Finance Minister Nirmala Sitharaman outlined the budget for 2022. According to a lot of tax experts, the 2022 budget is financially sound. The biggest highlight is definitely the digital currency tax has been proposed with several other changes.
In this blog, let’s have a look at the main findings:
New updated return
Budget 2022 introduces a new 139 unit (8A) to update tax returns. If taxpayers discover errors in their returns after the deadline has passed, for example, some income has been overlooked, they will have the option to correct the IT return. They can update the return within 2 years after the end of the relevant assessment year.
The updated return option does not apply in the following cases:
- The updated return is a loss return
- In case, there is a reduction in tax liability or an increase in the amount of the refund
- If searches or investigations have been carried out for the year in question
- Or if, any proceeding for assessment or reassessment is pending or completed
Taxpayers are required to pay additional income tax at the time of submitting the updated ITR. As an additional tax deduction, it is proposed to collect an amount of twenty-five per cent or fifty per cent. In addition, interest must be paid by the additional income provided.
Deduction for NPS u/s 80CCD:
For central government employees, the deduction for NPS contributions is currently authorised at 14% of pay (Basic + DA). However, it is regulated at 10% of the compensation (base salary + DA) for state government employees. It is envisaged in Budget 2022 to achieve parity between the centre and state government employees. As a result, the employer contribution deduction ceiling for state government employees will be doubled to 14 per cent.
Taxation of virtual digital assets- Cryptocurrency
For the taxation of virtual digital assets, a new section 115BBH has been added. It is proposed that any income derived from the transfer of virtual digital assets be taxed at a fixed rate of 30%, with no deductions allowed for expenses spent (except the cost of acquisition).
Surcharge on long term capital assets
Surcharges on listed equity shares, units, and other long-term capital assets are capped at 15%, while surcharges on other long-term capital assets are capped at 37%. To bring parity in all long-term capital assets, the budget for 2022 proposes lowering the rate of surcharge for other long-term capital assets to 15%.
Income tax exemption on Covid treatment expenditure
The amount received by a taxpayer for medical treatment from an employer or from any person for the treatment of COVID-19 is not subject to income tax. In addition, if a family member receives ex-gratia as a result of a death caused by the Covid -19, the exemption for money received from the employer is proposed to be limitless, however, the exemption for money obtained from other peers is proposed to be restricted to Rs. 10 lakh in total.
Tax Incentives for the Disabled
The current law allows for a deduction of any amount deposited under the insurance plan to the parents or guardians only if the person dies with a disability. It results in a lump-sum payment or annuity becoming available to the disabled person. It is suggested in Budget 2022 to change that the deduction will still be available if a lump-sum payment or annuity is offered to disabled persons during the subscriber’s lifetime after reaching the age of 60.
Exemption for Startups
If a few conditions are met, qualifying startups formed on or after April 1, 2016, but before April 1, 2022, may be eligible for tax advantages. Because there have been delays in establishing such units as a result of the pandemic, it is recommended to extend the term for incorporation of qualified start-ups for an additional year, until March 31, 2023.