On 5 July 2019, the Finance Minister presented the Finance Bill of the newly formed government for financial year (FY) 2019-20. The bill proposed changes to the tax laws starting 1 April 2019. The proposed key amendments includes:
The rate of surcharge for taxpayers with income of INR 20,000,000 (USD 285,714) to INR 50,000,000 (USD 714,286) has been increased from 15% to 25%, taking the effective marginal tax rate to 39%. The rate of surcharge for taxpayers with income in excess of INR 50,000,000 (USD 714,286) has been increased from 15% to 37%, taking the effective marginal tax rate to 42.74%. There are no other proposed changes to tax bands or rates for individual taxpayers.
The standard corporate tax rate is maintained at 30%, while the maximum income threshold for the reduced corporate tax rate of 25% is proposed to be increased from INR 2.5 billion to INR 4 billion;
The Bill proposes an additional deduction of INR 150,000 (USD 2,143) in respect of mortgage interest, provided certain conditions are met. This would be in addition to the existing INR 200,000 (USD 2,857) deduction available for mortgage interest on housing loans.
In case of failure to file an Income-tax return, the prosecution proceedings are initiated under Section 276CC if the tax payable by the assessee is Rs. 3,000 or more. This threshold limit has been increased to Rs. 10,000.
Taxpayers now meeting any of the below criteria during the fiscal year will also be required to mandatorily file tax returns:
- Deposits in one or more current accounts exceeding INR 10,000,000 (USD 142,857); or
- Expenditure incurred on foreign travel exceeding INR 200,000 (USD 2,857); or
- Electricity expenditure exceeding INR 100,000 (USD1,428); or
- Satisfying other previously stipulated conditions; and
- Increase in tax exemption for National Pension Scheme (NPS) subscribers.
Government has also proposed a new scheme of e-assessments of income tax on a pilot basis where the assessment would be done in electronic mode, in order to ensure greater efficiency and transparency. It was also proposed to move to ‘faceless assessment’.
The provisions of the Bill will not become law until these are approved by both houses of the Indian Parliament and receive the assent of the President of India. Once approved, the provisions will apply for the 2019/20 Indian fiscal year (1 April 2019 to 31 March 2020).
