Jul 132019

Amendments proposed in budget 2019

The major amendments proposed in budget 2019 with impact on future assessments are listed below:

Issue Before Budget 2019 After Budget 2019 Impact Analysis
TDS by certain individuals or HUF for payment made to contractor and professionals Not available An individual or HUF have to deduct tax at source (TDS) on payments made to a resident contractor or professional @ 5% when it is for personal use if the annual payment made to a contractor or individual exceeds Rs 50 lakh.


Such person deducting tax under this section shall deposit TDS on his PAN number.


It is also proposed to enable filing of application for issue of certificate for nil or lower rate of TDS.

This will capture data about income of professionals and contractor in detailed manner and in organized manner.



Thus, this initiative will unearth the undeclared income and batter serve the contractors and professionals as their ITR 4 is completely pre-filled with values of all major services provided by them.

Consideration for TDS on immovable property Only basic value is consider for TDS deduction and charges incidental to purchase of property is not consider. Consideration shall include other charges in the nature of club membership fee, car parking fee, electricity and water facility fee, maintenance fee, advance fee or any other charges of similar nature which are incidental to the purchase of immovable  property Now whatever payments being made for or for the purpose of purchase of immovable property will considered for TDS deduction.
Gifts made to non-residents Gifts made by a resident to another resident are liable for income tax subject to some exemptions Gift of any sum of money, or property situated in India, by a person resident in India to a person outside India (not being a gift otherwise exempt), on or after 5th day of July 2019, shall be deemed to accrue or arise in India. Now from July onwards same treatment will be given to gifts whether made to resident or non residents. This will also save tax evasion in case of transaction pertaining to non residents.
Compulsory filing of return Filing of return is compulsory only if income exceeds specified limit. Now filing compulsory for persons:

1.     who have deposited more than Rs. 1 crore in a current account in a year, or

2.     who have expended more than Rs. 2 lakh on foreign travel or

3.     who have expended more than Rs. 1 lakh on electricity consumption in a year or

4.     who fulfils the prescribed conditions,

5.     A person whose income becomes lower than maximum amount not chargeable to tax due to claim of rollover benefit of capital gains.

This will ensure that persons who enter into high value transactions also furnish return of income.

This will further broaden the tax base for the government.
Interchangeability of PAN and Aadhaar Not available The Income Tax Department shall allot PAN to such person on the basis of Aadhaar after obtaining demographic data from the Unique Identification Authority of India (UIDAI).


It is also proposed to provide that a person who has already linked his Aadhaar with his PAN may at his option use Aadhaar in place of PAN under the Act.

Now tax work is not depend only on PAN card.


Even if a person having only Aadhaar card he can do tax related work easily with his Aadhaar number.

Quoting of PAN/Aadhaar Provision for quoting pan is there but Aadhaar is there Quoting and authentication of PAN/Aadhaar shall be mandatory for certain prescribed transactions.


The person receiving relevant documents shall ensure correct quoting and authentication of PAN/Aadhaar for the prescribed transactions.


To ensure compliance of these provisions it is also proposed to amend the relevant penalty provisions.

To track high value transaction
Consequences of not linking Aadhaar with PAN The Act provides for making PAN invalid if it is not linked with Aadhaar within a notified date. Now onwards if a person  fails to intimate the Aadhaar number, the PAN allotted to such person shall be made inoperative in the prescribed manner after the date notified for the said linking. Past transactions carried out through such pan are saved and traceable.
Widening the scope of SFT Currently very limited person needs to file statement of financial transaction Widen the scope of furnishing of statement of financial transactions (SFT) by mandating furnishing of statement by the prescribed persons other than those who are currently furnishing the same.


It is also proposed to remove the current threshold of Rs. 50,000 for application of the provisions requiring furnishing of information,


For ensuring the accuracy of the information furnished, a suitable amendment to the relevant penalty provisions is also proposed.

All these provision will help in pre filing of return and also further computer based processing of return under section 143 shall be the final assessment in case of small value returns.
Payment by other electronic modes There are various provisions in the Act which prohibit cash transactions and allow or encourage payment or receipt only through account payee cheque, account payee draft or electronic clearing system through a bank account. it is proposed to amend these provisions to also allow payment or receipt through other prescribed electronic modes. This will promote online transaction.
TDS on cash withdrawal from banks No such provision it is proposed to provide for tax deduction at source at the rate of 2% on cash withdrawal by a person in excess of Rs. 1 crore in a year from his bank account.


Some business models, where large cash withdrawal is a necessity, are proposed to be exempted.


It is also proposed that the Central Government may notify the persons to whom these provisions shall not be applicable in consultation with the Reserve Bank of India.

A step forward to less cash economy.
Facilities for low-cost electronic payments A business enterprise whose annual turnover exceeds Rs. 50 crore shall provide facility for prescribed low cost electronic modes of payment.


For ensuring compliance, a suitable penalty provision is also proposed to be inserted in the Act.

This will facilitate low cost electronic mode of payment against goods and services.


Jul 102019

Income tax Incentives in Budget 2019

As you all are aware that budget for financial year 2019-20 is presented is presented in lok sabha on 5th July 2019 with the words “Mr. Speaker Sir, I rise to present the budget for the year 2019-2020……” The budget is yat to get pass in Rajya Sabha and nod from honorable president from India. Even though here an attempt is being made to analyze the various types of incentives proposed in the budget which shall be effective from next assessment year.

Tax incentive to Purpose Detailed analysis of tax incentives
International Financial Services Centre (IFSC) To promote the development of world class financial infrastructure 1.    It is proposed to provide for 100% deduction of profits for 10 consecutive years out of 15 years from the year of commencement.

2.    Tax exemptions for interest received by a non-resident in respect of monies lent to a unit located in IFSC.

3.    The benefit to non resident is proposed to be extended to a Category-III Alternative Investment Fund (AIF) in IFSC of which all the unit holders are non-residents, subject to certain other conditions.

4.    It is also proposed to notify other securities which shall be eligible for capital gains exemptions if traded on a recognised stock exchange in IFSC by a specified person.

5.    It is proposed to extend benefit of exemption from DDT even on distribution out of accumulated profit which has been accumulated by the unit after 1st April, 2017 from operations in IFSC.

6.    There would be no additional tax on distribution of any amount, on or after 1st September, 2019, by a specified Mutual Fund out of its income derived from transactions made on a recognised stock exchange located in any IFSC.

7.    It is proposed to allow deduction under section 80LA to a non-resident for the purpose of computing tax liability in respect of income of the nature of interest, dividend etc. referred to in section 115A.

Non-banking Financial Companies (NBFCs) Unlike others interest income on bad or doubtful debts of NBFCs are taxed on accrual basis. it is proposed that interest on bad or doubtful debts in the case of deposit-taking NBFC and systemically important non deposit-taking NBFC shall be charged to tax on receipt basis.


It is also proposed to provide that deduction of such interest shall be allowed to the payer on actual payment.

Start – ups Condition of carry forward of losses is relaxed  1.   Carry forward eligible start – ups losses even on satisfaction of any one of the two conditions, i.e. continuity of 51% shareholding/voting power or continuity of 100% of original shareholders.

2.   the benefit shall be available for sale of residential property on or before 31st March, 2021 on the pretext on investment of net consideration in equity shares of eligible start – ups.

3.   The condition of minimum holding of 50% of share capital or voting rights in the start-up is proposed to be relaxed to 25%.

4.   The condition restricting transfer of new asset being computer or computer software is also proposed to be relaxed from the current 5 years to 3 years.

Resolution of distressed companies Facilitate resolution Conditions of continuity of shareholding for carry forward and set off of losses shall not apply to such companies.


For the purposes of computation of Minimum Alternate Tax (MAT) liability of such companies, the aggregate of brought forward losses and unabsorbed depreciation shall also be allowed as deduction.

Exemption from deeming of fair market value of shares Facilitate resolution through the approved schemes Where the parties to the transactions do not have control over the determination of price, it is proposed to empower the Board to prescribe transactions for which the provisions relating to deeming of fair market value of shares shall not be applied for computation of capital gains and deemed gift under section 50CA and section 56(2)(x).
Rupee-denominated Bond (RDB) To contain the current account deficit and augment the foreign exchange inflow The Government had issued a press release on 17th September, 2018 exempting interest income of non-resident from RDB issued by a company or a business trust, outside India, during the period 17th September, 2018 to 31st March, 2019. It is proposed to incorporate this tax incentive in the Income-tax Act.
offshore funds To facilitate location of fund managers of offshore funds in India Conditions relating to the remuneration of fund manager and the time limit for building up of corpus, are proposed to be rationalised so as to facilitate setting up of fund management activity in India with respect to such offshore funds.
Category-II AIF Presently, the investment made by Category-I AIF is exempted from the applicability of the provisions of section 56(2)(viib) of the Income-tax Act. It is proposed to extend this exemption to Category-II AIF as well.
Electric vehicle Incentivise purchase of electric vehicle Deduction of an amount upto Rs. 1,50,000 for interest paid on loan taken for purchase of electric vehicle. The loan is required to be taken on or before 31st March, 2023.
Real estate Incentivise purchase of affordable house Deduction upto Rs. 1,50,000 for interest paid on loan taken for purchase of residential house having value upto Rs. 45 lakh. This shall be in addition to the existing interest deduction of Rs. 2 lakh.

It is proposed to increase the limit of carpet area from 30 square meters to 60 square meters in Metropolitan regions and from 60 square meters to 90 square meters in non- metropolitan regions.

It is also proposed to provide the limit on  cost of the house at Rs. 45 lakh in line with the definition in the GST Acts.

National Pension System (NPS) subscribers (i)               increase the limit of exemption from current 40% to 60% of payment on final withdrawal from NPS;

(ii)             allow deduction for employer’s contribution upto 14% of salary from current 10%, in case of Central Government employee;

(iii)          allow deduction under section 80C for contribution made to Tier II NPS account by Central Government employees.

Listed companies Discourage the practice of avoiding Dividend  Distribution Tax (DDT) through buy back of shares by listed companies it is proposed to provide that listed companies shall also be liable to pay additional tax at 20% in case of buy back of share, as is the case currently for unlisted companies.
Trust A trust or institution complies with local  laws that are material for the purposes of achieving its objects it is proposed to provide for cancellation of registration of the trust or institution under the Act for violation of such provision of any other law, where an order holding that such violation has occurred is either not contested or has become final.

It is proposed to provide that at the time of registration it shall also be examined whether there has been any such violation by the trust or institution seeking registration.