In her Union Budget speech on July 5, Union Finance Minister Nirmala Sitharaman announced several tax-related amendments. The changes were to be implemented from September 1.
Here are the top changes made:
TDS on life insurance policy
Under the new TDS (Tax deducted at source) rule the maturity proceeds in a life insurance policy is tax-free only if the sum assured is at least ten times of the premium. For example, if the premium value stands at Rs 1 lakh, the sum assured needs to be at least Rs 10 lakh for the maturity value to be tax-free. Earlier, the TDS on a life insurance policy, whenever sum assured, use to be 1 per cent of the maturity value, but under the new rule it will be 5 per cent on the net maturity amount (maturity amount minus the premium paid).
TDS deduction for professional services
Earlier, one was not required to deduct any TDS on any kind of payment made to professional (Architect, designer, etc.) when their services were used for any personal use. But under the new rule, to be effective from September 1, one has to deduct TDS before making payment. The TDS is then to be deposit with the government using PAN of the professional.
The 2019 Budget proposed to insert a new section 194M to provide for levy of TDS at the rate of 5 per cent on the amount paid on account of any work done by a professional if such amount exceeds Rs 50 lakh in a year.
2% Tax on cash withdrawals
Aggregate cash withdrawals of amount exceeding over Rs 1 crore from one or more accounts will attract a surcharge of two per cent from September 1.
In order to discourage high-value withdrawals, Finance Minister Nirmala Sitharaman had initially proposed a 2 per cent tax deduction at source (TDS) on Rs 1 crore cash withdrawal from an account in her Budget 2019 announcement on July 5.
The government, however, amended the Finance Bill 2019, citing misuse of the proposal by people holding multiple accounts. Now, TDS will be charged if aggregate withdrawal from one or more accounts belonging to a person goes beyond Rs 1 crore. The amendment was approved by voice vote in the Lok Sabha which passed the Finance Bill 2019.
Smaller transactions to be reported by Banks
Under the new rule, the government has widened the scope of furnishing of Statement of Financial Transactions (SFTs) by removing the current threshold of Rs 50,000, implying reporting of smaller transactions as well. Earlier, Banks were required to produce SFT including transactions of more than Rs 50,000 done in a year only.
Tax on purchase of immovable property
Earlier, under the Section of 194-IA of the Act, a TDS of 1 per cent was levied on any payment on transfer of certain immovable property other than agricultural land. From September 1, besides the sales, payments such as car parking fee, club membership fee, electricity and water facility fees, maintenance fee, advance fee etc will fall under the term ‘consideration for immovable property’ and subject to tax deduction.