Income Tax Rule Changes 2019-20: With nearby 70 amendments in Income Tax Act by the Finance Act, 2019, it is necessary for the taxpayers to be aware to take all income tax benefits. Here are the latest income tax rules 2019-20 explained along with their individual effect on the taxpayers in 2020.
Reduction in Corporate Tax Rate
Earlier the corporate tax rate was 25% up to the turnover of Rs.250 crore. Later in the Union Budget 2019, the turnover limit was increased up to Rs.400 crore having a tax rate of 25%
However, in order to boost the economy slowdown, In September 2019, the Finance Ministry amended the Income Tax Act to provide an option to the domestic companies to pay corporate tax at the rate of 22%. The domestic companies are eligible to opt for 22% if they do not avail any exemptions/incentives under different provisions of income tax.
New TDS Provisions and their applicability
In Budget 2019, New TDS provisions were introduced with applicability from 1st September 2019.
- Cash withdrawals over Rs 1 crore to attract 2% TDS from September 1 – 194N : Two percent tax deduction at source (TDS) on cash withdrawals from banks or post offices of over Rs 1 crore will come into effect from September 1. The aim to discourage cash transactions and move towards a less-cash economy. The Central Board of Direct Taxes (CBDT) said that if a person has already withdrawn Rs 1 crore or more in cash up to August 31, 2019, in the current fiscal, the two per cent TDS shall apply on all subsequent cash withdrawals.
- TDS at the time of purchasing an immovable property – 194IA: Payments such as club membership fees, car parking fees, electricity and water facility fees, maintenance fee, advance fee or any other charges of similar nature will be included in the cost of buying property amount while calculating the amount of tax to be deducted at the time of making payment for a property. From 1 September, a buyer will be required to deduct TDS at the rate of 1 per cent of purchase price while buying an immovable property of more than Rs 50 lakhs.
- TDS on payments made by HUF/Individual to professionals and contractors – 194M: If the payment made to a contractor or a professional or brokerage exceeds Rs 50 lakh in a year, an individual or HUF (Hindu Undivided Family) is required to deduct 5 per cent TDS at the time of crediting such amount. Payments made on or after September 1 will attract the provisions of Section 194M.
Income Tax Rates
There is no change in the rates of Income Tax. Therefore, the rates followed in AY 2019-20 shall be continued to apply for AY 2020-21.
However, the rate of surcharge has been increased for Individual, HUF, AOP, BOI, Pvt. Trust and AJP
|Earlier rates (Surcharge)||New rates (Surcharge)|
|10% (for income of individuals earning between Rs 50 lakh and Rs 1 crore)
15% ( for income of individuals earning over Rs 1 crore)
|10% (for income more than Rs. 50 lakh but up to Rs. 1 crore),
15% (for income More than Rs. 1 crore but up to Rs. 2 crore),
25% (for income More than Rs. 2 crore but up to Rs. 5 crore) and
37% (for income More than Rs. 5 crore)
Mandatory furnishing of return of income by certain persons [Section 139]
The following categories are persons are now compulsory required to file the return of income as per section 139 of Income Tax Act. These categories of persons are newly added in the budget with the aim to widen the scope for filing the income of return.
- Persons depositing amount exceeding Rs 1 crore in one or more current bank account
- Persons incurring an amount exceeding Rs. 2 lakh on foreign travel for himself or any other person
- Persons incurring more than Rs. 1 lakh on electricity consumption
- A person whose total income before claim of the rollover benefits (u/s 54, 54B, 54D, 54EC, 54F, 54G, 54GA, 54GB), is more than the maximum amount not chargeable to tax.
Deduction on purchase of the electric vehicle
With the aim to encourage purchasing electric vehicles, a new section 80EEB has been proposed to provide for deduction up to Rs 150,000 per year to individual taxpayers. The deduction shall be available in respect of interest on the loan is taken for the purchase of an “electric vehicle” from any financial institution.
This deduction is available for loans sanctioned by a financial institution (including a bank or NBFC) during the period beginning on the 1 April 2019 to 31 March 2023. A deduction once claimed can’t be claimed again in current or future financial years.
National Pension Scheme (NPS) withdrawal exemption
Before budget 2019, a person withdrawing a lumpsum corpus from NPS trust either on closure or opting out of the pension scheme was exempt from tax up to 40% of the withdrawal amount. However, Budget 2019 has proposed to increase the exemption from tax on the lumpsum withdrawal of corpus the corpus. Now, the exemption is up to 60%.
Note: The amendment shall be applicable from 1st April, 2020 and apply in relation to assessment year 2020‐21 and subsequent assessment years.