The Budget 2019 has brought many changes to the Income Tax slabs, GST, Capital Tax Benefits etc. To see how these changes affect your income and investments read the highlights below and get in touch with a Financial Advisor today.
Income Tax change – Individuals with annual income lower than Rs. 5 Lakh to be exempted from income tax.
Please note, if the taxable income is above Rs. 5 lakhs individuals will need to pay 5% tax on earnings up to Rs. 5 lakhs and 10% on earnings more than 5 lakhs i.e. there is no change in the tax structure of individuals with income more than Rs. 5 lakhs. Individuals with an annual income above Rs. 5 lakhs can reduce their tax liability by making investments in instruments under Section 80C of the Income Tax Act, 1961.
Here two tax saving investments in 80c
Equity-Linked Saving Schemes (ELSS): ELSS are open-ended diversified equity schemes offered by mutual fund houses. These schemes come with a compulsory lock-in period of 3 years. Investors can invest a maximum amount of Rs. 1.5 lakhs in these schemes to reduce their tax liability.
Public Provident Fund (PPF): PPFs are saving-cum-tax-saving schemes backed by the government of India. As this investment carries an Exempt-Exempt-Exempt (EEE) status the interest earned and the proceeds received at the time of maturity are tax exempt. Investors can invest a maximum amount of Rs. 1.5 lakhs in these schemes to reduce their tax liability.
Tax Deducted at Source (TDS) Exemption on Interest Earned – on interest earned from deposits in banks and post offices increased to Rs. 40,000 from Rs. 10,000.
As interest earned on bank deposits and post office deposits are fully taxable, most taxpayers are subject to TDS. If interest income earned from such deposits is more than Rs. 40,000 in a year banks deduct a TDS at the rate of 10%.
Capital Tax Benefit – Under Section 54 of the Income Tax Act, 1961, Long-Term Capital Gains (LTCG) from the sale of residential property can now be invested in two residential properties (For capital gains up to Rs. 2,00,00,000). There was a limit of one investment earlier.
Tax Exempt Gratuity – Tax-exempt gratuity limit increased to Rs. 20,00,000 from Rs. 10,00,000.
Gratuity is a sum of money customarily given by an employer to an employee in addition to the basic price.
TDS Threshold – Tax-exemption on rental income has been increased to Rs. 2,40,000 from Rs. 1,80,000.
Big GST Change – Flat 6% GST on service providers with turnover below Rs. 50 Lakhs, a considerable drop from the earlier flat GST rate of 18%. This is good news for Micro, Small, and Medium-Scale Enterprises. (MSME)
Affordable Housing Deductions – Deduction under 80IB(8) – extended by one more year i.e. for the housing projects approved till March 31, 2020.
Farmer Income Support Scheme – Direct income support of Rs. 6,000 per year to all marginal and small farmers with 2 hectares of land or less.
Mega Pension Yojana – Mega Pension Yojana to provide assured monthly pension of Rs. 3000 / per month with a contribution of Rs. 100 / per month for workers in the unorganized sector after 60 years of age.
MGNREGA – Rs. 60,000 crore will be allocated for the right-to-work programme in FY’20.
Find the best investments for the Financial Year 2019 here.