Key changes in the Income Tax Act,1961 brought in vide Finance Act, 2019

The Finance Bill, 2019 has received the President assent on 1st of August, 2019.

Some of the key changes brought vide Finance Act, 2019 under the Income Tax Act, 1961 are

A. Key Amendments effective from 1stSeptember, 2019

  1. Section 194 M has been inserted requiring an individual or HUF to deduct TDS at the rate of 5% on payment on account of contractual work or professional fees if the amount of payment in a Financial Year (FY) exceeds Rs. 50 Lakhs, provided such individual or HUF is not required to deduct tax at source under section 194C or 194J.
  2. Section 194 IA has been amended to expand the definition of “consideration on immovable property” on which tax is required to be deducted at source for payment made for acquisition of immovable property which will now include all charges in the nature of club membership fee, car parking fee, electricity and water facility fees, maintenance fee, advance fee or any other charge.
  3. Section 139A has been amended to allow inter-changeability of PAN and Aadhaar number. The following changes have been incorporated:
  • Every person who is required to disclose his PAN under the Act, and who, has not been allotted a PAN but possesses the Aadhaar number, may disclose his Aadhaar number in lieu of PAN and such person will be allotted a PAN in the prescribed manner
  • Every person who has been allotted a PAN, and who has linked his Aadhaar number under section 139AA, may disclose his Aadhaar number in lieu of a PAN.
  • Every person entering into a prescribed transaction as per Rule 114 B shall now quote his PAN or Aadhaar number in the documents pertaining to such transaction and authenticate such PAN or Aadhar number in the prescribed manner.
  • Every person receiving a document relating to such transactions will ensure that the PAN or the Aadhaar number has been duly quoted therein and that it is authenticated

Further, Section 272B has been amended to provide for the levy of penalty of Rs.10,000 for failure to comply with the provisions of Section 139A for each such default.

4. Section 285BA relating to furnishing of statement of Financial Transactions (SFT) has been amended to –

  • Extend reporting requirements pertaining to SFT in respect of certain prescribed persons other than those who are currently furnishing SFT and
  • Provide that, Government may prescribe transaction below current threshold of Rs 50,000 for furnishing of information; and
  • Provide that, if there is any defect in the statement filed and the same is not rectified within the specified time, the provisions of the Act shall apply as if such person had furnished inaccurate information in the statement.

Also, penal provisions contained in Section 271FAA have been amended to provide that any person who provide inaccurate information in statements shall be liable to pay penalty of Rs 50,000.

5. Section 194N has been inserted to provide for levy of TDS at 2% on aggregate cash payments in excess of Rs.1 Crore made during a FY by (i) banking company or (ii) cooperative bank or (iii) post office, to any person (recipient) in respect of account maintained by such person. This implies that tax will be deducted on cash withdrawal exceeding INR 1 crore in a FY from a bank account / post office account.

6. Sections 269SS, 269ST & 269T have been amended to include electronic modes of payment apart from the payment received through bank account i.e.payee cheque, account payee draft or electronic clearing system in order to encourage the other electronic modes of payment.

B. KeyAmendments effective from 1st November, 2019

  • Section 269SU has been inserted to mandate every person carrying on business having turnover, sales or gross receipts in excess of Rs. 50 crore in the immediately preceding FY, to provide facility for accepting payments through prescribed electronic modes.

Also, Section 271DB has been inserted that provide for a penalty of Rs. 5,000/-, for every day during which such failure continues.

  • Section 195 has been amended so as to provide for online filing of application to Assessing officer by a person making a payment to a non-resident for seeking determination of tax deducted at source.

C. Key Amendments effective from 1stApril, 2020 (Assessment year 2020-21)

  1. Section 80EEA, has been inserted to allow individuals to claim additional deduction of Rs. 1,50,000 for interest paid on loan taken for purchase of residential house having value upto Rs. 45 lakh subject to the prescribed conditions. This shall be in addition to the existing interest deduction of Rs. 2 lakh available under Section 24.
  1. Section 80EEB, has been inserted to allow individuals to claim deduction of Rs. 1,50,000 in respect of interest on loan taken for purchase of an “electric vehicle” from any financial institution subject to prescribed conditions.
  1. Section 139 has been amended to include certain additional criteria, wherein a person shall be mandatorily required to file his return of income if such person–
  • Has deposited amounts more than INR 1 crore in one or more current accounts maintained with banks or co-operative banks; or
  • Has incurred expenditure exceeding INR 2 lakh for self/ any other person for travel to a foreign country; or
  • Has incurred expenditure exceeding INR 1 lakh towards consumption of electricity; or
  • Fulfils any other such conditions, as may be prescribed.
  1. Section 43CA relating to full value of consideration for transfer of assets other than capital assets in certain cases has been amended so as to include such other electronic mode and to prohibit cash transactions and allow/ encourage payment or receipt only through account payee cheque, account payee draft or electronic clearing system through a bank account as may be prescribed.
  1. Currently, Section 54GB, subject to certain conditions, provides for capital gains exemption to an individual or HUF on sale of long-term capital assets, being a residential property (a house or a plot of land), provided that the net consideration received is invested for subscription of equity shares of eligible companies (including eligible start-up) and such funds are utilised by the eligible companies for purchase of new assets. Following conditions have now been amended for eligible startups –
  • Extending the sunset date for transfer of residential property in the case of investment in eligible start-ups from 31 March 2019 to 31 March 2021.
  • Relaxation of the minimum shareholding in the eligible company from current 50% of share capital or voting rights to 25% thereof.
  • Relaxation of the condition restricting transfer of new asset being computer or computer software from the current five years to three years.

Source: E- Gazette

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