- Date : 06/02/2019
- Read: 3 mins
The Interim Budget 2019 offered a bouquet of sweeteners to taxpayers across socioeconomic classes.
Certain investment incentives announced by Finance Minister Piyush Goyal while presenting the Interim Budget 2019 are expected to make old-school bank deposits and real estate investments lucrative again.
The Budget has proposed an increase in the limit of tax deducted at source (TDS) on interest earned on term deposits, savings accounts, and other deposit schemes with banks or post offices. The limit will be quadrupled from Rs 10,000 to Rs 40,000 for a financial year. The same has been increased to Rs 50,000 on interest income earned by senior citizens.
Term deposits worth an estimated Rs 24 crore were placed with various banks as of 2018, with an average account balance of Rs 2.75 lakh. With the proposed raise on the TDS limit, banks are likely to see a surge in term deposits, according to some experts.
Related: 5 Announcements in the past 5 Budgets that impacted your finances
For taxpayers, the new proposal means no TDS will be deducted from the interest income up to Rs 40,000. However, the interest income would still be taxable at the hands of individuals as per the current tax laws.
Earlier, it was mandatory for the taxpayer to submit Form 15G to avoid TDS in case the interest income exceeded the threshold of Rs 10,000. In case they missed out on submitting it, then they were liable to a TDS on the interest above Rs 10,000. Under such a scenario, the individual would have to claim a refund of this TDS in case the income was below the taxable limit. The latest proposal provides relief to small depositors and non-working spouses.
A higher limit of Rs 40,000 means that TDS will not be deducted till an individual’s interest income from bank FDs and post office deposit schemes crosses this limit.
Furthermore, the Budget also proposes an increase in the threshold of TDS paid on rental income from Rs 1.8 lakh to Rs 2.4 lakh, which could come as relief to small taxpayers.
Related: Key takeaways of Union Budget 2019
Real estate investments will look up
Proposed changes in the real estate sector could make the asset class attractive for a certain segment of investors. Over the long term, real estate is expected to offer substantial returns, thanks to a growing middle class, potentially higher income levels, and rapid urbanisation.
Capital gains from sale of real estate assets of up to Rs 2 crore can now be reinvested in two separate real estate assets under Section 54. This provision is allowed only once for any assessee; however, it presents the opportunity to invest the gains across attractive real estate options in multiple properties and locations, allowing owners/investors to diversify risk and return on the investment portfolio.
Additionally, tax on ‘notional rent’ on self-occupied property will no longer be applicable for owners of multiple homes. This will reduce the tax liability of such homeowners and families that live in separate locations.
Similarly, tax on notional rent on unsold real estate inventory will be exempt for two years from the end of the year in which the project has been completed, bringing some relief to developers.
There are talks to further reduce the GST on purchase of new house property to 8% from the present 12%, making real estate investments a little more affordable for first-time buyers. It will allow resellers and owners of multiple properties to better invest their funds, save tax, and make handsome gains. Here's an expert's guide to buying real estate in 2019.
Certain investment incentives announced by Finance Minister Piyush Goyal while presenting the Interim Budget 2019 are expected to make old-school bank deposits and real estate investments lucrative again.
The Budget has proposed an increase in the limit of tax deducted at source (TDS) on interest earned on term deposits, savings accounts, and other deposit schemes with banks or post offices. The limit will be quadrupled from Rs 10,000 to Rs 40,000 for a financial year. The same has been increased to Rs 50,000 on interest income earned by senior citizens.
Term deposits worth an estimated Rs 24 crore were placed with various banks as of 2018, with an average account balance of Rs 2.75 lakh. With the proposed raise on the TDS limit, banks are likely to see a surge in term deposits, according to some experts.
Related: 5 Announcements in the past 5 Budgets that impacted your finances
For taxpayers, the new proposal means no TDS will be deducted from the interest income up to Rs 40,000. However, the interest income would still be taxable at the hands of individuals as per the current tax laws.
Earlier, it was mandatory for the taxpayer to submit Form 15G to avoid TDS in case the interest income exceeded the threshold of Rs 10,000. In case they missed out on submitting it, then they were liable to a TDS on the interest above Rs 10,000. Under such a scenario, the individual would have to claim a refund of this TDS in case the income was below the taxable limit. The latest proposal provides relief to small depositors and non-working spouses.
A higher limit of Rs 40,000 means that TDS will not be deducted till an individual’s interest income from bank FDs and post office deposit schemes crosses this limit.
Furthermore, the Budget also proposes an increase in the threshold of TDS paid on rental income from Rs 1.8 lakh to Rs 2.4 lakh, which could come as relief to small taxpayers.
Related: Key takeaways of Union Budget 2019
Real estate investments will look up
Proposed changes in the real estate sector could make the asset class attractive for a certain segment of investors. Over the long term, real estate is expected to offer substantial returns, thanks to a growing middle class, potentially higher income levels, and rapid urbanisation.
Capital gains from sale of real estate assets of up to Rs 2 crore can now be reinvested in two separate real estate assets under Section 54. This provision is allowed only once for any assessee; however, it presents the opportunity to invest the gains across attractive real estate options in multiple properties and locations, allowing owners/investors to diversify risk and return on the investment portfolio.
Additionally, tax on ‘notional rent’ on self-occupied property will no longer be applicable for owners of multiple homes. This will reduce the tax liability of such homeowners and families that live in separate locations.
Similarly, tax on notional rent on unsold real estate inventory will be exempt for two years from the end of the year in which the project has been completed, bringing some relief to developers.
There are talks to further reduce the GST on purchase of new house property to 8% from the present 12%, making real estate investments a little more affordable for first-time buyers. It will allow resellers and owners of multiple properties to better invest their funds, save tax, and make handsome gains. Here's an expert's guide to buying real estate in 2019.
