Budget 2019: Personal tax proposals to stimulate growth, boost affordable housing and bring in greater transparency

Currently, a deduction towards interest payable on a housing loan, on a self-occupied property, can be claimed up to Rs 2 lakh per annum. In order to provide impetus to affordable housing, an additional deduction of up to Rs 1.5 lakh per annum has been proposed for first time home buyers in respect of interest payable on a housing loan sanctioned during the period April 1, 2019 to March 31, 2020. Therefore, a person purchasing such a house can now claim an enhanced interest deduction up to Rs 3.5 lakh p.a. This additional deduction is subject to the condition that the stamp duty value of the house property should not exceed Rs 45 lakh.

Keeping in mind the intention to envision India as a global hub of manufacturing electrical vehicles and to make such vehicles affordable, a deduction up to Rs 1.5 lakh p.a. has been proposed in respect of interest payable on loan availed for purchase of an electric vehicle, which is sanctioned during the period 1 April 2019 to 31 March 2023. This is subject to the condition that no other electric vehicle should be owned on the date of sanction of such loan.

With effect from 1^st September 2019, it is proposed to allow the interchangeability of Permanent Account Number (‘PAN’) with Aadhaar. Thus, individuals who do not possess PAN would be eligible to file their Income-tax return by quoting Aadhaar only. Also, Aadhaar can be quoted in other prescribed transactions that otherwise require quoting of PAN (e.g. registration of house property, obtaining credit card, etc.).

Also it has been stated that Aadhaar may be applied by non-resident Indian passport holders on their return to India without waiting for 182 days.

Currently, individual taxpayers having taxable annual income above Rs 1 crore are subject to a surcharge of 15 percent.  On the premise that high income earners need to contribute to nation building, it has been proposed to increase the surcharge to 25 percent and 37 percent for those having taxable annual income above Rs 2 crore (up to Rs 5 crore) and above INR 5 crore respectively, from the existing 15 percent. This would result in a maximum marginal rate of 39 percent and 42.744 percent respectively being applicable to such category of individuals.

As per the press release issued by the Ministry of Finance, Government of India in December 2018, the income-tax exemption limit on lump sum withdrawal by the National Pension System subscriber, at the time of retirement, was proposed to be enhanced from existing 40 percent to 60 percent of the accumulated corpus. However, the enabling provisions for the same under the Act were awaited. This Budget has now made the necessary provisions for implementation of this exemption.

The FM mentioned in her speech that pre-filled tax returns will be made available to taxpayers in the near future which will contain details of salary income, capital gains from securities, bank interests, dividends etc. and tax deductions thereon. Information regarding these incomes will be collected from the concerned sources such as Banks, Stock exchanges, mutual funds, EPFO, State Registration Departments etc. This will help ease the process and time taken for filing the tax return and also enhance the accuracy.

The FM also mentioned about introduction of faceless assessments involving no human interface in the near future. Cases selected for assessment will be allocated to assessment units on an ad hoc basis and notices shall be issued electronically by a centralised unit without disclosing the name, designation or location of the assessing officer.

Currently, tax at 1 percent is deducted at source by the purchaser of an immovable property on the amount of consideration paid or credited on transfer of such property. However, the term ‘consideration for immovable property’ is currently not defined under the Act. It is proposed that consideration would include other types of payments besides the sales consideration such as 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.

At present, there is no liability on an individual to deduct TDS on any payment made to a resident contractor or professional when it is for personal use. It is now proposed to provide for levy of TDS at the rate of 5 percent on the sum paid on account of contractual work or professional fee by an individual, if such sum paid exceeds Rs 50 lakhs in a year. However, in order to reduce the compliance burden, such individuals are not required to obtain tax deduction account number.

Further, in order to further discourage cash transactions and move towards cashless economy, it has been proposed to levy TDS at the rate of 2 percent on cash withdrawals in excess of Rs 1 crore in aggregate made during the year from an account maintained by the recipient.

The government has made it mandatory for individuals who enter into specified transactions (e.g. withdrawal of cash in excess of Rs 1 crore in one or more current accounts, foreign travel expenditure of more than two lakhs, electricity bill exceeding Rs 1 lakhs per annum or other conditions to be prescribed) will need to file a tax return if otherwise the said person was not required to file a return.

To conclude, the FM stated that due to slew of efforts taken by the government, the direct tax revenue has significantly increased over the past couple of years and is now growing at double digit rate every year. It appears that the aforesaid proposals have been introduced to augment this objective further.