Budget 2019

Budget 2019
MAJOR TAX RELATED PROPOSALS

Major Takeaways from Budget 2019

Changes in Tax Rates…
1. Reduction in Corporate Tax Rate
For AY 2020-21, it is proposed that companies whose turnover or gross receipts in
the PY 2017-18 does not exceed Rs. 400 crore shall be required to pay tax
@25%. With this, 99.3% of the companies shall be required to pay tax @25%
only.
2. Increase in Rate of Surcharge for Individuals/HUF/AOP/BOI
Pre Budget Scenario Post Budget Scenario
Total Income Rate of Surcharge
1) 50,00,001 – 1,00,00,000 10%
2) More than Rs. 1 Crore 15%
Total Income Rate of Surcharge
1) 50,00,001 – 1,00,00,000 10%
2) 1,00,00,001 – 2,00,00,000 15%
3) 2,00,00,001 – 5,00,00,000 25%
4) More than Rs. 5 Crore 35%

Takeaways for Businesses…
1. TDS on Cash Withdrawals – Section 194N
 TDS is required to be deducted in respect of cash withdrawals from all types of Bank
Accounts viz. Saving, Current, Salaried etc.
 This may significantly impact the working capital requirements of businesses.
Currently, under section 285BA of the
Income Tax Act, 1961, banks are only
required to report to Income Tax
Department, any cash withdrawals (including
through bearer’s cheque) aggregating to fifty
lakh rupees or more in a FY, from one or
more current account of a person.
Now, it has been proposed to cast a further
duty on the banks to deduct TDS at the rate
of 2% on cash withdrawal exceeding Rs. 1
crore in aggregate made during a financial
year from a bank account.

2. Acceptance of Payment through prescribed electronic modes – Sec 269SU
 It has been proposed that, businesses with turnover or gross receipts of more than Rs.
50 crore in the immediately preceding PY shall mandatorily provide the facility for
accepting payment through prescribed electronic modes.
 Prescribed electronic modes – Inferring from the budget speech, prescribed
electronic modes (as may be notified by Govt.) may include BHIM UPI, UPI-QR Code,
Aadhaar Pay, NEFT, RTGS, etc.
 Non-compliance of these provisions will attract penalty at the rate of Rs. 5,000/- for
every day during which such failure continues.
 Further, no charges will be imposed by the bank or system provider on customers as
well as merchants for using such prescribed electronic modes of payment.

 Increasing the scope of provisions of ‘First Proviso to Sec 201(1)
Pre – Budget Scenario
Currently, if a person (deductor) fails to deduct the TDS on any payment made to a resident
payee, he shall be deemed to be an assessee in default and no deduction of the payment so
made is allowed to him in computation of his income, unless such resident payee –
I) Has furnished ROI
II) Has taken into account such income on which TDS has not been deducted
III) Has paid tax on income declared by him
And the deductor furnishes a certificate to this effect from an accountant
Post – Budget Scenario – Now, it is proposed to extend this benefit to the deductor, even
in respect of failure to deduct tax on payment to non-resident.

 Deduction of interest on loans taken from certain classes of NBFCs to be
allowed on payment basis
 Conversion of interest into any type of loan shall not amount to payment
Currently, Sec 43B allows interest on any
loan or borrowing taken from Scheduled
Bank, Co-operative Bank, Public
Financial Institution, State Financial
Corporation & State Industrial Investment
Corporation only if the same is paid on or
before due date of furnishing return of
income.
Now, the scope of the section is proposed to
be extended to provide that interest on any
loan or borrowing taken from NBFC –
Deposit taking or NBFC – ND – SI shall also
be allowed only if the same is paid on or
before the due date of furnishing return of
income.

 Extending the scope of provisions relating to tax on Buy Back of shares
 Currently, it is only the unlisted companies
which are required to pay tax @20% of the
distributed income on account of buy back of
unlisted shares by the company.
 The consequential income arising in the hands
of shareholders has been exempted from tax
under clause (34A) of Section 10.
 Capital Gain arising in the hands of
shareholders on buy back of listed shares is
taxable in the hands of shareholders only as per
provisions of Sec 46A.
The existing anti-abuse provisions of 115QA
are proposed to be extended to all
companies including companies listed on
recognized stock exchange with immediate
effect from 05th July, 2019.
Accordingly, exemption under clause (34A) of
Sec 10 shall also be available to
shareholders of listed company.

Takeaways for Start Ups…
 Relaxing and Extending the provisions of Sec 54GB
Pre-Budget Scenario
Benefits of exemption from long term capital gain arising out of transfer
of long term capital asset, being a residential house property on
investment of the net consideration in the equity shares of an eligible
company was available up to 31st March, 2019. Thus, at present no
benefit under section 54GB is available for residential property
transferred after 31st March, 2019.

 Relaxing and Extending the provisions of Sec 54GB
Post-Budget Scenario
In order to incentivize investment in eligible start-ups, it is proposed to amend
the said section so as to –
1. Extend the sun set date of transfer of residential property for investment in
eligible start-ups from 31st March, 2019 to 31st March, 2021;
2. Relax the condition of minimum shareholding of 50% of share capital or
voting rights to 25%
3. Relax the condition restricting transfer of new asset being computer or
computer software from the current 5 years to 3 years

 Relaxing provisions relating to carry forward and set off of losses
Pre-Budget Scenario
Conditions for Carry Forward of Losses
for Companies other than Start Up
Conditions for Carry Forward of Losses
for eligible Start-ups
The shares of the company carrying
not less than fifty-one percent of the
voting power were beneficially held by
persons who beneficially held shares of
the company carrying not less than
fifty-one per cent of the voting power
on the last day of the year or years in
which the loss was incurred.
All the shareholders of such company
who held shares carrying voting power
on the last day of the year or years in
which the loss was incurred, continue
to hold those shares on the last day of
such previous year
Such loss has been incurred during the
period of seven years beginning from
the year in which such company is
incorporated

 Relaxing provisions relating to carry forward and set off of
losses
Post-Budget Scenario
Conditions for Carry Forward of Losses for eligible Start-ups
Now, it is proposed to amend section 79 so as to provide that loss
incurred in any year prior to the previous year, in case of closely
held eligible start-up, shall be allowed to be carried forward and
set off on satisfaction of either of the two conditions stated before.

Major Takeaways for Individuals…
 Additional Deduction of 1.5 Lakh of interest on loan taken for
acquisition of Residential Property
Sr. No. Particulars Remarks
1. Available to Individual only
2. Deduction on account of Interest Payable on loan taken by him from any financial
institution
3. Purpose of Loan Acquisition of a Residential House Property
4. Amount of Deduction 1,50,000/-
5. Applicable from AY 2020-21
6. Conditions for claiming
deduction
1. Loan has been sanctioned in PY 2019-20.
2. Stamp duty value of residential property <= 45,00,000/-
3. Assessee does not own any residential house property on
the date of sanction of loan.
4. Not claiming deduction under section 80EE.

 Additional Deduction of 1.5 Lakh of interest on loan taken for purchase
of electric vehicle
Sr. No. Particulars Remarks
1. Available to Individual only
2. Deduction on account of Interest Payable on loan taken by him from any
financial institution
3. Purpose of Loan Purchase of Electric Vehicle
4. Amount of Deduction 1,50,000/-
5. Applicable from AY 2020-21
6. Conditions for claiming
deduction
Loan has been sanctioned between
01.04.2019 to 31.03.2023

 Incentives to National Pension Scheme (NPS) subscribers
Pre-Budget Scenario Post-Budget Scenario
1. Currently, any payment out of
NPS on closure of scheme or opting
out by assessee, is exempt from tax
to the extent of 40% of the amount
payable.
It is proposed to increase the said
exemption from 40% to 60% of the
total amount payable.
2. Also, contributions to NPS by CG
or employer are exempt to the extent
of 10% of the salary.
It is proposed to increase the limit of
deduction to 14% where such
contribution is made by CG

 Mandatory Furnishing of ROI by certain persons
Following persons shall be required to mandatorily furnish their ROI,
irrespective of their income –
1. Person who has deposited more than Rs. 1 Crore (aggregate) in one or
more Current Account.
2. Person who has incurred expenditure of more than Rs. 2 Lakh on
foreign travel
3. Person who has incurred expenditure of more than Rs. 1 Lakh on
consumption of electricity
4. Persons who fulfills other prescribed conditions

 Mandatory furnishing of ROI by certain persons
ROI was required to be furnished if
total Income before claiming
deduction under Chapter VI-A or
exemption under Section 10(38)
exceeded the maximum amount not
chargeable to tax.
Now, ROI shall be required to be
furnished if total income from
claiming deduction under Chapter
VI-A, exemption under Section
10(38), Sec 54, 54B, 54D, 54EC,
54F, 54G, 54GA & 54GB exceeds
the maximum amount not
chargeable to tax.

+91 7291009410
ca.amanbansal@outlook.com

Budget 2019

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