Here are a few changes made in income tax rules that came into effect from September 1, 2019
Section 194 N of IT act provides that aggregate cash withdrawal beyond Rs.1 crore thresholds in a year from banks, post offices or cooperative societies will attract TDS at the rate of 2 percent. This new rule is applicable to payments made on or after September 1, 2019. However, it was clarified by the IT department that for the current financial year, the calculation of threshold limit of cash withdrawal for causing deduction under section 194N will be counted from 1 April, 2019.
Section 194-IA of Income Tax Act provides that the buyer of immovable property (other than payment of compensation on acquisition of certain immovable property u/s 194LA and agricultural land) has to deduct TDS at 1% of the total sale consideration. However, no deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property is less than fifty lakh rupees. If the payment is made by installments, then TDS has to be deducted on each installment paid. TDS to be deducted on total amount paid to the seller any person, being a transferee, responsible for paying
Amendment to Section 194 IA: With effect from September 1, 2019, TDS to be deducted on total amount paid to the seller including all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property, under immovable property, for levy of TDS. Since TDS is levied at the rate of 1 percent if the value of the property exceeds Rs.50 lakh, charges like club membership fee, car parking fee, electricity or water facility fee will also be included for calculation of TDS.
Important Note: Buyers of property worth more than Rs.50 lakh must remember that if they do not deduct tax at source (TDS) or failed to deposit the amount with the income tax department on time, may have to pay a penalty of up to Rs.1 lakh under section 271 H besides the dues and late filing interest. In case the payment is made in installments, then TDS needs to be deducted at the time of making each payment. The TDS, deducted each time while paying the installment, is to be deposited with the department by way of return cum challan (Form 26QB) within seven days of the following month of making the payment. Buyers must also remember to issue Form 16B for tax deducted from the sale proceeds. Form 16B can be generated via TRACES. The seller may not be able to take tax credit for TDS deducted in case of non-filing or late filing of Form 26QB by the buyer. Penalties remain the same for failing to do so.
Section 194 M (newly introduced) of Income Tax Act provides that the individual is required to deduct TDS at the rate of 5 percent for paying a sum in excess of Rs.50 lakh for carrying out any work in pursuance of a contract or by way of fees for professional services during a financial year. This new rule is applicable to payments made on or after September 1, 2019.
TDS on maturity proceeds of Insurance Policy: From September 1, 2019, TDS being levied at the rate of 5% on net maturity amount of Life Insurance policies i.e. maturity amount minus the premium paid. The impact will be more now than previously if the maturity proceeds of Life Insurance policy exceed Rs.1 lakh from earlier rate of 1 percent. Nevertheless, if the annual premium paid on the insurance policy is less than 10 percent of the sum assured the amount received on maturity are exempt from tax. As per existing rules, Life policies purchased before April1, 2012, the premium paid must be less than 20 percent of sum assured to get the tax exemption on maturity.
Banks to report even small transactions: Banks and financial institutions have been furnishing statement of financial transaction (SFT) with a threshold of Rs.50000/- of transactions in a year. With effect from September 1, 2019, this threshold limit is being removed. Now onwards these institutions are required to report even small transactions in SFT. From the above statements furnished by the banks, income tax department is going to get all your income and tax related information which may reflect on pre-filled income tax forms.
