Highlights for Non-Residents
The NDA Government presented its last Budget proposal before the general elections which are due in 2019. The Finance Minister in his Budget proposal has sought to introduce measures which are focused on Income tax relief for individual small taxpayers.
A] TAX RELIEF/ CONCESSIONS
I. Exemption from long-term capital gains taxation on sale of residential property
At present, long term capital gains arising on sale of a residential property, are exempt from tax, provided the capital gains are re-invested in one residential house property.
It is now proposed to extend the said benefit of re-investment to two residential properties, provided that the capital gains on sale of residential property does not exceed Rs 2 crore.
The benefit of this provision can be availed, at the option of the person only once in his lifetime.
For example, if capital gains on sale of residential property are Rs 1.5 crore, and person reinvest the same in House No. 1 ‘1 Crore’ and House No. 2 ‘0.50 Crore’. The entire gains will be exempt from taxation. The balance Rs 0.50 crore shall not be available for future years as the said option is available once in a lifetime.
II.Incentive for home owners
At present, tax is not chargeable on notional rent of one self-occupied house property.
It is now proposed to extend this tax exemption to two self-occupied house properties. This means, one can now own upto two residential house properties without having to pay any Income Tax on notional rent.
III.Restriction on allowability of interest on housing loan
The deduction on account of interest on borrowed capital for purchase or construction of self-occupied house property was allowed upto Rs 2,00,000.
It is now proposed that the said limit of deduction of Rs 2,00,000 shall apply to the aggregate of two self-occupied house properties.
IV. Incentive for real estate
At present, if any property held by the Real Estate Developers as stock-in-trade and which is not let out for whole or part of the year, then the tax on notional rent is not charged for a period of one year from the end of financial year in which the certificate of completion of construction of property is obtained.
It is now proposed to extend the above tax exemption on notional rent from properties held as stock-in-trade from one year to two years.
V. Standard deduction on salary income
Presently, standard deduction is provided to salaried individual employees of Rs 40,000 or amount of salary received, whichever is less, in lieu of transport allowance and reimbursement of miscellaneous medical expenses.
It is now proposed to increase this standard deduction to Rs 50,000.
VI. Tax benefit to Resident Individuals
At present, resident individuals having aggregate total income of Rs 3,50,000 in a year is not chargeable to tax. Now, this has been increased to Rs 5,00,000.
B] Rates of Tax
I. For Non Resident Individuals
There has been no change in tax rates for Non-resident individuals. The basic rate of tax as well as surcharge has remained the same.
|Financial Year (April-2019 to March-2020)|
|Individual’s Total Income||Rate|
|Up to Rs.2,50,000/-||Nil**|
|Rs. 2,50,001/- to Rs.5,00,000/-||5% of the amount by which the total income exceeds Rs. 2,50,000/-|
|Rs. 5,00,001/- to Rs.10,00,000/-||Rs.12,500/- plus 20% of the amount
by which the total income exceeds
|Exceeds Rs.10,00,000/-||Rs.1,12,500/- plus 30% of the amount by which income exceeds Rs.10,00,000/- (Refer Note 1)|
|Note 1:- The amount shall be increased by a surcharge at the rate of 10% in case total income exceeds Rs.50 Lakhs but not exceeding Rs.1 Crore and @ 15% in case total income exceeds Rs.1 Crore. Hence, the highest effective rate of tax in case of individual shall be “35.88%” i.e. Maximum Marginal Rate of Tax (after including the Health and Education Cess @ 4%). Marginal Tax Rate relief is available.
**If NRI is having only Capital Gains (including Long term and Short term) in Equity shares or Equity Oriented Mutual Fund (on which STT is paid), there is no benefit of basic exemption available.
II. For Foreign Companies
Foreign companies are taxable at 40%
2% surcharge is applicable if the total income exceeds Rs.1 Crore but does not exceed Rs.10 Crores
5% surcharge is applicable if the total income exceeds Rs.10 Crores
4% Health and Education cess is applicable on income tax (inclusive of surcharge, if any)
Marginal Tax Rate relief is available.
C] Rates of Tax Deducted at Source (TDS)
A] The basic TDS Rates as applicable in case of non-resident, subject to the DTAA relief, if any are as follows:-
|Particulars||Rate of TDS||Health and Education cess on TDS excluding Surcharge*, if any||Effective Tax Rate|
|1) Capital Gains on Equity Oriented Mutual Fund Units and Equity Shares sold on Recognized Stock Exchange and STT paid thereon:|
|2) Capital Gain on Debt Mutual Fund & listed securities other than (1)|
|3. Capital gain on Other Assets|
|4) Interest on Bank Deposits(NRO A/c)||30%||4%||31.20%*|
|5) Income From Rent||30%||4%||31.20%*|
|6) Royalty & Fees for Technical Service (FTS)||10%||4%||
*Rate of TDS shall be increased by applicable rate of surcharge.
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