Income Tax Return filing: 5 changes in I-T Act to be considered before computing tax liability for AY 2019-20

Updated: May 15, 2019 12:51:56 PM

As the ITR filing process for AY2019-20 has started, it is important to calculate income and tax liability thereon accurately so as to avoid levy of any additional interest or penalty.

income tax return, ITR, income tax return filing, income tax return filing 2019-20, income tax slab for ay 2019-20 calculator, e-filing of income tax, 5 changes in tax rules ITR Filing: From the AY 2019-20, standard deduction of up to Rs 40,000 is allowed to the salaried class taxpayers in lieu of exemption with respect of transport allowance and medical reimbursement.

As the income tax return (ITR) filing process for the Assessment Year 2019-20 has started, it is important to calculate income and tax liability thereon accurately so as to avoid levy of any additional interest or penalty. Here are 5 important changes made in the Income-Tax Act which one should be beware of while computing tax liability for the Assessment Year 2019-20.

1. Health and Education Cess at the rate of 4%

The rate of cess, which is levied on the amount of income tax plus surcharge, has been increased from 3% to 4%. Earlier the cess of 3% comprised of 2% of education cess and 1% of senior and higher secondary education cess. Now, a cess of 4% is levied on account of health and education.

2. Tax on long-term capital gain from transfer of listed equity shares

Up to the Assessment Year 2018-19, any long-term capital gain arising from transfer of listed equity shares or units of equity-oriented mutual funds was fully exempt from income tax under Section 10(38) if such transaction was chargeable to Securities Transaction Tax (STT).

This exemption has been withdrawn from the Assessment Year 2019-20. Therefore, any long-term capital gain arising from transfer of said securities would now be chargeable to tax at the rate of 10% if the amount of gain exceeds Rs 1 lakh.

However, if a person has acquired the aforesaid capital asset before February 1, 2018, then he can take higher of the following as cost of acquisition of such an asset:

(a) Actual cost of acquisition of equity shares/units

(b) Lower of FMV of such asset as on 31-01-2018 or full value of consideration received as a result of transfer of such assets.

3. Standard deduction from salary income

From the Assessment Year 2019-20, standard deduction of up to Rs 40,000 is allowed to the salaried class taxpayers in lieu of exemption with respect of transport allowance and medical reimbursement.

However, a handicapped employee shall continue to take the exemption of transport allowance of Rs 3,200 per month as well as standard deduction.

4. Section 80TTB deductions to senior citizens

A new Section 80TTB has been inserted in the Income-Tax Act to allow deduction of up to Rs 50,000 to the senior citizen who has earned interest income from deposits with banks or post offices or co-operative banks. Interest earned on saving bank deposits and fixed deposits both are eligible for deduction.

5. Section 80D limit increased to Rs. 50,000 for senior citizens

The limit of deduction under Section 80D has been increased from Rs 30,000 to Rs 50,000 in case any amount is paid towards medical insurance premium, contribution to central government health scheme, preventive health check-up or medical expenditure in respect of senior citizens. The deduction for medical expenditure shall be eligible for deduction under Section 80D, if no health insurance policy has been taken on the health of senior citizen.

(By CA Dipen Mittal, Manager, Taxmann.com, and CA Shivi Agarwal, Assistant Manager, Taxmann.com)

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