Income Tax Changes in Union Budget 2022
Even though there was no announcement regarding changes in the income tax slab for Union Budget 2022, the government came up with various new tax rules. Whether it is for investment purposes or filing taxes, every taxpayer should be familiar with income tax changes in Budget 2022.
This article will cover the various changes in tax relief, indirect and direct tax, besides taxation in different industries.
Direct Tax Changes in Budget 2022
- One of the key features of Union Budget 2022 is the introduction of further relief in filing income tax returns. Taxpayers can now omit errors and file updated returns by making additional tax payments within 2 years from the assessment year’s end.
The government hopes that this new provision will help reduce tax litigation and promote voluntary tax filing. It will allow assesses to declare income that they missed in the previous year.
- Tax relief for persons with disabilities: The parents or guardians can opt for tax deductions on the annuity or lump sum payment that their differently-abled dependent receives through insurance schemes. This offer is available till the parent/guardian turns 60.
- The Alternative Minimum Tax (AMT) paid by cooperative societies got reduced from 18.5% to 15%.
- The cooperative society surcharge was reduced from 12% to 7%. However, this is only applicable to those who have an annual income of Rs. 1 crore to Rs. 10 crore.
- The tax deduction limit on contributions made by employers to a state government employee’s NPS account has increased. For uniformity and parity, the limit is now 14% instead of 10%.
- Any cess or surcharge levied on an individual’s income cannot be a part of business expenditure.
- One cannot set off any loss in the form of undisclosed income if detected during a survey or search.
- Surcharge on long-term capital gains can only be 15% of all assets.
Also Read: Section 32 Of The Income Tax Act
Indirect Tax Changes in Budget 2022
- Section 16, 34, 37, 39 and 52 of the Central Goods and Services Tax Act: November 30 of the next year is the last date to upload missed sales invoices, make changes, corrections, or claim missed input tax credit.
- Section 29 of the CGST Act: There will be a cancellation of registration if any composition taxable person does not file annual returns for three months beyond April 30 (due date).
- The due date for filing GSTR-5 by Non-resident Indians was 20th of the following month. However, now, it is the 13th of next month.
- The government has removed sections 42, 43, and 43A that deal with matching and reversal of tax credits.
- There will be a removal of concessional customs duty on the import of capital goods. The government will reimpose an initial moderate tariff of 7.5%.
- Slowly, 350+ exemption entries, like exemptions on chemicals, fabrics, agricultural produce, drugs, etc., will phase out.
- There is a reduction in import duty on polished and cut diamonds and other gemstones. Customs duty is now 5%, and the aim is to provide a boost to the jewellery sector. However, the government raised import duty on imitation jewellery to bring down their import.
- The customs duty will be calibrated to boost the domestic manufacturing of wearable devices and electronic smart meters. Through this, we will get a preferable graded rate structure.
- There will be no concessional rate of 15% on foreign dividends for FY 2022-23.
Taxes on Digital Assets
- Starting from FY 2022-23, the Reserve Bank of India will introduce its own digital currency.
- To legitimise digital assets in India, people will have to pay taxes on the income they earn through their transfer. There is a tax of 30% on the transfer of cryptocurrency and non-fungible tokens. On top of this, 1% TDS also applies beyond a certain threshold.
- Gifting of digital assets is also taxable in the hands of the recipient. Furthermore, one cannot claim any tax deduction, except the cost of acquisition.
Taxes on the Manufacturing Sector
- Newly incorporated manufacturing entities under Section 115BAB get a year extension for commencement of manufacture. Thus, the last date to start manufacturing got extended from March 31 2023 to March 31 2024.
- Keeping in mind the ‘Make in India’ and ‘Atmanirbhar Bharat’ initiatives, there are various exemptions on domestically manufactured products.
- There is a removal of concessional duties on raw materials used to produce intermediate products.
Taxes on Startups
- There is a one-year extension with regard to the tax incentive period for startups. The eligible startups established under Section 80-IAC will be able to get tax incentives until March 31 2023.
Also Read: Section 92E Of The Income Tax Act
Final Word
Changes regarding the income tax rules can be confusing for taxpayers. That said, it is vital that one looks through the income tax changes in Budget 2022 mentioned in the article above. This knowledge saves you the trouble of hiring a chartered accountant and allows you to fulfil your social duty of obeying income tax laws.
FAQs On Income Tax Changes In Union Budget 2022
Ans: In simple terms, financial year is the year in which taxpayers earn their income. Meanwhile, assessment year is the year following the financial year, in which the assessment of one’s income takes place. Thus, if FY is 2022-23, then AY will be 2023-24.
Ans: Governments across the globe impose an excise tax on certain goods considered harmful to individuals and society at large. Thus, one incurs sin tax on products like alcohol, tobacco, soft drinks, coffee, fast food, etc.
Ans: The term ‘digital assets’ refers to a broad category of things that exist in a digital format held on a storage drive or computer system. They come with a right to use. Digital materials that do not offer this right are not digital assets. Some examples of digital assets are photos, videos, PDFs, cryptocurrencies, and animations.
Ans: In September 2014, the Central Government launched the ‘Make in India’ initiative to make India self-reliant. It is part of a nation-building initiative that provides incentives to individuals and entities to manufacture, assemble, and develop products in India.
Ans: Every year the Finance Minister gives a Union Budget speech at the Parliament. This speech is in two parts. Part A is about the economic conditions of previous and current years and budget estimates for the financial year. On the other hand, Part B talks about the government’s various tax proposals that directly affect an individual’s finances.
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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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