoption of electric vehicles in India, a new section 80EEB is proposed to provide deduction to individuals of interest paid/ payable up to INR 1,50,000 on loans taken from any financial institution for purchase of electric vehicle.
The deduction is proposed to be subject to the following condition that the loan has been sanctioned by the financial institution during the period 1st April, 2019 to 31st March, 2023.
However, if deduction under proposed section 80EEB is taken, deduction shall not be allowed in respect of such interest under any other provisions.
For the purpose of this section, ‘electric vehicle” has been defined as a vehicle which is powered exclusively by an electric motor whose traction energy is supplied exclusively by traction battery installed in the vehicle and has such electric regenerative braking system, which during braking provides for the conversion of vehicle kinetic energy into electrical energy.
This amendment will take effect from 1st April, 2020 (i.e. A.Y. 2020-21).
Section 194DA – Tax Deduction at Source (TDS) on non-exempt portion of life insurance pay-out on net basis
Presently, section 194DA prescribes for deduction of tax at source at the rate of 1% on the gross amount received by a resident under a life insurance policy. It is proposed to amend section 194DA to provide for deduction of tax at source at the rate of 5% of amount chargeable to income tax.
This amendment will take effect from 1st September 2019
Section 194-IA – TDS on purchase of immovable property
Under section 194-IA, any person paying a sum exceeding INR 50 lakh to a resident transferor for acquiring immovable property is required is to deduct tax at source at the rate of 1% of such sum. It is proposed to amend the Explanation to section 194-IA and provide that the term “consideration for immovable property” shall include all charges of the nature of club membership fee, car parking fee, electricity and water facility fees, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property.
This amendment will take effect from 1st September 2019.
Section 194M – TDS on payment by Individual/HUF to contractors and professionals
It is proposed to insert a new section 194M to provide for levy of TDS at the rate of 5% on the sum, or the aggregate of sums, paid or credited in a year on account of contractual work or professional fees by an Individual or a HUF (other than those who are required to deduct tax at source under section 194C and 194J). The above provision shall not be applicable if the payment or aggregate of payments do not exceeds INR 50 lakh rupees in a year
However, in order to reduce the compliance burden, it is proposed that such individuals or HUFs shall be able to deposit the tax deducted using their Permanent Account Number (PAN) and shall not be required to obtain Tax deduction Account Number (TAN).
As a consequence of the above amendment, it is proposed to amend section 197(1) to include section 194M within the scope of the aforesaid section.
The amendments will take effect from 1st September 2019
