Key Changes in Income Tax and GST which will be effective from 1st April 2019

Interim Budget was presented by the Finance Minister in February 2019. The Interim Budget 2019 introduced changes in income tax rules to offer relief to small taxpayers and to the owners of residential properties. There are many changes which will take place in GST as well from 1st April 2019.

Lets take a quick look at the key changes from Income Tax and GST perspective, which will be effective from 1st April 2019.

Key Changes in Income Tax and GST which will be effective from 1st April 2019

1.) Change in Tax rebate

Rebate under Section 87A [FY 2018-19] : The rebate was available to a resident individual if his total income does not exceed Rs. 3,50,000. The amount of rebate is 100% of income-tax or Rs. 2,500, whichever is less.

Rebate under Section 87A [FY 2019-20] : The rebate is available to a resident individual if his total income does not exceed Rs. 5,00,000. The amount of rebate is 100% of income-tax or Rs. 12,500, whichever is less.

The basic exemption limit and tax slabs applicable for individuals earning total taxable income above Rs 5 lakh, is however unchanged.

2.) Change in Standard Deduction

Standard Deduction under Section 16 [FY 2018-19] : Standard Deduction of Rs. 40,000 was available to salaried employees.

Standard Deduction under Section 16 [FY 2019-20] : Standard Deduction of Rs. 50,000 is available to salaried employees.

3.) New GST Rates and Rules for Housing Sector

From April 1, 2019, for on-going under-construction projects, developers and builders will have an option either to charge the GST as per old rates, i.e., at 12 per cent (with input tax credit) or new rates at 5 per cent (without input tax credit).

In case of affordable housing, such rates would be 8 per cent (with input tax credit) or 1 per cent (without input tax credit).

4.) Taxation of House Property under concept of Deemed Rent

As per Income Tax Act you can claim only one property as self occupied property and other property will be deemed to be let-out property and notional rental income has to be calculated on the same which was taxable under income tax act.

One of the changes which has been introduced from FY 2019-20 is that
the taxpayer can now claim two properties as self occupied property and therefore no notional rent would be calculated on the same.

5.) Capital Gain from sale of House Property

As per Income Tax Act taxpayer can claim exemption from capital gain on sale of house property if the proceed of sale is invested by him to purchase/construct one house property subject to certain limitations.

From FY 2019-20 and onwards, taxpayer can claim exemption from capital gain on sale of house property if the proceed of sale is invested by him to purchase/construct upto 2 house properties subject to limitation that:

1.) the long-term capital gains from sale of such house property shall not exceed Rs 2 crore, and

2.) the benefit can be claimed only once in the taxpayers lifetime.

6.) Introduction of Composition Scheme for Service provider

Interested and Eligible taxpayer can opt for Composition Scheme for Service Provider with effect from 1st April 2019.

7.) Increase in threshhold limit for a composition dealer

The threshold limit for opting for composition scheme has been increased to 1.5 Crores with effect from 1st April 2019

8.) Increase in threshhold limit GST Registration

The threshold limit for taking GST registration has been increased to 40 Lakhs for supplier of Goods with effect from 1st April 2019

9.) Increase TDS limit for bank interest and Rent

Interest Limit for Deduction of Tax as per section 194A has been increased to 40,000 in FY 2019-20 from 10,000 in FY 2018-19.

Rent Limit for Deduction of Tax as per section 194I has been increased to 2,40,000 in FY 2019-20 from 1,80,000 in FY 2018-19.

10.) Relief on use of GST Input Tax Credit for Payment of Tax

Government has eased cash flow concerns with relaxations in ITC setoff mechanism vide Notification 16/2019 - Central Tax by inserting Rule 88A

With this change, businesses still have to set off IGST liability first. But now, the Government has allowed businesses to utilise the remainder of IGST credit to pay off either of CGST or SGST liabilities at their discretion.

11.) New GST Returns Deferred

Earlier the new GST returns were to be introduced by government on pilot basis from 1st April 2019 and the same was to be made compulsory with effect from 1st July 2019.

The same has been deffered for now and the same would be applicable when announced.

Compiled by CA Pratibha Goyal