Income Tax Budget 2022: Finance Minister Nirmala Sitharaman today announced no change in personal income tax slabs and rates in Budget 2022. The finance minister proposed that tax deduction will be allowed on employer’s contribution up to 14% for state government employees. For taxpayers, the FM said they will be able to file updated ITR.
“India is growing at an accelerated pace and people are undertaking multiple financial transactions. The Income Tax Department has established a robust framework of reporting of taxpayers’ transactions. In this context, some taxpayers may realize that they have committed omissions or mistakes in correctly estimating their income for tax payment. To provide an opportunity to correct such errors, I am proposing a new provision permitting taxpayers to file an Updated Return on payment of additional tax. This updated return can be filed within two years from the end of the relevant assessment year,” Sitharaman said.
The Finance Minister also said in Budget Speech 2022 that this year all Post Offices in the country will be brought on the core banking system customers. With this, Post Office accountholders will be able to make online transactions and even transfer money to other bank accounts through netbanking.
Ahead of the Budget, taxpayers were expecting the announcement of changes in Income Tax Slabs and Rates. Some experts believed that big bang tax relief may not be announced in Budget 2022. However, Economic Survey 2021-22 tabled in the Parliament on Monday (January 31, 2022) raised hope for bigger tax reliefs for all types of taxpayers, including salaried individuals, senior citizens, NRIs and pensioners.
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The Economic Survey has listed several relief measures for taxpayers the Government has taken since the outbreak of Covid-19 pandemic (read details here). Now that the economy is looking set to grow fast, one can hope the Government will improve upon last year’s tax-related announcements.
Finance Minister Nirmala Sitharaman was also expected to announce rules for taxation of income from cryptocurrencies.
The Income Tax slabs had not been raised in a meaningful manner over the years and are not linked to inflation unlike in case of taxation of gains from certain asset classes. As a result, over the years salaried individual’s net income and hence the purchasing power had reduced despite the cost of living having gone up significantly.
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Experts expected that return filing should also be simplified for individuals whose salaries fall below this threshold. The Government had sought to reduce the tax burden on an individual tax payer by introducing a new tax scheme without exemptions and with lower tax rates. However, data shows that it has not become popular and the salaried individuals are still choosing the earlier scheme because that is leading to lower taxes in most cases. Read Share Market Live Updates Here
Read Updates, Analysis and Explanation on Income Tax related announcements in Budget 2022
Budget 2022 Income Tax Slab Rate 2022 Highlights: New Income Tax Slabs Rates in India FY 2022-23, New Income Tax Slabs and Rates Budget 2022 News
PFRDA Chairperson Supratim Bandyopadhyay says, “The tax deduction limit in National Pension System (NPS) has increased from 10% to 14% for state government employees. This is a significant announcement to bring State Government employees on par with the Central Government employees and this will help State Government employees getting extended social security benefits in line with their counterparts in the Union Government.”
SBI Research says, “The surcharge on the long-term capital gains (LTCG) has been capped at 15%. The rate of LTCG vary between 10% to
20% depending upon the type or class of assets. Currently, LTCG surcharge is available only for listed shares and units of mutual funds. This is beneficial for the individual investors who are holding shares for more than 12 months and selling it thereafter, thus, to treat gains on sale of such shares as long-term capital gains.”
Tamil Nadu Chief Minister M K Stalin said there is no change in personal income tax slabs, no welfare schemes for farmers who died protesting the three farm laws, no flood relief allocation to the state and there is also no funding for Tamil Nadu government's project proposals. Stalin dubbed the Union Budget 2022 as one that has forgotten people's welfare and slammed the Centre for its 'big brother attitude' by ignoring the demand of state governments to further extend the GST compensation regime. “The budget is a big disappointment for Tamil Nadu and its people, the Chief Minister said as reported by PTI.
Taxes have not been raised during the pandemic to collect additional funds for the massive spending programme of the government, Finance Minister Nirmala Sitharaman said on Tuesday in response to questions on her Budget belying expectations of a reduction in the income tax burden on the middle class. Sitharaman's fourth Budget in a row neither tinkered with tax slabs nor raised the standard deduction, which was widely expected in view of elevated inflation levels and the impact of the pandemic on the middle class. “If the expectation was to raise tax, I haven't done that,” she said at a post-Budget press conference when asked about the Budget belying expectations of the middle class. “I hadn't done that (raise income tax rates) last year (and) this year too,” she said. “I have not collected a single rupee additionally through tax burden.” (PTI)
Anita Basrur-Partner, Direct Tax – Sudit K. Parekh & Co. LLP, says Keeping in mind the availability of data with the government, updated returns can be filed within 2 years by paying additional fees / taxes. This will bring down litigation.
Allowing taxpayers to update returns is a very positive move. With tax returns asking for various details including details of foreign assets, it was observed that some details were missed by the taxpayers. This window of allowing 2 years to update returns will help genuine taxpayers to make good any inadvertent omissions.
AMT reduced to 15% for co-op societies to bring parity with companies.
Virtual digital assets are proposed to be taxed at 30% without any deductions or allowances except cost of investment. It is also proposed to introduce withholding tax on these virtual digital asset transfers etc. This will increase compliances.
The surcharge in case of sale of long-term capital gain reduced to 15% as against existing 37%. This will bring down the tax liability for taxpayers. Taking the effective tax rate to 23.92%
Education cess deduction not to be allowed. This reverses various tribunal and high court judgements. This will add to litigation as many assesses would have made a claim for these in line with favourable decisions.
Somasundaram PR, Regional CEO, India at World Gold Council, says: “The budget is very positive for the Indian Jewellery Industry. The emphasis on exports was evident with the announcement of a simplified regulatory framework to allow the e-commerce export of jewellery. The general policy thrust aimed at higher economic growth is again a tangible benefit for gold, as it is well established that income growth is the single dominant factor in long term gold demand. Digital push, MSME support and infrastructure spending address several industry priorities and offer significant leverage for the industry to play a bigger economic role. This year’s budget, read in the context of the significant traction in the implementation of previous year's announcements on gold, point to a stable, sustained path to reforms over the years. Definitely one more reason for industry to cheer after the high five for gold in Q4 by customers”
Prateek Mehta, Co-Founder and Chief Business Officer, Scripbox, says, “This year’s budget has some significant measures towards enhancing financial inclusion in the country by adding post offices under core banking services, setting up digital banks, and enhancing resolutions for cross-border insolvency matters with the updated IBC amendments. Also, the announcement of limiting the surcharge on all long term capital gains to 15% is a positive step. The announcement regarding Sovereign Green Bonds is also something noteworthy for investors.”
“We definitely welcome these steps. While there was no mention of a crypto-bill, RBI is all set to launch the Digital Rupee. The 30%tax+1% TDS on virtual assets is also interesting as the government seems to be considering crypto-currencies, NFTs and other such assets as a source of tax revenue. It acknowledges their status as something of value and economic activity, if nothing else.”
“The ongoing pandemic, coupled with the rising inflation, has adversely effected the household expenses of the common man for an elongated period now. However, with the higher capex and fiscal deficit target the Finance Minister has limited specific relief to individual taxpayers,” says Parizad Sirwalla, Partner and Head, Global Mobility Services, Tax, KPMG in India.
“To provide impetus to trust based governance as a concept, an updated tax return system has been introduced wherein a taxpayer can file a tax return upon payment of specified taxes within 2 years from the end of the relevant assessment year. Interestingly, some relief to individuals with income above 2 crores in the form of capping of surcharge at the rate of 15 per cent on long term capital gains (on specified assets) from existing graduated rates. It would be relevant to analyze the fine print of the finance bill for other announcements and tax sops if any on the personal tax front,” he adds.
“Allowing taxpayers to update returns is a very positive move. With tax returns asking for various details including details of foreign assets, it was observed that some details were missed by the taxpayers. This window of allowing 2 years to update returns will help genuine taxpayer to make good any inadvertent omissions.
“Extension of favorable tax regime of 15% for Manufacturing entities extended from March 2023 to March 2024. This is a welcome move and was required as capex for companies were hampered due to covid and hence it was difficult to meet the timelines provided. This will boost make in India initiative and would encourage FDI inflows in India,” says Nishit Parikh- Partner, Direct & International Tax – Sudit K Parekh & Co. LLP.
Amit Singhania, Partner, Shardul Amarchand Mangaldas & Co, says “This a step towards reducing the compliance hassles for taxpayers. Taxpayers have been facing challenging in mismatch of income and expenses while filing tax return. This will provide requisite relief to them.”
Belying expectations, Finance Minister Nirmala Sitharaman did not tinker with the personal income tax rates in the Budget for 2022-23. The minister also did not raise standard deduction, which was widely anticipated in view of elevated inflation levels and impact of the pandemic on the middle class.
The standard deduction currently stands at Rs 50,000. There was no change income tax slabs in the personal income tax category in the Budget unveiled on Tuesday. The corporate tax rate too was kept at the same level. However, concessional rate of 15 per cent has been extended by one year for newly incorporated manufacturing units. PTI
“If the time for revising ITR has passed or it has already been assessed, a taxpayer could no longer amend and pay additional taxes. (Earlier time period was end of AY). If the taxpayer wants to pay additional taxes and amend an already filed return, it can be done now, within 2 years from the end of the relevant assessment year. The intention is to allow taxpayers an opportunity to pay any unpaid taxes without severe consequences, in case they have made a mistake at the time of filing and return is already processed,” says Archit Gupta, CEO, Clear.
Giving taxpayers an opportunity to file an updated tax return to report any income that was erroneously missed out or to correct errors is a much awaited tax reform,” says Gouri Puri, Partner, Shardul Amarchand Mangaldas on Union Budget 2022-23.
“Hitherto, if a taxpayer missed the due date to file a revised return, there was no mechanism in law to self-report any income that was not offered to tax. This left the taxpayer vulnerable to litigation, interest and penalties even when there was an intent to disclose income. This reform should go a long way in reducing tax disputes and building trust between the taxpayer and the Government. “
Health and education cess clarification is an additional surcharge levied on assessee for welfare of the country. It is clarified that it is not a business expenditure and cannot be allowed as a business expense while computing the total income. This overrules certain court rulings which had earlier allowed for tax deduction on such a cess, says Ritesh Kumar, Partner, IndusLaw.
“To opt for Concessional tax rate under sec 115AB, sunset has been extended up to 31 March 2024 from current 31 March 2023. This is a welcome step given that not much economic activity prevailed during the COVID pandemic induced lockdowns,” says Ritesh Kumar, Partner, IndusLaw
Tax deduction limit increased to 14% on employers contribution to NPS of state government employees.
Surcharge on cooperative societies reduced to 12% for income of
Rs 1 crore to 10 crore.
Taxpayers can file updated ITR within two year of relevant assessment year, says FM (Full details awaited)
With Post Office netbanking facility in all branches, account holders will be able to make online deposits in PPF, NSC and other accounts.
Budget Speech Live: In 2022, 100% of 1.5 lakh post offices will come on core banking system. Post Office customers to get access to net banking, ATMs and more, says Sitharaman.
Sitharaman said Rs 48,000 crore has been allotted for PM Avas Yojana- both rural and urban – to provide affordable housing.
India to start a digital university, says FM Sitharaman. She also said that Budget 2022 lays the blue print for the road to India at 100. It will be based on four priorities – PM Gatishakti for economic growth and sustainable development; Inclusive development; Productivity enhancement; Financing of investments
Budget to provide impetus for growth, says Nirmala Sitharaman.
Finance Minister Nirmala Sitharaman has started Budget speech 2022.
Sanjib Jha, CEO and ED, Coverfox.com says, “The 4 aspects which affect taxation for a salaried individual are tax-slab, exemption limits, standard deductions and perquisite benefits. This year, the highest expectation of a salaried individual is to have higher tax exemption limits, especially the 80C.” Read Full Story
Budget 2022 Live: From indirect tax perspective, simplification of compliances, clarification on debatable issues to reduce litigation, relaxations on stringent requirements are some of the key areas where a taxpayer is awaiting some reforms and reliefs, Tushar Aggarwal, Founder Partner, Tattvam Advisors, says.
“To begin with, SEZs have been facing lot of challenges in meeting the Net Foreign Exchange requirements to maintain their status. As a result, several SEZs are forced to suspend their operations and many have been de-notified. The matter has been in discussion for quiet sometime and due to pandemic hitting the country over last two years, the situation has only worsened for them. Therefore, an amendment is expected in the SEZ laws allowing SEZs to sell goods in DTA without imposition of customs duties,” he adds.
Finance Minister Nirmala Sitharaman to present Union Budget with a tab, not traditional ‘Bahi Khata’
With the Covid-19 pandemic hitting millions of people in the country, there has been a surge in medical expenses. Therefore an increase in the deduction limit for health insurance and medical expenses under section 80D of the Income Tax Act is expected. Read Full Story
Budget Live: Experts say that he the Government could consider reforming the system by raising the threshold meaningfully as suggested above. In order to broaden the tax base, it is time that agricultural income is taxed. Tax on agricultural income has been a sensitive issue and in order to manage expectations, Government could start with a high threshold for taxing agricultural income, say INR 25/50 Lakhs.
“After two years of the pandemic and the economy struggling to stand on its feet, expectations from the finance minister are high from Budget 2022. The previous budget, which was a bumper one, has increased expectations from the government that it will steer the economy on a higher growth path,” Vikas Singhania CEO at TradeSmart, says.
“Some relief for taxpayers is likely ahead of important state elections. Incentives to boost the economy and nudge the private sector to invest more are expected. Infrastructure will continue to be the focus area. Start-ups and renewable energies have been the focus area for the government and may continue to get benefits in this budget. As for the market, one can expect some benefits, especially since the government wants to divest a big company like LIC,” he adds.
With the Government’s focus on ease of living, Government could consider simplifying the tax regime for salaried taxpayers whose salary income doesn’t exceed a certain threshold. For instance, the Government could consider raising the lowest income tax slab generously, say to Rs 5 lakh or even Rs 10 lakh without any exemptions, says Abhishek Saxena, Partner, Phoenix Legal.
“The salaried taxpayers below the Rs 10 lakh threshold roughly account for around 90% of the total salaried taxpayers and contribute about 5% of the total income tax collected. For collection of this small amount, Government has to spend disproportionate amount of cost, time and efforts. At the same time, significant inconvenience is caused to the salaried taxpayer for complying with the tax regime. By doing this Government will free up the time of tax officers who could then focus their efforts on tax evaders to compensate for this loss of revenue and the tax savings to the taxpayers could also result in increased consumption expenditure thereby giving a stimulus to the economy,” Saxena told FE Online.
The Economic Survey 2022 said recently launched Retail Direct Scheme by RBI will be instrumental in channelizing the savings of middle class, small businessmen and senior citizens directly into risk free government securities. With an objective to facilitate efficient direct access of retail individual investor to the G-Sec market, which was earlier directly being accessed only by large institutional investors, this scheme will give a boost to financial inclusion and broaden the investor base.
Under the scheme, retail investors will be able to open a Retail Direct Gilt (RDG) account using an online portal through which it can directly invest minimum of Rs 10,000 and maximum of Rs 2 crore per security. The retail investors can not only place a non-competitive bid in primary issuance of all Central & State Government securities such as Treasury Bills and bonds but also access Secondary market through Negotiated Dealing System-Order Matching (NDS OM) – RBI’s trading system, which was previously accessible only to select financial institutions.
As of now, bulk of the G-Sec is held by few institutional investors like commercial banks, insurance companies and mutual funds. Diversified investor base provides flexibility to the Government in its borrowing program. Also, it would enable stable demand for G-sec from different investor categories.
Budget 2022 Tax and Personal Finance Expectations: Amit Singhania, Partner, Shardul Amarchand Mangaldas & Co, shares his Budget expectations
Increase the limit of deduction available under Section 80C from INR 1,50,000/- to INR 200,000
Increase the cap for deduction on interest paid on home loans for self-occupied properties under section 24(b) of the Act from INR 200,000 to INR 300,000.
For Salaried Persons
Increase the limit of standard deduction from INR 50,000/- for higher disposable income.
Clarity on Taxability of Interest on Employee’s PF Contributions
Interest income accrued (on or after 1 April 2021) on the employees’ PF contribution in excess of INR 2,50,000 in a year is now chargeable to tax.
However, there is a lack of clarity on whether the same is taxable in the year of accrual or withdrawal. It is recommended that necessary amendments be made under the Income-tax Act, 1961 to tax them in the year of withdrawal only.
For Stocks and Mutual Fund Investors
Removal of LTCG tax on equities is amongst the biggest expectations from retail investors. If not this, then at least the limit of INR 100,000 on tax-free gains limit should be increased to INR 10,00,000.
The concept of speculative income for F&O and intra-day transactions should be removed and income classification arising from capital market transactions should be limited to business income, long-term capital gains and short-term capital gains.
Budget Live: “After the hard hit of second wave of COVID -19 pandemic, the economy was in revival mode at great pace when the third wave rumbled the speed. As the country has started recouping from the third wave, there is lot many expectations from this budget,” Paras Nath, Partner, Tax & Regulatory Services, T R Chadha & Co LLP, told FE Online.
“For individuals and salaried section, the major expectation is a reduction in burden of tax either by reduction in rates or increase of slab. Further, increase in standard deduction and simplification of the process of return filing by eliminating the complexity of making choice from old and new regime is also expected,” he added.
“One hopes that the budget will be more attractive to incentivize individual taxpayers. It is expected that the standard deduction for the salaried individuals may be increased from INR 50,000 to INR 75,000 to provide relief to the salaried personnel,” Mitesh Jain, Partner, Economic Laws Practice, told FE Online.
“Additionally, a new allowance may be introduced for salaried personnel who have been working from home during the pandemic. The budget is further expected to enhance the limit of investment deduction under Section 80C, health insurance premium deduction under Section 80D and interest on housing loan deduction since the limits have not been increased during the last 5 years,” he added.
In view of the pandemic, tax experts are hoping that the Government will increase the limit for health insurance from the existing Rs 25,000 threshold.
Announcements with respect to regulation of cryptocurrencies are also expected to provide a sigh of relief to the existing investors, according to Abhishek A Rastogi, Partner at Khaitan and Co.
Income Tax Budget 2022 Live: It is expected that there will be certain relaxations for salaried individuals and that the standard deduction may increase from 50,000, especially in light of additional expenses borne due to work from home, says Abhishek A Rastogi, Partner at Khaitan and Co.
“The government may incentivise savings and can increase the limit of 1,50,000 under section 80 C. Alternatively, the term insurance may be excluded from the existing limit and an additional limit may be provided for term insurance,” says Rastogi.