By Gaurav Karnik
Paving the way for progressive development of India, the Union Budget 2022 emphasised on four priorities – PM Gati Shakti, inclusive development, productivity enhancement & investment, sunrise opportunities, energy transition and climate action along with financing of investments. There was a significant expectation that the Budget 2022 would provide significant tax reliefs alongwith major reforms but the same have not been met. Instead incremental tax measures have been introduced with the silver lining being no new taxes being proposed.
Taxpayers will be permitted to file an updated tax return within a period of 36 months from the end of relevant financial year to enable reporting of any income that may have been omitted by the tax payer while filing original return. However, such revised return shall entail additional tax pay-out of 25%/ 50% depending on when such revision is made. Alternate minimum tax and surcharge on co-operatives have been reduced to 15% and 7% respectively. The government has also capped the surcharge at 15% on long-term capital gains arising from transfer of all types of capital assets which will help reduce artificial distinction amongst assets. An additional year has been provided to start-ups and new manufacturing companies to avail the tax incentive available under section 80IAC and 115BAB respectively, which is a welcome measure.
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The government finally bit the bullet in this Budget with respect to taxation of digital assets, one of the hottest tax topics globally. It is proposed to tax transfer of all digital assets (including crypto tokens, NFTs, etc.) at the rate of 30% with deduction being provided only for cost the acquisition of such assets and at the same time not permitting any set off or carry forward of any losses arising from such digital assets transactions.
Further, to track such transactions, tax deduction at source at the rate of 1% has also been introduced. New tax withholding provision – section 194R at rate of 10% has been introduced w.e.f July 1, 2022 to capture transactions between businesses & their resident agents/channel partners to whom certain benefits or perquisites are given, whether in cash or in kind.
At the same time clarification regarding deduction of goodwill from block of assets, conversion of outstanding interest into debt not being considered as ‘payment’ for tax deduction purposes, definition of slump sale to include the word transfer, rationalisation of provisions related to tax withholding on immovable property to be effected on higher of stamp duty value or consideration paid, re-emphasis on disallowance of expenditure related to gifting, travel, incentives etc. in the medical industry and violation of any laws (whether in India or overseas) or compounding of such offences, have been proposed.
The new reassessment regime brought in last year has also been tweaked to remove ambiguities and expand the scope in search/survey cases. Similarly, provision of higher TDS/TCS in case of non-filer of tax returns which was introduced in July 2021 has been rationalised to check tax compliance for only one year only instead of two years and at the same time additional penal and prosecution provisions, litigation procedures, etc. have also been proposed.
The author is Tax Partner, EY India
