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Budget 2019 was announced yesterday and brought many gifts for the middle, agri & salaried class. Interim budgets have historically been non-partisan; Budget 2019 is a remarkable shift from this position. Will this be enough to woo voters? Only time will tell. For now, let’s look at the changes proposed.

Increase in rebate under section 87A:

Undoubtedly the biggest sop of the budget has been the increase of rebate to Rs. 12,500 (from Rs. 2,500).  This effectively doubles the basic exemption limit to Rs. 500,000. Further, if the taxpayer opts to invest Rs. 150,000 in 80C instruments, NPS, own a house & services a loan (upto Rs. 200,000), the effective exemption limit sits at a pretty sum of Rs. 900,000.

It is worth noting that taxpayers earning more than Rs. 500,000 would be subject to the same tax rates as 2017-18.

Increase in standard deduction

Standard deduction (in lieu of conveyance allowance & medical reimbursement) of Rs. 40,000 was introduced in 2018 to reduce compliance burden. This limit has been enhanced to Rs. 50,000 now.

Treating second home as self-occupied

This comes as a relief to taxpayers owning more than 1 self-occupied property. Till date, only 1 such property was exempted (i.e. NIL rent) from tax; the other had to be assessed as if it was let-out (i.e. a notional rent that the property would fetch if it was let out was subjected to tax). From 2019, however, the taxpayer will be allowed to take benefit of NIL rent on both properties.

The aggregate amount of interest deduction on both homes still stands restricted to Rs.200,000

Interest and rental threshold for TDS increased.

This amendment benefits pensioners and home-makers with savings in bank or post office deposits. Banks were required to deduct tax at 10% if the interest paid on these deposits was more than Rs. 10,000. This effectively translates to a deposit of Rs. 150,000 (at 6.5% interest); it is more likely than not that the targeted assessees, have more than this sum in their deposit accounts. The threshold has now been enhanced to Rs. 40,000 (effective deposit of Rs. 600,000 +).

Additionally, individuals having taxable income up to Rs.5 lakhs are not being taxed from 2019-20. Such individuals can avoid TDS from banks/post offices by filing Form 15G / 15-H to prevent any tax deduction

In addition, threshold for rental TDS has been enhanced from Rs. 180,000 to Rs. 240,000.

Higher deduction from capital gains on sale of house property

Sec. 54 exempts taxpayers from capital gains on sale of house property if such gains are invested in another residential property. Till date, tax exemption was restricted to 1 house property. This has now been enhanced to 2.

Such higher deduction is available only if the capital gains derived sale of old residential house is up to Rs.2 crore and can be availed once in a lifetime.

80-IBA – approval window increased by 1 more year

The Budget has extended the approval window for the assessee who is involved in business of developing and building housing projects for claiming 100% deduction of profits so derived from 31-March-2019 to 31-March-2020.

Non-levy of tax on unsold real estate inventory

The Finance Act 2017 provided that where  the house property consisting of any building and land appurtenant  thereto is  held as stock-in-trade, the annual value of such property up to 1 year from end of  the financial year in which completion certificate is obtained, shall be taken “NIL”  

Now the govt has extended this period to two years to address the exigencies  faced by the players in real estate sector .

Electronic assessments and refunds

This Budget has given a new push to electronic assessments and refunds. The target is to process all refunds within 24 hours and to implement anonymised scrutiny in 2 years for all cases.

In case of any questions, please do not hesitate to reach out to us on pavan@bclindia.in or ankush@bclindia.in or write to us on bclindia.in/contact/. We would be glad to be of your assistance.

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Sudhir Chaturvedi
Sudhir Chaturvedi
3 years ago

Excellent budget proposals keeping view of forthcoming election.

Prafful Lalwani
Prafful Lalwani
3 years ago

Nicely analysed and easily understandable presentation.

3 years ago

Excellent article