Budget 2019: 6 key takeaways that can impact your personal finance

Growth stimulation, promoting affordable housing and incentivizing digital economy have been the key focus areas of the first full budget presented by Modi 2.0 government. Apart from keeping the tax slabs unchanged, there are a number of budget proposals that will impact your personal finance. Let us discuss these in detail:

Additional interest deduction of upto Rs 1.5 lakh under affordable housing

A major impetus provided to ‘Housing for All’ mission is the announcement of an additional deduction of Rs 1.5 lakh on interest payments made on home loans availed during the period of 1st April 2019 to 31st March 2020. To qualify for such deduction under section 80EEA, the value of the housing property has been capped at Rs 45 lakh. Moreover, the assessee should not own any residential property on the date of sanction of loan.

Remember that Rs 1.5 lakh deduction for first time home buyers is in addition to the existing Rs 2 lakh deduction available on interest payments made on home loans. This move has been aimed at incentivizing homeowners to purchase affordable housing units by the end of this financial year, which would help in reviving subdued demand in the housing industry as well.

Enabling provision for NPS exemption

Although the proposal of making lumpsum withdrawal from NPS post-maturity completely tax free was approved by the government in December 2018, the decision was notified in the Interim Budget earlier this year. This anomaly has been rectified in this Budget, and NPS will enjoy the EEE (Exempt, Exempt, Exempt) status once the Budget gets approved, therefore bringing tax parity with other competing retirement products, such as PPF and EPF.

Additionally, this year’s Budget also provided incentives to central government employees by increasing the deduction for employer’s contribution from 10 per cent to 14 per cent of their salary, and by allowing a deduction under section 80C for the employee’s contribution to Tier II NPS account.

2 per cent TDS on annual cash withdrawal of above Rs 1 crore

Government proposed to levy TDS (Tax Deducted at Source) at the rate of 2 per cent on cash withdrawals exceeding Rs 1 crore in a year from a bank account. This announcement in Budget has been aimed to discourage the practice of making business payments in cash, and rather move towards cashless economy by adopting digital payment options.

Compulsory filing of return

Government made income tax return filing mandatory for individuals undertaking certain high value transactions. As per this, individuals depositing more than Rs 1 crore in current account in a year, spending over Rs 2 lakh on foreign travel and consuming more than Rs 1 lakh on electricity in a year. This move is aimed at ensuring tax compliance and reducing tax evasion.

Surcharge rates hiked for high net worth individuals

In view of rising income levels, the government proposed to increase current surcharge rates for high net worth individuals. As per the proposal announced in the Budget, those having taxable income of Rs 2 crore to Rs 5 crore would have to pay surcharge rate of 25 per cent, whereas those with taxable income of above Rs 5 crore would have to pay 37 per cent surcharge, instead of current surcharge rate of 15 per cent applicable to both these tax slabs. Consequently, the effective tax rates for those having taxable income of Rs 2-5 crore and above Rs 5 crore would increase by around 3 per cent and 7 per cent respectively.

By Naveen Kukreja – CEO & Co-founder, Paisabazaar.com