New amendments to the Income Tax Act with effect from 1st September 2019

The full Budget for Financial Year 2019-20 was presented in July this year after the general elections. Hence the tax changes came into effect from September 1, 2019.

• Tax Deducted at Source (TDS) on additional payments made when purchasing immovable property

From September 1, while buying a property, payment made for other services or amenities such as club membership fee, car parking fee, electricity and water facility fee has to be included while computing the amount paid for the property for the purpose of deducting TDS.

• TDS on cash withdrawals from Bank Accounts

Cash withdrawals exceeding Rs. 1 crore on aggregate basis during the year from an account held with a bank, co-operative 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.

• 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 percent.

A new section 194N has been inserted in the Income Tax Act for this purpose.

• TDS on non-exempt portion of life insurance

If life insurance maturity proceeds received are taxable, then TDS will be deducted at the rate of five per cent on the net income portion. The net income portion is defined as the total sum received less of total amount of insurance premium paid.

• Banks and Financial Institutions can be asked to report even small transactions

Till now banks and other financial institutions were required to report specified financial transactions if the amount exceeded the threshold limit of Rs. 50,000/- were to be reported to the income tax department through a Statement of Financial Transactions (SFT). The Government has now removed the limit and can direct the Banks and financial institutions to report any or all transactions which can be in turn verified with the returns filed.

• PAN to become inoperative if not linked with Aadhar

PAN will become now become inoperative but not invalid if not linked with Aadhaar by the specified deadline.

• Interchangeability of PAN and Aadhar and mandatory quoting in prescribed transactions

Aadhaar can be quoted in lieu of PAN only for certain prescribed transactions. Though the new law comes into effect from September 1, the government is yet to notify the certain prescribed transactions.