The key changes in the Interim Budget 2019 from a personal tax perspective, which will be effective from 1 April 2019.
1. Standard Deduction from Salary: Standard deduction has been increased from Rs 40,000 to Rs 50,000 for salaried individuals (which was introduced in the Budget 2018 in lieu of exemption for medical reimbursement and conveyance allowance).
2. No deemed rental income on having two residential house properties : Home-owners will not be required to pay tax on notional rent if they have more than one self-occupied property. According to the budget proposals, exemption has been proposed on the income tax from the notional rent on second -self-occupied house. However, there is no change in aggregate limit for deduction in respect of interest on housing loan. The aggregate deduction for interest on housing loan for both houses cannot exceed Rs. 30000 or Rs. 2,00,000.
3. Rebate under section 87A : Individual taxpayers with annual income up to Rs. 5 lakh rupees will get full tax rebate. The income limit eligible to avail tax rebate under section 87A have been raised to Rs. 5 lakh from Rs. 3.5 lakh. The limit of tax rebate under section 87A increased to Rs. 12,500.00 from Rs. 2,500.00
4. Section 54 Relied extended to 2 Residential Houses : Individual or HUF will able to claim Long Term Capital Gains (Capital gain on Sale of Residential House) exemption benefit where sales Proceeds are invested in purchase of Two Residential House but subject to following Conditions
1. The long-term capital gains from sale of such house property shall not exceed Rs 2 crore, and
2. The benefit can be claimed only once in the taxpayer’s lifetime.
GST Council has approved the transition plan for the implementation of the new tax structure for housing units.
GST rates for new projects will be mandatory from April 1.
Builders of existing housing projects that are completing construction by 31st March 2019 get to choose either of the two alternatives:
Alternative 1: Choose the old rate of 12% (8% for affordable housing) and charge this GST Rate in the invoices raised. Further, input tax credit benefit is available and can be passed on to the buyer.
Alternative 2: Choose to bear GST tax at the rate of 5% (1% for affordable housing as defined by GST law). The benefit of the input tax credit(ITC) is not available to the builder for procurements used in construction.
Those who choose the 2nd alternative must reverse the accumulated ITC on their closing stock of under-construction properties in a proportion laid down in rules (to be notified) within six months.
The new rate of 5% (1% for affordable housing) will apply to those residential properties whose construction is going on even after 31st March 2019 or any new projects launched after 1st April 2019. Here, the benefit of ITC on procurements will not be available to the builders.
80% procurement of materials should be from the registered dealer.
Up to 15% of commercial space to be treated as residential property for GST purpose.
The Goods and Services Tax (GST) council in its 32nd meeting held last week announced a lot of changes including the fact that the new limit for registration under GST would be Rs 40 lakh. This has been hailed as a major decision to help small taxpayers go out of the tax net and hence the related compliances and costs. However, this limit has come with far too many complications, as explained below, and a small businessmen will have to take help of a tax expert before deciding whether to avail this exemption limit or continue to be in GST regime. The main issues, which will have to be kept in mind are:
1. Next Year: This limit is applicable from financial year 2019-2020 onward. i.e. for financial year starting from 1 April 2019.
2.Goods, Not Services: The limit is applicable only for sale of goods. For service providers limit continues to be Rs20 lakh for all states except for special states where it is Rs 10 lakh
3. Not for Interstate Sales: The limit is not applicable if you are selling goods inter-state i.e. from one state to another.
4. Amendments: GST being a dual tax (Central and State), the limit for turnover will have to be changed in both the Acts. This will have to be done for each state in Central Goods and Services Act, 2017 as well.
5. Registration: Section 24 of GST Act makes compulsory to register in certain circumstances, and this section is not amended. Hence, if a small businessmen is registered due to that, then he will have to continue with registration. Exporters and those selling on websites like Flipkart, Amazon, Snapdeal will have to continue with their registration.
6. No Clarity on Service Income: If a person is selling goods has even small service income like rent for neon signs or product placements at his shop, whether limit of Rs 20 lakh or Rs 40 lakh will be applied to him? For e.g. a person may have sales of Rs 25 lakh and rental income of Rs 5 lakh, now whether he will be covered by new exemption limit. Since increase in limit is for goods only and there no separate limit for goods and services for aggregate turnover. Once registered, GST has to be charged on all outward supplies whether goods or service.
7. Turnover Calculation: Section 22 of GST Act uses the word aggregate turnover (taxable goods plus taxable services plus exempt/nil rated goods plus exempt/nil rated services) while describing persons who are liable for registration. Hence, small shop owners will have to see their turnover in totality before deciding. Even for as basic as limit for registration why to have so much complications.
8. GST Paid Becomes Cost: All GST paid on purchases will become cost to the person and he cannot charge any GST on outward supplies i.e. sales
9. Draconian Consequences: On top of all this, please remember section 17(5)(i) which says that if you decide that tax is not payable and then GST department asks for tax and you lose in appeal, you may not be eligible for input tax credit on purchases.
GST was supposed to remove distinction between goods and services or mixed supply of goods and services since under the erstwhile regime many disputes were relating to this. Now we are slowly again going towards that as there will be separate limit for registration and we already have separate procedure for refund in case of export of goods and service. Also for composition scheme there will be separate limit of Rs 50 lakh for services and Rs 150 lakh for goods with different rates.
With middle-class apathy on the rise, Finance Minister Arun Jaitley may double the income tax exemption threshold for the salaried from the present Rs 2.5 lakhs to Rs 5 lakhs while also reinstating tax-free status for medical expenses and transport allowance, providing some relief to the section already under strain since demonstration.
The problem that may manifest itself is that the Union Budget will precede the unveiling of the Direct Tax Code Report on February 28. Tinkering with the tax rates before the release of the report will make it contentious.
The new Direct Tax Code will try to bring more assesses into the tax net, make the system more equitable for different classes of taxpayers, make businesses more competitive by lowering the corporate tax rate and phase out the remaining tax exemptions that lead to litigation. It will also redefine key concepts such as income and scope of taxation
At the moment, income up to Rs 2.5 lakh is exempt from personal income tax. Income between Rs 2.5-5 lakh attracts 5 per cent tax, while that between Rs 5-10 lakh is levied with 20 per cent tax. Income above Rs 10 lakh is taxed at 30 per cent. Rs 5 lakh exemption is only applicable to individuals of over 80 years.
Also, tax free medical expenses up to Rs 15,000 and transport allowance up to Rs 19,200 per annul has been replaced with a Rs 20,000 standard deduction for those earning above Rs 5 lakh last year. This will benefit tax payers to the tune of Rs 12,500 annually which is not much but can be viewed as a sentiment buster.
1. Threshold limit increased to 40 Lakhs
Effective April 1, the GST exemption threshold has been raised from Rs 20 lakh to Rs 40 lakh. For hilly states and those in the North East, the threshold has been doubled to Rs 20 lakh.
Earlier in a press talk AP FM said increased to 50lakhs, but it is increased to 40lakhs only as said by FM
2. Power to states
Now states will be able to choose if they want to keep the GST exemption limit at Rs 20 lakh or Rs 40 lakh, Jaitley said.
3. Composition limit increased to 1.5Cr from the present 1 cr
The existing Composition Scheme turnover threshold raised to Rs 1.5 crore.
Those who use the scheme from April 1,2019
4 Quarterly payment and Annual Return
Now Composition tax payers will pay tax quarterly, but file returns annually.
5 Composition scheme for services
Those providing services or mixed supplies (goods and services) with a turnover up to Rs 50 lakhs will now be entitled to avail composition scheme.
6 Rate for services under comp scheme @ 6%
Compounding rate for services under composition scheme is fixed at 6 percent.
A committee has been set up to consider real estate GST rates, a consensus is yet to be achieved, says FM Arun Jaitley.
8 Calamity cess by Kerela @1%
GST Council lets Kerala levy 1% cess for 2 years on intra-state sales: Finance Minister @arunjaitley
1. Increase in Turnover Limit for the existing Composition Scheme:The limit of Annual Turnover in the preceding Financial Year for availing Composition Scheme for Goods shall be increased to Rs 1.5 crore. Special category States would decide, within one week, about the Composition Limit in their respective States.
1.1 Compliance Simplification: The compliance under Composition Scheme shall be simplified as now they would need to file one Annual Return but Payment of Taxes would remain Quarterly (along with a simple declaration).
2. Higher Exemption Threshold Limit for Supplier of Goods: There would be two Threshold Limits for exemption from Registration and Payment of GST for the suppliers of Goods i.e. Rs 40 lakhs and Rs 20 lakhs. States would have an option to decide about one of the limits within a weeks’ time. The Threshold for Registration for Service Providers would continue to be Rs 20 lakhs and in case of Special Category States at Rs 10 lakhs.
3. Composition Scheme for Services :A Composition Scheme shall be made available for Suppliers of Services (or Mixed Suppliers) with a Tax Rate of 6% (3% CGST +3% SGST) having an Annual Turnover in the preceding Financial Year up to Rs 50 lakhs.
3.1 The said Scheme Shall be applicable to both Service Providers as well as Suppliers of Goods and Services, who are not eligible for the presently available Composition Scheme for Goods.
3.2 They would be liable to file one Annual Return with Quarterly Payment of Taxes (along with a Simple Declaration).
4. Effective date:The decisions at Sl. No. 1 to 3 above shall be made operational from the 1st of April, 2019.
5. Free Accounting and Billing Software shall be provided to Small Taxpayers by GSTN
6. Matters referred to Group of Ministers
i. A seven Member Group of Ministers shall be constituted to examine the proposal of giving a Composition Scheme to Boost the Residential Segment of the Real Estate Sector.
ii. A Group of Ministers shall be constituted to examine the GST Rate Structure on Lotteries.
7. Revenue Mobilization for Natural Calamities : GST Council approved Levy of Cess on Intra-State Supply of Goods and Services within the State of Kerala at a rate not exceeding 1% for a period not exceeding 2 years.
The GST Council in its 32nd Meeting held today under the Chairmanship of the Union Minister of Finance & Corporate Affairs, Shri Arun Jaitley in New Delhi gave approval for the following:
Changes made by CGST (Amendment) Act,2018, IGST (Amendment) Act, 2018, UTGST (Amendment) Act, 2018 and GST (Compensation to States) Amendment Act, 2018 along with amendments in CGST Rules, notifications and Circulars issued earlier and the Corresponding Changes in SGST Acts would be notified w.e.f. 01.02.2019.
The Last Date for passing the examination for GST Practitioners to be extended till 31.12.2019 for those GST Practitioners who have enrolled under rule 83(1)(b) i.e. who were sales tax practitioner or tax return preparer under the existing law for a period of not less than five years.
The prices of petroleum products in the country are benchmarked to international product prices. Generally, the prices of sensitive petroleum products in the country are higher/lower than other countries due to various factors, including prevailing tax regime and subsidy compensations by the respective Governments.The details of prices of petrol and diesel at Delhi and Mumbai are available at Petroleum Planning and Analysis Cell (PPAC) website i.e. www.ppac .org.in . Article 279A (5) of the Constitution provides that Goods and Services Tax Council shall recommend the dateon which goods and services tax shall be levied on petroleum crude, high speed diesel, motor spirit, natural gas and aviation turbine fuel. Thus while, petroleum products are constitutionally included under GST, the date on which GST shall be levied on such goods, shall be as per the decision of the GST Council. As per the section 9(2) of the CGST Act, inclusion of all excluded petroleum products, including petrol and diesel in GST will require recommendation of the GST Council. All the States and Union Territories (UT) with Legislature are represented in the GST Council by their Minister-in-charge of Finance or Taxation or any other Minister nominated by the State/UT. Any decision regarding levy of GST on petroleum products has to be decided as per recommendation of the GST Council. This information was given by Minister of Petroleum & Natural Gas, Shri Dharmendra Pradhan in a written reply to the Rajya Sabha today.
1).Higher interest income exemption for senior citizens, the government increased interest income exemption limit on bank and post office deposits to Rs 50,000, from Rs 10,000 earlier. In addition, for senior citizens, tax deduction at source (TDS) will not be triggered if interest income is up to Rs 50,000.
2).Dividend distribution tax on dividends from equity mutual funds which were earlier tax-free, attracted tax at the rate of 10%. Remember that dividends from equity mutual funds are tax-free in the hands of investors. But dividends from equity mutual funds are paid after deducting a dividend distribution tax (DDT) of 11.648% (including cess), which reduces the in-hand return for investors.
Long- term capital gains tax on equities:
From 1 April 2018, a new long term capital gains (LTCG) regime on equity instruments – listed shares or equity – oriented mutual funds – came into effect. Earlier such gains on equity were exempt from tax. Now investors have to pay 10% tax on gains exceeding Rs 1 lakh a year. Equity holding beyond a year is considered long term. However, to soften the blow, the government introduced a grandfathering provision, which means that if listed shares or equity funds were acquired before February 1, there would be no levy of long- term capital gains tax.
3).Rs 40,000 standard deduction, one need not provide any documents and proof. A salaried individual or pensioner can claim standard deduction up to Rs 40,000 from his/her income.
4).Higher cess, the government raised the cess on income tax to 4% from 3% for individual taxpayers on the amount of income tax payable.
5).Tax exemption on NPS for the self-employed: Employees contributing to the National Pension System (NPS) were allowed to withdraw up to 40% of the total corpus without any tax at the time of maturity or closure of the account. The same benefit has now been extended to self-employed subscribers.
6).Lock-in period of 54EC bonds increased: Long-term profits from real estate sales are tax-free if invested in specific bonds under section 54EC. Till last year, you had to stay invested in the 54EC bonds for at least three years to enjoy the tax break, but from his year, your money will be locked in for five years.
7).Higher deduction on health insurance premiums: Senior citizens now can avail deduction of upto Rs 50,000 for health insurance premium under section 80D. Earlier the limit was Rs 30,000. Also, the deduction available for payment towards medical treatment of specified disease has been hiked to Rs 1 lakh for senior citizens.
8).Govt brings NPS on a par with PF.makes it tax-free; The Union Cabinet recently approved many changes in the NPS to make it more attractive for investors.NPS will be made fully tax-free on withdrawal.Subscribers will get full tax exemption on the 60% of the corpus that an investor is allowed to withdraw on maturity.This will help bring the NPS on a par with other tax –savings instruments like the PPF where withdrawals are fully tax-free This is likely to be effective from April 1 next year. Read: NPS rule changes explained in 10 points.
9).More tax benefits on single premium health insurance policies: In cases where premium for health insurance for multiple years has been paid in one year, the deduction shall be allowed on proportionate basis for the number for years for which the benefit of health insurance is provided.