New income tax rules: 7 changes in I-T law to impact taxpayers. All you need to know
From tax on cash withdrawals to PAN-Aadhaar interchangeability, many monumental changes were proposed in the Budget 2019. Usually, income tax-related changes which are announced in the Budget come into effect from April 1.
However, since the full Budget for FY 2019-20 was presented in July this year after the general elections, there are certain changes in income tax rules that will come into effect from September 1, 2019.
Here are 7 important tax-related changes that will impact your personal finances:
1. TDS on life insurance policy:
If the maturity proceeds received by an individual are taxable, then TDS will be deducted only on the net income portion and not on the total amount paid. From September 1, TDS will be deducted at the rate of 5 per cent in case the taxable proceeds, i.e., the net income portion exceeds Rs 1 lakh. Prior to this TDS was deducted at the rate of 1 per cent on the total amount paid.
2. Deduct TDS for a professional job:
From September 1, if one hired a contractor or professional during a financial year exceeding Rs 50 lakh in aggregate per annum, TDS at 5% would be deductible. As per Section 194N of the Income Tax Act, "Tax Deduction at Source (TDS) on payment by Individual/HUF to contractors and 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 when it is for personal use."
3. TDS at the time of purchase of immovable property:
From September 1 onwards, while buying a property, payment made for services or amenities, such as club membership fee, car parking fee, electricity, water facility fee etc will have to be included while calculating the amount to be paid for the property for the purpose TDS deduction.
4. TDS on cash withdrawal:
From now, cash withdrawals exceeding Rs 1 crore during the financial year from an account held with a bank, cooperative bank or post office will invite levy of TDS deduction of 2 per cent. A new section 194N has been inserted in the Income Tax Act according to which TDS will be levied at the rate of two per cent on cash withdrawals made from the account.
5: PAN-Aadhaar link:
According to rules, from now onwards, if PAN is not linked with Aadhaar by September 30, it will lead to PAN card becoming ‘Inoperative’. With this the individual will be treated as if he/ she never had a PAN. Although, the Centre has not yet clarified as to what will happen if the PAN becomes inoperative.
6: Inter-changeability of PAN and Aadhaar:
In Budget 2019, important changes were introduced, i.e inter-changeability of PAN and Aadhaar. Aadhaar can be quoted in lieu of PAN only for certain prescribed transactions. Though the new law comes into effect from September 1, the government is yet to notify the certain prescribed transaction.
7. Banks and FIs to report even small transactions:
It is required to furnish a statement of financial transaction (SFT) with amount exceeded the threshold limit of Rs 50,000 in a year. From now onwards, all threshold limit is removed and all banks and FIs are going to report small transaction even.
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