CA Kuldeep Arora
Impact of proposals of Union Budget 2019 on an Individual Income Tax Payer
1. Transfer of any money or property situate in India by a person resident in India to a
person outside India
Section 9 of the Act deals with Income deemed to accrue or arise in India. Under the Act, non –residents are taxable in India in respect of income that accrues or arises in India or is received in India or is deemed to accrue or arise in India or is deemed to be received in India. Under the existing provisions of the Act, a gift of money or property is taxed in the hands of donee/receiver, except exemptions given u/s 56(2)(x). Presently, these gifts are made by persons being residents in India to persons outside India and are claimed to be non-taxable in India as the income does not accrue or arise in India. To make these gifts taxable in India, it is proposed to provide that income as referred u/s 2(24)(xviia), arising from any sum of money paid, or any property situate in India transferred, on or after 5th July, 2019 by a person resident in India to a person outside India shall be deemed to accrue or arise in India. However, the gifts to relatives and on account of marriage as provided u/s 56(2)(x) will continue to be exempt. DTAA provisions will also apply.
2. Mandatory furnishing of ITR by certain persons
In order to ensure that persons who enter into certain high value transactions do furnish their return of income, it is proposed to amend section 139 of the Act so as to provide that a person shall be mandatory required to file his return of income, if during the previous year, he-
(i) has deposited an amount or aggregate of the amounts exceeding one crore rupees in one or more current account maintained with a banking company or a cooperative bank; or
(ii) has incurred expenditure of an amount or aggregate of the amounts exceeding two lakh rupees for himself or any other person for travel to a foreign country; or
(iii) has incurred expenditure of an amount or aggregate of the amounts exceeding one lakh rupees towards consumption of electricity; or
(iv) fulfills such other prescribed conditions, as may be prescribed.
A person who is claiming rollover benefits on investment in a house or a bond or other assets, under sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA and 54GB of the Act, shall also, necessarily be required to furnish a return, if before claim of the rollover benefits, his total income is more than the maximumamount not chargeable to tax.
3. Inter-changeability of PAN & AADHAAR and mandatory quoting in prescribed transactions.
As per section 139A(1) of the Act, provides that every person specified therein, who has not been allotted a PAN, shall apply to the Assessing Officer for allotment of PAN. In many cases persons entering into high value transactions, such as purchase of foreign currency or huge withdrawal from the banks, do not possess a PAN. In order to keep an audit trail of such transactions, for widening and deepening of the tax base, it is proposed to insert a new clause (vii) in the aforesaid sub-section so as to provide that every person, who intends to enter into certain prescribed transactions and has not been allotted a PAN, shall also apply for allotment of a PAN. To ensure ease of compliance, it is also proposed to provide for inter-changeability of PAN with the AADHAAR number.
Accordingly, the provisions of section 139A are proposed to be amended so as to provide that-
(i) every person who is required to furnish or intimate or quote his PAN under the Act, and who, has not been allotted a PAN but possesses the AADHAAR number, may furnish or intimate or quote his AADHAAR number in lieu of PAN, and such person shall be allotted a PAN in the prescribed manner;
(ii) every person who has been allotted a PAN, and who has linked his AADHAAR number under section 139AA, may furnish or intimate or quote his AADHAAR number in lieu of a PAN. Further, section 139A, provides that every person, receiving a document relating to a transaction for which PAN is required to be quoted shall ensure that the PAN has been duly quoted therein. It is proposed to provide that every person receiving such documents shall also ensure that the PAN or the AADHAAR number, as the case may be, has been duly quoted. A new subsection (6A) is also proposed to be inserted to ensure quoting of PAN or AADHAAR number for entering into prescribed transactions and authentication thereof in the prescribed manner. Duty is also proposed to be cast upon the person receiving any document relating to such transactions, through newly proposed sub-section (6B), to ensure that PAN or AADHAAR number, as the case may be, is duly quoted, and authenticated. In order to ensure proper compliance of the provisions relating to quoting and authentication of PAN or AADHAAR, the penalty provision contained in section 272B is proposed to be amended suitably.
4. Consequence of not linking PAN with AADHAAR
As per proviso to section 139AA(2) , the PAN allotted to a person shall be deemed to be invalid, in case the person fails to intimate the AADHAAR number, on or before the notified date. In order to protect validity of transactions previously carried out through such PAN, it is proposed to amend the said proviso so as to provide that if a person fails to intimate the AADHAAR number, the PAN allotted to such person shall be made inoperative in the prescribed manner.
5. Provision of credit of relief provided under section 89
Section 89 of the Income-tax Act contains provisions for providing tax relief where salary, etc. is paid in arrears or in advance. The existing provisions of section 140A, section 143, section 234A, section 234B and section 234C contain provisions relating to computation of tax liability after allowing credit for prepaid taxes and certain admissible reliefs, credits etc. However, the relief under section 89 is not specifically mentioned in these sections, which is resulting into genuine hardship in the case of taxpayers who are eligible for this relief. In view of the above, it is proposed to amend section 140A, section 143, section 234A, section 234B and section 234C so as to provide that computation of tax liability shall be made after allowing relief under section 89. (With retrospective effect from 1st April 2007)
6. Tax incentive for affordable housing
It is proposed to insert section 80EEA to provide a deduction in respect of interest up to Rs 1.5 Lakh on loan taken for residential house property from any financial institution subject to the following conditions:
i. loan has been sanctioned by a financial institution between 1st April, 2019 to 31st March 2020.
ii. the stamp duty value of house property does not exceed Rs 45 Lakh
iii. assessee does not own any residential house property on the date of sanction of loan.
It is also proposed that where a deduction under this section is allowed for any interest, deduction shall not be allowed in respect of such interest under any other provisions of the Act for the same or any other assessment year.
“Financial institution" means a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies, or any bank or banking institution referred to in section 51 of that Act or a housing finance company;
The existing provisions of the section 80-IBA provide that where the gross total income of an assessee includes any profits and gains derived from the business of developing and building housing projects, there shall, subject to certain conditions, be allowed, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business. With a view to align the definition of "affordable housing" under section 80-IBA with the definition under GST Act, it is proposed to amend the said section so as to modify certain conditions regarding the housing project approved on or after 1st day of September, 2019.
The modified conditions are as under:
i. the assessee shall be eligible for deduction under the section, in respect of a housing project if a residential unit in the housing project have carpet area not exceeding 60 square meter in metropolitan cities or 90 square meter in cities or towns other than metropolitan cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region); and
ii. the stamp duty value of such residential unit in the housing project shall not exceed forty-five lakh rupees;
7. Tax incentive for electric vehicles
it is proposed to insert section 80EEB to provide for a deduction of interest on loan taken for purchase of an electric vehicle from financial institution up to Rs 1.5 Lakh subject to the condition that the loan has been sanctioned between 1st April 2019 to 31st March 2023. Where a deduction for interest is allowed under this section, such interest shall not be allowed a deduction under any other provisions of the Act for the same or any other assessment year i.e. this deduction is only for non-business assessees.
The memorandum explaining the bill specified another condition that the assessee shall not own any other electric vehicle on the date of sanction of loan. But this condition is missing in the proposed Finance Bill. But this will certainly be inserted in the final bill to be passed in Parliament.
8. Incentives to National Pension System (NPS) subscribers
i. Under the existing provisions of section 10, any payment to assessee on closure of his account or on his opting out of the pension scheme, to the extent it does not exceed 40% of the total amount payable to him, is exempt from tax. Now it is proposed to amend the said section so as to increase the said exemption from 40% to 60%. It is to be noted that maximum withdrawal limit is already 60% under NPS scheme. Now, the whole of such amount is proposed to be exempted.
ii. Under the existing provisions of section 80CCD of the Income-tax Act, in respect of any contribution by the Central Government or any other employer to the account of the employee referred to in the section, the assessee shall be allowed a deduction in the computation of his total income, of the whole of the amount contributed by the Central Government or any other employer, as does not exceed 10% of his salary in the previous year. In order to ensure that the Central Government employees get full deduction of the enhanced contribution of pension, it is proposed to increase the limit u/s 80CCD to 14% from existing 10%. For other employers’ limit is kept unchanged at 10%.
iii. Any amount paid or deposited for a fixed period of not less than 3 years by a Central Government employee as a contribution to his Tier-II account of the pension scheme is proposed to be eligible for deduction u/s 80C.