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Budget 2019- How it has impacted your finances?

Budget 2019- How it has impacted your finances?

Budget 2019- How it has impacted your finances?

Everyone had huge expectations from the Interim Union Budget 2019, especially because there hasn’t been any change in the last year in the slab. Let us analyse what are the new changes and how the new budget will impact us.

Changes in the Tax Slab:

Income 2016-17 2017-18 & 2018-19 2019-20
Upto Rs 2,50,000 NIL NIL NIL
Rs 2,50,001 to Rs 3,00,000 10%^ 5% NIL
Rs 3,00,001 to Rs 5,00,000 10%^ 5% NIL
Rs 5,00,001 to Rs 10,00,000 20%^ 20%* 20%**
Rs 10,00,001 and more 30%^ 30%* 30%**

^ The health and education cess = 3% of the Income Tax in the year 2016-17
*The health and education cess = 3% of the Income Tax in the year 2017-18 and 4% in the year 2018-19
** The health and education cess = 4% of the Income Tax in the year 2016-17

NO CHANGE in the deductions for Investments:

  • Investments U/S 80C: Rs 1.50 lakhs p.a.
  • Investments U/S 80C:
    1. Life Insurance
    2. Provident Fund
    3. ELSS (Equity linked savings scheme)
    4. Bank 5-year FD
    5. School Tuition Fees
    6. Home Loan Principal repayment
    7. NPS
  • Total Deduction for NPS is Rs 2 lakhs p.a. where:
    1. 60% of the corpus can be withdrawn tax-free
    2. Mandatory to purchase annuity from the remaining 40% of the corpus
  • 80D investments:
    1. Rs 25,000 for self, spouse and children
    2. For dependent parents it is Rs 25,000 p.a. if they are <60 years of age and Rs 50,000 p.a. if they are 60 years or more
  • Deduction on home loan interest= Rs 2 lakhs U/S 24B
  • Only Rs 2 lakhs of loss can be set-off against income of FY18
  • Long Term Capital Gain tax for capital gains > Rs 1 lakh p.a. for Equity and Equity Mutual Funds levied at 10% p.a. Gains before 31st Jan, 2018 is grandfathered

 

Impact of the changes on your Income:

Taxable Annual Income/FY 2018-19 2019-20 Change in Tax Component
3 Lakhs 5% of Rs 50,000= INR 2,500 + Cess NIL INR 2,500
5 Lakhs 5% of 2.5 Lakhs= INR 12,500 + Cess NIL INR 12,5000
10 Lakhs 5% of 2.5 lakhs + 20% of 5 Lakhs= INR 12,500 + INR 1,00,000= INR 1,12,500 +Cess 5% of 2.5 Lakhs + 20% of 5 Lakhs= INR 12,500 + INR 1,00,000= INR 1,12,500 + Cess 0
15 Lakhs 5% of 2.5 lakhs + 20% of 5 Lakhs + 30% of 5 Lakhs= INR 12,500 + INR 1,00,000 + INR 1,50,000= INR 2,62,500 +Cess 5% of 2.5 lakhs + 20% of 5 Lakhs + 30% of 5 Lakhs= INR 12,500 + INR 1,00,000 + INR 1,50,000= INR 2,62,500 +Cess 0

P.S: For taxable income more than INR 5 lakhs, after the deductions for 80C, 80D, Home Loan, Donations, etc. there is NO change in the tax slab. This budget has given a tax “rebate” to people with annual income of INR 5 lakhs or less and has not increased the exemption slab for all. So, for people with higher income, the tax slab remains unchanged!

 

Some of the other major changes can be listed as:
Savings and Health:

  1. Standard Deduction re-introduced of Rs 40,000 p.a. and replaced Rs 19,200 of allowance and Rs 18,000 of medical reimbursement now increased to Rs 50,000 p.a.
    How does it impact?
    Salaried people will get an additional deduction of Rs 10,000 from their income under the heads of medical bills, transport, etc.
  2. Ceiling Limit of TDS u/s 194A has increased from INR 10,000 to INR 40,000
    How does it impact?
    For people who earn interest from Bank and Post Office Small Saving Deposits, TDS deduction slab has been raised from the current level of INR 10,000 to INR 40,000
  3. 2% interest relief on loan for MSME GST registered person
    How does it impact?
    Helps small traders and MSME registered organizations with a relief in interest for availing loans.
  4. More fund allocated towards Government aided health schemes like Ayushman Bharat, etc.
    How does it impact?
    Better facilities and reach are expected and thus a higher utilization of the insurance.

 

Post Retirement benefit

  1. Tax free Gratuity limit increase to 20 Lakhs from 10 Lakhs
  2. Mega Pension Yojana, namely Pradhan Mantri Shram Yogi Mandhan, to provide assured monthly pension of INR 3000 per month, with contribution of INR 100 per month, for workers in unorganised sector after 60 years of age.

 

Real Estate:

  1. TDS on Home Rent with Ceiling Limit of TDS u/s 194 has increased from INR 1,80,000 to INR 2,40,000 p.a.
  2. Tax exempted on notional rent on a second self-occupied house
  3. Capital tax Benefit u/s 54 has increased from investment in one residential house to two residential houses, i.e. Benefit of rollover of capital tax gains to be increased from investment in one residential house to that in two residential houses, for a taxpayer having capital gains up to 2 crore rupees can be exercised once in a lifetime.

 

Summary of Income Tax Benefits:

Summary of Impact on Real Estate:

Overall this budget has been quite a populist budget and has something for the middle class and for the small businesses and salaried people as well. However, the budget has dampened the expectations of the increase in Tax Slab for the overall population.

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Courtesy Article: Rupanjali Mitra Basu / February 2, 2019 mintpro.in