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Budget 2022 revealed new income tax reforms.
The government would allow a one-time window to remedy omissions in income tax filings (ITRs), according to Finance Minister Nirmala Sitharaman. Taxpayers will be able to file an amended return on payment of taxes within two years of the end of the relevant assessment year, according to a new tax law introduced by the Finance Minister.
1) ITR filing: Relief for taxpayers
According to FM, taxpayer have two years from the end of the relevant assessment year to file an updated ITR. According to the FM, this is a new provision that will ensure voluntary tax filing and reduce litigation.
“As a concept, trust-based governance is increasingly being included into income-tax legislation. If there are any errors or omissions, a new provision has been provided to file an amended return to modify and pay the applicable taxes, which must be done within two years of the relevant assessment year. Ritesh Kumar, Partner at IndusLaw, says, “It promotes trust-based governance.”
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2) Digital asset proceeds are subject to a 30% tax.
Finance Minister Nirmala Sitharaman has announced a 30% tax on virtual/digital asset revenues.
“Virtual digital assets are subject to a 30% tax. Other than acquisition costs, there are no deductions. There is no allowance for a set-off against other income. If a sale exceeds a specified threshold by 1%, tax withholding will be activated. Employer contributions to the National Pension System (NPS) were raised from 10% to 14% for state government employees, bringing them in line with central government employees. Non-government personnel are not eligible “Saraswathi Kasturirangan, Partner at Deloitte India, commented.
“Virtual digital assets (crypto): establishing a specific tax regime for virtual digital assets (such as crypto) while offering clarity is not what the industry expected.” “The 30% tax rate and set-off loss restriction is a pretty aggressive move in deterring crypto transactions,” stated Ritesh Kumar, Partner, IndusLaw.
3) Net Promoter Score
The maximum tax deduction for contributions to the NPS by state government employees has been increased from 10% to 14 percent.
“We have fully grasped the value of the most recent provisions for taxpayers. One excellent scheme is the tax deduction limit on the employer’s contribution to the NPS account of state government employees, which has been increased to 14 percent. And the new return filing provision is far better than the old one, with a maximum time limit of two years till the end of the assessment year. To make things even better, the tax benefits for startups have been extended for another year,” stated Amit Gupta, MD, SAG Infotech.
“Increasing the employer’s contribution to the NPS account of central and state government employees to 14 percent is a solid step toward easing the tax burden on employees.” The extending of the return filing deadline to two years would relieve the strain on assessors and ITOs. However, we had hoped that the budget will increase the standard deduction limit from Rs. 50,000 to Rs. 1,00,000, and that WFH employees would receive special tax relief,” said Gaurav Kapoor, Director & Co-Founder, Fincorpit Consulting Private Limited.
4) Payments made for the transfer of digital assets will be subject to a 1% TDS.
5) Only a 15% levy on long-term capital gains will be applied to all assets.
“Long term capital gains to be subject to surcharge solely at 15 percent for all assets as against graded surcharge. “At the moment, this is only available for listed shares and mutual fund units,” FM Sitharaman explained.
“At the moment, the surcharge on long-term capital gains on listed shares and equity funds is capped at 15%, but the surcharge on other LTCG is based on total income.” According to tax expert Balwant Jain, the FM has proposed a ceiling on all LTCG.
Relief from income taxes on Covid-19 treatment costs and compensation
“In terms of personal taxation, the budget doesn’t have much to offer.” Persons who got money for expenses related to Covid 19 treatment, on the other hand, have been granted relief. Similarly, money received by family members upon a person’s death will be exempt up to ten lakhs for family members,” according to tax expert Balwant Jain.
Persons with disabilities are eligible for tax assistance.
A differently-abled individual’s parent or guardian can enrol in an insurance plan for that person. Only if the lump-sum payment or annuity is accessible to the differently-abled person upon the death of the subscriber, i.e. parent or guardian, is the parent or guardian entitled to a deduction.
There may be times when differently-abled dependants require an annuity or lump sum payment, even if their parents or guardians are still alive. I suggest that annuity and lump-sum payments to differently-abled dependents be made during the lifespan of the parents/guardians, i.e., when the parents/guardians reach the age of sixty.