New Income Tax Laws
Generally, the changes related to income tax announced in the budget comes into effect from April 1st but as you know that budget for financial year 2019-20 was presented in Lok Sabha this year after the general elections. Therefore, some of the tax changes are came into effect from 1st September 2019.
Tax changes came into effect from 1st September 2019 are as follows –
TDS on additional payments at the time of purchasing immovable property
From 1st September 2019, every person buying a property has to mandatorily include the amount he or she has paid for other services or amenities such as Car parking fee, electricity fee, water fee, club membership fee etc. in the amount paid for the property in order to deduct TDS.
Previously, TDS amount was calculated by subtracting other payments like club membership fee, car parking fee etc. from the total payment made for buying a property and there was no provision defined properly in the income tax law for “Consideration for immovable property”. In case the value of your property exceeds 50 Lakh, you will be subjected to TDS deduction at the rate of 1%.
TDS on bank account cash withdrawals
From September 1st 2019, any cash withdrawal from the bank account exceeding Rs.1 crore during the year on aggregate basis will be subjected to TDS. It is done by the government to discourage the large cash transactions and to promote economy as cash less. A new section 194N has been made by the government in income tax law which defines that any cash withdrawal from the bank account exceeding Rs.1 crore will be subjected to TDS at the rate of 2%.
TDS on payments made by individuals & HUF’s to contractors & professionals
From September 1st, any payments made by individuals & HUF’s to contractors and professionals exceeding the amount of Rs.50 lakh per annum on aggregate basis will be subjected to TDS at the rate of 5%. This means that if any individual wants to make payment above this specified limit for the purpose of wedding functions, house renovation or to any single professional for any other purpose in a particular year will be subjected to tax at the time of making payment. Individuals & HUF’s deducting the tax not required to obtain tax deduction number (TAN). This is done by the government to provide ease of compliance. This law is applicable on all the payments made by the individuals for business or personal use.
TDS on non-exempt portion of Life insurance
In case your maturity insurance amount received is taxable, then you will be subjected to 5% TDS on net income portion. Net income means total sum received less total amount of insurance premium paid.
Right now, the proceeds received by you on maturity of a life insurance policy are exempted from tax if the annual policy premium paid by you does not exceed 10% (20% in case of insurance policies sold prior to April 2012) of the sum assured. Remember one thing that if the proceeds received by an individual are taxable, then it will be subjected to TDS at 5% (if net income is more than Rs. 1 Lakh). Previously, the rate of TDS was 1% of the total amount paid.
Banks & financial institutions can be asked to report even small transactions
Previously, banks & other financial institutions were reporting specific financial transactions in case the amount of the transaction exceeds the limit of Rs. 50000 or more as specified by the income tax department. Banks & financial institutions need to file statement of financial transactions in order to report the transactions of Rs. 50000 or more to the income tax department.
In order to widen the scope of reporting requirement, government removed the specified limit of Rs. 50000 from September 1st, 2019 and new legislation is introduced which defines that banks & financial institutions needs to report even small transactions to the income tax department so that tax department can use this data to check ITR.
If PAN is not linked with Aadhaar
As per previous rules, if your Pan is not linked with Aadhaar by a specified deadline, it would have become invalid and treated as person never had a PAN card.
As per the new changes implemented by the government in July 2019 budget, PAN will become inoperative but not invalid in case it is not linked with Aadhaar by the specified deadline. It is done by the government to safeguard the validity of previous transactions done with the help of PAN.
Inter-changeability of PAN and Aadhaar and mandatory quoting in Prescribed transactions
The another important announcement made by the government in July 2019 budget is that you can use Aadhaar in lieu of PAN only for certain prescribed transactions. However, the government is yet to announce that what type of transaction comes under “Certain prescribed transactions”.
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