The new financial year has just begun, and so has new tax rules that kicked in April 1. As you must be getting on with your tax as well as financial planning now, you must be aware of all the changes proposed in Budget 2019 that will apply in current financial year. Following are the changes in tax rules and the tasks that you need to perform at the beginning of the financial year:
1. Tax rebate increased: Till last year if you had a taxable income of Rs 3.5 lakh, you got a tax rebate of Rs 2,500 under section 87A. From FY20 onwards, if you have a taxable income of less than Rs 5 lakh, you won't be paying any taxes. The rebate limit has been increased to Rs 12,500 from 2,500.
2. Standard deduction limit increased: Standard deduction of Rs 40,000 was introduced in 2018 in place of medical reimbursement and conveyance allowance. This limit has been increased to Rs 50,000. This deduction is only available to salaried class and pensioners.
3. No notional rent on second self-occupied house property: Earlier, if you had two self-occupied houses, one was deemed to be let out and tax was calculated on the basis of a notional rent. In the interim budget 2019, individuals have been exempted from paying any notional rent on second house. "This will benefit individuals who have been paying taxes on the notional rent for the second house property," says Homi Mistry, Partner, Deloitte India.
4. TDS deduction limit raised : Till last year bank/ post office could deduct TDS in case the interest earned for the year from deposits was Rs 10,000. This limit has been raised to Rs 40,000.
5. Changes in Section 54: Earlier, if you had capital gains from selling a house property, you could utilise it for buying one house property to get the tax exemption. From this year onwards, you can utilise it for buying two houses. "However, the capital gain amount should not exceed Rs 2 crore. This benefit can be availed by an assesse only once in his lifetime," says Mistry.
Tasks to be performed
1. Submit Forms 15H and 15G : Bank deducts TDS (tax deducted at source) in case the interest earned across the deposits across branches is more than Rs 40,000. But if your income is below the exempted limit, then you can avoid this TDS deduction by submitting form 15G (for those below 60 years of age) and form 15H (for those above 60 years of age). These forms are valid for a year and needs to be submitted every year. It is always better to submit them as soon as the new financial year kicks in. "Estimate your income for submission of Form 15H (for Senior citizens) and 15G (for others) to banks and other deductions for obtaining income without TDS," says Archit Gupta, Founder & CEO ClearTax.
2. Start planning for your tax saving : For a better tax planning, it is always good to start well in advance. Estimate your tax liability for the year based on the income. Explore all avenues to save taxes and how much more you need to invest. Instead of doing the tax-saving investment at the last moment, it will be better to spread the amount throughout the year to avoid stretching your finances.
3. Submit Form 12BB: You need to submit an investment and expense declaration (such as house rent, leave travel, interest on housing loan, tuition fees, etc) with your employer at the beginning of the year, which will be used by the employer to deduct TDS from your salary. You would need to submit form 12BB with the employer declaring all this.
4. Link PAN and Aadhaar: Although the deadline to link PAN and Aadhaar has been increased by six months, it is better to do it as soon as possible as you would need it while filing your income tax return.