Recent important Income Tax Changes we must know

Recent important Income Tax Changes we must know Budget 2019 announced Big Changes in Income Tax Laws. Many of these will be applicable from 1st September 2019. These changes will impact common man and therefore we need to be aware and ready for them.

TDS on Additional Payments made while purchasing Immovable property

Previously Tax was deducted by buyer at time of purchasing the property and additional payments for parking, electricity, facility management etc. were not included for calculation of consideration paid for buying the property. But from Finance Act 2019 onwards, additional payments for parking, electricity, facility management etc. will be covered under ambit of consideration paid for purchasing property and therefore TDS will be applicable on the same. TDS will continue to be deducted at the rate of one per cent if the value of the property exceeds Rs 50 lakh. This situation has been explained with the help of an example : For Example Mr Deepak booked a Flat of Rs. 40 Lakhs on 01-06-2019. He paid the entire amount on the date of booking. On that date he was not liable to deduct TDS. At time of handing the possession on 01-11-2019, the seller asked the Mr Deepak for additional payment of Rs. 15 lakhs for car parking and Club Membership Fees. Now as per the proposed amendment Mr. Deepak shall deduct tax from total consideration (i.e. Rs. 55 lakhs) at 1% (Rs. 55,000) and deposit the same by December 30, 2019. You May also refer : FAQ of TDS on property under section 194-IA of Income Tax Act

TDS on cash withdrawals from bank account

Cash withdrawals exceeding Rs 1 crore on aggregate basis during the year from an account held with a bank, cooperative bank or post office will invite levy of TDS from September 1. The move is aimed at discouraging large cash transactions and also to promote a less cash economy.

You may Also Refer : Cash withdrawal before 1/09/2019 won?t be subjected to TDS but same shall be counted in limit of Rs. 1 cr

Individuals & HUF to deduct TDS on payments to contractors & professionals

At present there is no liability on an individual or Hindu undivided family (HUF) to deduct tax at source on any payment made to a resident contractor or professional. But Budget 2019 has introduced a new section 194M, wherein an individual or HUF paying any sum to a contractor or a professional or commission or brokerage more than Rs 50 lakh in a financial year would be required to deduct tax at source (TDS) at the time of credit of such sum or at the time of payment of such sum; whichever is earlier.

You may also read : Individuals & HUF to deduct TDS on payments to contractors & professionals

TDS on Taxable portion of Life Insurance

Under section 194DA of the Act, a person is obliged to deduct tax at source, if it pays any sum to a resident under a life insurance policy, which is not exempt under sub-section (10D) of section 10. The present requirement is to deduct tax at the rate of one per cent. of such sum at the time of payment. Several concerns have been expressed that deducting tax on gross amount creates difficulties to an assesse who otherwise has to pay tax on net income (i.e after deducting the amount of insurance premium paid by him from the total sum received). From the point of views of tax administration as well, it is preferable to deduct tax on net income so that the income as per TDS return of the deductor can be matched automatically with the return of income filed by the assessee. The person who is paying a sum to a resident under a life insurance policy is aware of the amount of insurance premium paid by the assessee. Hence, it is proposed to provide for tax deduction at source at the rate of five per cent. on income component of the sum paid by the person. For Example, In Financial Year 2013-14, Mr. Deepak buys an insurance policy of Rs. 60 lakhs (for a term of 20 years) by paying the premium of Rs. 10 lakhs. He surrenders the policy for Rs. 20 lakhs on 01-10-2019. Prior to the Finance Bill, 2019, the payer insurance co. was required to deduct tax at the rate of 1% on total sum paid (i.e., Rs. 20 lakhs) to Mr. Deepak. However, after the proposed amendment, tax shall be deducted at the rate of 5% on the net income and not on the gross amount paid to insured (Mr. Deepak). Thus, the insurance company will be required to compute the taxable amount in hands of Mr. Deepak. In this case, long term capital gains will arise in the hands of Mr. Deepak as period of holding is more than 36 months.

Consideration	2000000
Cost of Acquisition (Rs. 10 lakhs * 290 (CII for FY 2019-20)/220 (CII for FY 2013-14)	13,18,182
LTCG	6,81,818
TDS to be Deducted	34,091

Cost inflation index for the financial year 2019-20 has been assumed as 290.

PAN to become inoperative if not linked with Aadhaar

In Budget 2017, it was announced that PAN must be mandatorily linked with Aadhaar or else, it will become invalid. The Central Board of Direct Taxes (CBDT) in its notification dated March 31, 2019 notified the date i.e. 30 September, 2019 by which PAN must be linked with Aadhaar.

Aadhaar can be quoted in lieu of PAN for certain prescribed transactions

Aadhaar can be quoted in lieu of PAN only for certain prescribed transactions. Surprisingly the new law comes into effect from September 1, the government is yet to notify the certain prescribed transactions Tags : Be Ready for 7 changes in income tax that will come into effect from Sept 1, TDS on Additional Payments made while purchasing Immovable property, TDS on cash withdrawals from bank account, Individuals & HUF to deduct TDS on payments to contractors & professionals, TDS on Taxable portion of Life Insurance, PAN to become inoperative if not linked with Aadhaar, Aadhaar can be quoted in lieu of PAN for certain prescribed transactions, TDS on Life Insurance

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