1. Rebate u/s 87A Increased to ₹12,500:
Finance Minister in his speech announced that people with taxable income of ₹5,00,000 would get a full tax rebate. Many of us thought, he has changed the tax slab. But actually, he made changes in Section 87A.
What is covered here
From FY 2019-20, for individuals with taxable income of ₹5,00,000 or less, the tax rebate would be
-
- Person’s tax liability or
- ₹12,500
Whichever is lower.
Lest understand it with example:
| Particulars | FY 2019-20 | FY 2018-19 |
| Taxable Income | 5,00,000 | 5,00,000 |
| Income Tax | 12,500 | 12,500 |
| Tax Rebate u/s 87A | 12,500 | 0 |
| Health & Education Cess @ 4% | 0 | 500 |
| Total Tax Payable | 0 | 13,000 |
This would only benefit people with taxable income below ₹5,00,00. If they reduce slab rates it would benefit every taxpayer.
Know more Eligibility to Claim Rebate u/s 87A FY 2019-20 (AY 2020-21)
2. Standard deduction increased from ₹40,000 to ₹50,000:
The standard deduction available to Salaried & Pensioners has been increased from ₹40,000 to ₹50,000. This would reduce the tax liability up to ₹3,558 in the highest tax slab.
3. TDS threshold increased from ₹10,000 to ₹40,000 on Bank Interest Income
The threshold of deducting TDS on interest income from Bank, Post Office or co-operative deposit has been increased from ₹10,000 to ₹40,000.
Lest understand it with an example:
Let’s assume an interest rate of 8% & you deposited ₹5,00,00 in Bank Fixed Deposit then there is NO TDS deduction on interest (₹40,00) received from a bank.
I personally feel this is a great move by GOI as many people had to unnecessary go through TDS and file Income tax returns of fill Form 15G/H.
Point of caution: No TDS deduction does not mean you need not to pay tax. You must still have to disclose the interest income and pay tax if required.
4. No Tax on Notional Rental Income from Second House:
Until this year, if someone had more than one house, he could show one house as self-occupied while all other houses have to be either classified as rented (if it was actually rented) or deemed to be rented (if vacant or self-occupied). In case of “deemed to be rented” the taxpayer had to show notional rental income from those houses and pay taxes on the same. From the next financial year FY 2019-20, now you can have two houses as self-occupied. This is a good move as many people have to maintain two houses, one for self and other for dependents including parents, children or spouse.
5. Capital gains exemption on reinvestment in two house properties:
Taxpayers can save on Long term capital gains arising from the sale of the house by buying another house under section 54. In Budget 2019, the taxpayers can now buy two houses on the sale of 1 house if the capital gains are less than ₹2 crores. This benefit can be availed only once in a lifetime. This was a good move as many people had to sell one house and buy multiple properties to bequeath to their heirs.
Disclaimer: Due care has been taken to draft this write-up and is intended to express the Authors understanding and to start an academic discussion on the subject discussed in above write-up. it should not be considered as professional advice. Readers are advised to refer to relevant provisions of law before applying any of the above-mentioned views. The author accepts no responsibility whatsoever and will not be liable for any losses, claims or damages which may arise because of the content of this write-up.