Seven Changes In Income Tax Laws With Effect From September 1, 2019

Income tax related changes announced in the Budget usually come into effect from April 1. However, since the full Budget for FY 2019-20 was presented in July this year after the general elections, there are certain tax changes that will come into effect from September 1, 2019.

Here are the main changes in tax laws that will come into effect from September 1.

TDS on additional payments made when purchasing immovable property

Income tax related changes announced in the Budget usually come into effect from April 1. However, since the full Budget for FY 2019-20 was presented in July this year after the general elections, there are certain tax changes that will come into effect from September 1, 2019.

From September 1, 2019, while buying a property, you will have to include the payment made for other services or amenities such as club membership fee, car parking fee, electricity and water facility fee and so on when computing the amount paid for the property for the purpose of deducting TDS.

Chartered Accountant Naveen Wadhwa, DGM, Taxmann.com says, “Previously, tax was deducted by the buyer from the payment made for the purchase of property. However, other payments such as club membership fees etc. were usually subtracted from the total consideration to compute the amount of TDS. The primary reason for this stems from the fact that ‘consideration for immovable property’ was not defined properly in the Income Tax Act. Remember, the TDS will continue to be deducted at the rate of one per cent if the value of the property exceeds Rs 50 lakh.”

TDS on cash withdrawals from bank account

Cash withdrawals exceeding Rs 1 crore on aggregate basis during the year from an account held with a bank, cooperative bank or post office will invite levy of TDS from September 1. The move is aimed at discouraging large cash transactions and also to promote a less cash economy.

A new section 194N has been inserted in the Income Tax Act which defines that TDS will be levied at the rate of two per cent on cash withdrawals made from the account.

TDS on payments made by individuals and HUFs to contractors and professionals

From September 1, individuals and HUFs making a payment to contractors and professionals exceeding Rs 50 lakh in aggregate per annum will also be required to deduct TDS at the rate of 5 per cent.

This would mean that individuals making payments over this limit for house renovation, wedding functions or for any other purpose to a single professional in a year would be required to deduct tax at the time of making the payment.

A new section 194N has been inserted in the Income Tax Act for this purpose. However, in order to provide ease of compliance, individuals and HUFs, deducting the tax will not be required to obtain TAN (tax deduction account number). The new law will be applicable to all the payments made by the individual whether for personal use or for business purposes (in case their accounts are not required to be audited.)

TDS on non-exempt portion of life insurance