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Union Budget 2019: Income Tax Changes Research Team | Posted On Thursday, July 11,2019, 12:57 PM

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Union Budget 2019: Income Tax Changes



The Finance Minister Nirmala Sitharaman had presented the Union Budget 2019 on July 5th and its time to understand, how tax changes affect you.

The focus shifts from return on investment to tax efficiency. Tax efficiency is returns after tax or the returns you get after all taxes are paid. If your investments are not tax efficient, there’s no point investing. This is why you must know how tax changes in Union Budget 2019 affect you.

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Union Budget 2019: Income Tax Changes

1. No Changes in Income Tax Slabs

There are no changes in the income tax slabs for the Financial Year 2019-20. This doesn’t hold true for the super-rich. If you are earning between Rs 2 Crores to Rs 5 Crores, you have a surcharge of 25%. If you earn more than Rs 5 Crores a year, there is a surcharge of 37%.

What is the effective income tax rate for the two highest slabs of income earners? Well, it’s a massive 39% and 42.7% for the super-rich.

Income Tax Slabs for Individuals Below 60 Years:

Income Slabs

Tax Rates



0 to Rs 2.5 Lakhs




Rs 2,50,001 to Rs 5,00,000




Rs 5,00,001 to Rs 10,00,000




Rs 10,00,001 to Rs 50,00,000




Rs 50,00,001 to Rs 1 Crore




More than Rs 1 Crore but less than Rs 2 Crore




More than Rs 2 Crore but less than Rs 5 Crore




More than Rs 5 Crores




You also enjoy an Income Tax Rebate under Section 87A, if net taxable income doesn’t exceed Rs 5 Lakhs. You enjoy 0 tax liability.

See Also: Things To Expect From The Union Budget 2019

2. Tax-Free NPS Withdrawal

National Pension System or NPS is a Government-sponsored pension scheme. This scheme was launched way back in 2004 and was opened to all sections in 2009. You can contribute to NPS across working life.

If you are between 18 to 60 years, you may join the NPS after completing KYC norms. NPS offers two accounts: Tier-I and Tier-II accounts. Tier-1 is compulsory, while Tier-II account is voluntary.

NPS invests up to 50% in stocks making it great for aggressive investors. You enjoy Section 80C tax benefits up to Rs 1.5 Lakhs a year on investment in NPS.

The Union Budget 2019 has given EEE (Exempt-Exempt-Exempt) tax status to the NPS. After Union Budget 2019, the entire 60% corpus withdrawn from NPS at retirement is tax exempt. The remaining 40% has to be compulsorily invested in an annuity plan. Earlier, two-thirds of the corpus withdrawn at maturity was tax exempt and the remaining one-third was taxed.

3. Tax Benefits for Affordable Housing

You can easily buy an affordable house in a tier-2 or tier-3 city after Union Budget 2019. The Finance Minister has made a proposal to increase the income tax deduction on home loan interest from Rs 2 Lakhs a year under Section 24(b) to Rs 3.5 Lakhs a year on property/houses of value up to Rs 45 Lakhs. You can get this deduction on home loans availed up to March 31st 2020. You enjoy interest savings of Rs 7 Lakhs on home loan over a 15 year loan period.

4. TDS on Cash Withdrawal

After Union Budget 2019, there is a 2% TDS on cash withdrawals which exceed Rs 1 Crore a year from a bank, cooperative bank or post office. This is for a single account.

See Also: A Key Takeaways From Union Budget 2019

5. ITR is Compulsory for These Cases

ITR is mandatory if:

  • The amount you deposit in current account with bank or co-operative bank exceeds Rs 1 Crore in a financial year.
  • Expenses incurred on foreign travel are more than Rs 2 Lakhs in a Financial Year.
  • You have an electricity bill of Rs 1 Lakh or more in a year.
  • You claim capital gains exemption on an investment in house.

6. NRIs to Pay Tax on Gifts

The gifts NRIs receive from someone who resides in India are now under the tax ambit. This tax is applicable for the money paid or any property situated in India which is transferred on or after July 5th 2019. (Gifts of value less than Rs 50,000 are exempt).

7. Hike in Standard Deduction

The salaried class enjoys a standard deduction up to Rs 50,000 a year.

See Also: Union Budget 2019: A Tax on the Super Rich

8. There’s No Tax on Notional Rent

There’s no need to pay tax on notional rent (This is deemed rent) if the second house is lying vacant.

9. LTCG on House Property

You can sell your house and save tax by investing LTCG (Long Term Capital Gains) in two houses. This used to be just a single house. You enjoy this benefit only if capital gains don’t exceed Rs 2 Crore and that too, only once in your lifetime.

10. Tax Saving on Loans for Electric Vehicle

After Union Budget 2019, you enjoy an additional income tax deduction of Rs 1.5 Lakhs for interest paid on loans to buy electric vehicle. This takes the total interest savings to Rs 2.5 Lakhs depending on tax bracket and loan duration.

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