New Income Tax Rules applicable from September, 2019
Union finance minister Nirmala Sitharaman in her maiden budget speech announced some tax-related changes which came into effect from September 1. Her key announcements were that the tax deducted at source (TDS) will be levied at the rate of 2 per cent on cash payment worth more than Rs 1 crore. Also the TDS will be levied if life insurance maturity received is taxable. Further, the government amended 194-IA of Income Tax Act to include all charges of the nature of club membership fee, car parking fee, or any other charges of similar nature under immovable property for levy of the TDS. Here is a 5-Point explainer of new tax-related changes that have come into effect in India from September 1.
1. TDS on additional payment made when purchasing immovable property
The government had amended 194-IA of income Tax Act during the budget announcement in July in which FM Nirmala Sitharaman announced that if any person purchases an immovable property of Rs 50 lakh or more than that (excluding agricultural land), is required to deduct TDS at the rate of 1 per cent from September 1, 2019, onward. The amendment included all charges of the nature of club membership fee, car parking fee, electricity and water facility fees, maintenance fee, advance fee or any other charges of similar nature, which are incidental to the transfer of immovable property.
2. TDS on cash withdrawals from bank accounts
The government has included a new section 194N in the Act. With this new inclusion, the TDS can be levied at the rate of 2 per cent on cash payments worth more than Rs 1 crore in aggregate made within the year, by a cooperative bank, a banking company, or post office to any individual from an account, which is maintained by the recipient.
The Central Board of direct Taxes (CBDT) further said that if a person has already withdrawn Rs 1 crore or more in cash up to August 31, 2019, in the current fiscal, the two per cent TDS shall apply on all subsequent cash withdrawals.
The government had made the provision of levying 2 per cent TDS on cash withdrawals exceeding Rs 1 crore in the Union Budget with an aim to discourage cash transactions and move towards less cash economy.
After receiving queries regarding the levy of the TDS, CBDT said the provision “is to come into effect from September 1, 2019”
Hence, any cash withdrawal prior to September 1, 2019, will not be subjected to the TDS.
“However, since the threshold of Rs 1 crore is with respect to the previous year, calculation of amount of cash withdrawal for triggering deduction under section 194N of the Finance Act shall be counted from April 1, 2019 ,” it said.
Hence, if a person has already withdrawn Rs 1crore or more in cash up to August 31, 2019 from one or more accounts maintained with a banking company or a cooperative bank or a post office, the two per cent TDS would apply on all subsequent cash withdrawals.
3. TDS on payments made by HUF/Individual to professionals and contractors
Under this provision announced in the Budget, if the payment made to a contractor or a professional or a brokerage exceeds Rs 50 lakh in a year, an individual or HUF (Hindu Undivided Family) is required to deduct 5 per cent TDS at the time of crediting such amount. This will help check evasion but may lead to a higher burden of compliance for the payer.
This means that individuals making payments of over Rs 50 lakh, let’s say, house renovation, wedding functions or any other purpose to a single professional in a year would be required to deduct tax at the time of making the payment.
4. TDS on life insurance
If life insurance maturity proceeds received are taxable, then the TDS will be deducted at the rate of 5 per cent on the net income portion. The net income portion is defined as the total sum received less of the total amount of insurance premium paid. Earlier, the TDS was 1% of the gross maturity payout under the policy.
5. Interchangeability of Pan and Aadhaar
Union finance minister Nirmala Sitharaman in her Budget speech had announced that taxpayers who don’t own a PAN card (Permanent Account Number) can now file Income Tax returns with their Aadhaar Card also. The FM allowed the interchangeability of PAN and Aadhaar card for filing tax returns.
Note: - The possibility of other interpretation and contrary view cannot be denied. It will be better if finance ministry comes out with a detailed press release outlining the intended scope of the new ordinance. Let us hope that the issue gets settled with the probable coming press release
Disclaimer: The information contained in the above article are solely for informational purpose after exercising due care. However, it does not constitute professional advice or a formal recommendation. The author do not owns any responsibility for any loss or damage caused to any person, directly or indirectly, for any action taken on the basis of the above article.
Regards
?CA Anil Soni