personal finance

9 changes that impact your financial plan for FY2019-20


Your financial planning for the new financial year, i.e., 2019-20 should take into account the changes in the personal finance landscape that come into effect from April 1 this year.

So here are the 9 tax and other key changes that you must keep in mind for this financial year.

1. Zero tax on taxable income up to Rs 5 lakh

2. Standard deduction limit hiked to Rs 50,000

3. No income tax on notional income from second house

4. TDS threshold limit hiked to Rs 40,000

5. External benchmark to decide interest rates on loans

6. No transfer of physical shares from April 1, 2019.

7. New GST rules and rules for housing sector

8. Investing capital gains in two houses

9. Reporting of LTCG gains from equity in ITR

  • Zero tax on taxable income up to Rs 5 lakh

As per interim budget 2019, you will not be required to pay any tax if your taxable income does not exceed Rs 5 lakh for financial year 2019-20 except in a few specific cases.

As announced in the interim budget 2019, individuals having taxable income up to Rs 5 lakh in a financial year will be able to avail full tax rebate and thereby will not be required to pay any tax on this income. The tax-rebate available under Section 87A has been increased to Rs 12, 500 from FY 2019-20 onwards.

However, you will still have to file your income tax return (ITR). As per income tax laws, it is mandatory to file ITR if your total income exceeds the minimum exemption limit.

Individuals with taxable income exceeding Rs 5 lakh can make use of various deductions such as Sections 80C, 80D of the Income Tax Act and other allowances such as House Rent Allowance (HRA), Leave Travel Allowance (LTA) (tax-exempt up to a certain extent) to lower his/her taxable income and

thereby availing the benefit of tax rebate.

Also Read:
All the deductions that can reduce your taxable income to Rs 5 lakh

Remember, after claiming all the tax-saving deductions, if your taxable income still exceeds Rs 5 lakh, then you will be liable to pay income tax as per the existing rates.

Also Read:
Latest income tax slabs

  • Standard deduction hiked to Rs 50,000

To help you save more tax in the new financial year, Interim Budget 2019 has also hiked the standard deduction from salary from Rs 40,000 to Rs 50,000, an increase of Rs 10,000.

Standard deduction was first introduced in Budget 2018 in lieu of transport allowance and medical reimbursement. This deduction is available to all the salaried class and pensioners. The deduction is claimed at the time of filing your income tax return.

  • No income tax on notional rent from second self-occupied property

From FY 2019-20, people with a second house, lying vacant will not be required to pay any income tax on the notional rent from this house. Till FY 2018-19, an individual having a second house which was not let out was required to calculate notional rent and pay tax on it accordingly. The notional rent is the amount of the rent which the individual would have earned if the house was let out by him.

Previously, if the individual was having more than one house property, then he could treat any one house property as ‘self-occupied’ and was required to pay tax on the other house property/s, irrespective of whether they were actually on rent or not.

Also Read:
How tax benefit changes for individuals having two houses

  • TDS threshold increased to Rs 40,000

Taxpayers with income below the taxable limit were earlier required to submit Form 15G in order to avoid TDS on the interest income from bank. In a bid to provide relief to such tax payers, the TDS limit has been hiked to Rs 40,000 from Rs 10,000 earlier. This change is expected to reduce paperwork for people in the lower income brackets.

However, one must not confuse this with taxation of interest income earned from banks.

The hike in TDS threshold limit means that no TDS will be deducted by the banks for the interest income up to Rs 40,000. However, interest incomes will still be taxable as per current tax laws.

Interest income on fixed deposit held with banks is still taxable, whereas the tax-saving deduction under Section 80TTA can be claimed for the interest income earned from the savings account either held with a bank or post office.

  • External benchmark to decide interest rate on loans

The Reserve Bank of India (RBI) in its bi-monthly monetary policy meet held in December 2018 announced that all new floating rate personal or retail loans such as housing, auto etc and to micro and small enterprises would be linked to an external benchmark. Till now loans were linked to an internal benchmark, i.e., marginal cost of funds based lending rate (MCLR), prime lending rate (PLR) and benchmark prime lending rate (BPLR).

Though the statement said that the linkage to external benchmark will come into effect from April 1, 2019, however, the central bank is yet to issue final guidelines in this regard. It is yet to be seen how banks will implement this new rule. Linking loan interest rates to an external benchmark is expected to increase transparency in the changes in the rate with changes in the rates prevalent in the economy.

  • No transfer of physical shares from April 1,2019

The Securities Exchange Board of India (SEBI) announced last year that transfer of physical shares will not be allowed from December 5, 2018. However, this deadline was extended to April 1, 2019, as large numbers of shareholders were still holding shares in physical form. Therefore, as per the last SEBI order, from April 1 onwards, transfer of shares will be allowed only in dematerialised form.

Also Read:
How to demat your shares

  • New GST rates and rules for housing sector

As per the announcement made by the GST council in its 33rd meeting held on February 24, 2019 and subsequent clarification, the new rates of Goods and Services Tax (GST) for the real estate sector will come into effect from April 1, 2019.

From April 1, 2019, for on-going under-construction projects, developers and builders will have an option either to charge the GST as per old rates, i.e., at 12 per cent (with input tax credit) or new rates at 5 per cent (without input tax credit).

In case of affordable housing, such rates would be 8 per cent (with input tax credit) or 1 per cent (without input tax credit). Any new under-construction projects starting from April 1, 2019 would mandatorily be required to charge GST as per new rates.

Also, the council has defined what kind of houses will fall under the affordable housing category. As per the new definition, an affordable housing is a residential house/flat with a carpet area of up to 90 square metres in non-metropolitan cities/town and 60 square metres in metropolitan cities having value up to Rs 45 lakh. Metropolitan cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR). The previous limit for affordable housing was a uniform carpet area of up to 60 square metres for a house.

Therefore, while buying a flat in an on-going real estate project, you need to check what is the GST rate charged by the builder/developer.

  • Benefit of investing capital gains in two residential houses

Taxpayers who have sold their house property will now have the option to invest the long-term capital gains (LTCG) in two houses instead of one in order to avoid paying LTCG tax on the amounts so invested. However, one must remember that this benefit can be availed only if the capital gains does not exceed Rs 2 crore and can be availed once in a lifetime.

Also Read:
Now you can buy two houses to save LTCG tax

  • Equity LTCG taxation has changed: Remember when filing ITR

LTCG tax on equity shares and equity-oriented mutual funds was announced in Budget 2018. Therefore, if you have sold equity shares and/or units of equity-oriented mutual funds in FY2018-19, which was held for more than one year, you will be required to pay tax on and report these transactions while filing ITR for FY2018-19. This ITR is due to be filed in the FY which has just started, i.e., in FY2019-20.

The LTCG will attract a tax rate of 10 per cent without indexation benefit, if the gains exceeds Rs 1 lakh in FY 2018-19.





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