When financial advisors do financial planning for their clients for the new FY, they must take into consideration all the modifications related to tax management and personal finance. Here are 5 prime changes
- Rise in TDS limit
Previously, if interest earned on recurring deposits and fixed deposits was more than Rs.10,000 per year, banks would deduct 10% TDS. In last year’s interim budget, the ceiling was increased to Rs.40,000. Hence, advisors should inform their clients that TDS will only be applied if their interest income is more than Rs.40,000.
- Zero tax on taxable income below Rs.5 lakh
Financial experts must keep in mind that any of their clients having taxable earnings up to Rs.5 lakh in a year can claim entire tax rebate and pay zero tax. From FY2019-20 onwards, the tax reimbursement under Section 87A has been hiked to Rs.12,500 thereby making income less than 5 lakh free of tax. But individuals whose income is more than the basic exemption limit of Rs.2.5 lakh will still have to file returns as per Income Tax laws.
- Transfer of shares only in demat form
Your clients won’t be able to transfer shares physically as per a circular issued by SEBI last year. From April 1 2019, if they want to transfer any stocks, they can only do so through demat mode.
- Advantage of investing LTCG in two houses
Taxpayers who have sold their house now have the choice to invest the long-term capital gains (LTCG) in 2 homes in place of the earlier rule of 1 house so as to prevent giving LTCG on the amount. However, as their financial advisor, you must tell clients that this advantage can be availed only once during their life and moreover, the gains should not be more than Rs. 2 crore.
- Notional rent to be tax free
Earlier, individuals who had a second home which was vacant had to pay tax for notional rent obtained from the land. No tax will be levied on such notional revenue from this financial year.