As taxpayers have been facing hard times due to job loss and salary cuts during the Covid-19 pandemic, amidst the high rate of inflation, there were high expectations that the Union Budget 2022 would provide some tax relief in the form of higher tax exemption, lower tax rate, higher deductions, introduction of Work from Home allowance, etc.
“There was a widespread expectation that the personal tax basic exemption would be increased from Rs 2.50 lakh to Rs 3 lakh keeping in view inflation which has not been fulfilled. The HNIs would have expected that the highest tax rate of 42.7 per cent would have been reduced and capped at 39 per cent but there is no change in this respect. At the same time, the apprehension of introduction of wealth tax or inheritance tax to reduce inequality of income and wealth has been allayed and there is no proposal in this respect,” said Dr. Suresh Surana, Founder, RSM India.
“The taxation of crypto or digital assets at 30 per cent plus surcharge and cess would provide clarity but would be a disappointment for crypto assets holders as it does not provide for lower rate of tax for long term capital gains,” he added.
Finance Minister Nirmala Sitharaman has left the existing income tax rates and slabs unchanged.
“The Budget has not tinkered with the tax rates for the existing as well as new tax regime for individual taxpayers. Against the popular expectation of enhancing the deduction limits for investments, health insurance and interest of house property, the Budget has not proposed any such beneficial changes,” said Mitesh Jain, Partner, Economic Laws Practice.
“A relief has been provided to the individual taxpayers by limiting the surcharge on transfer of long-term capital assets to 15 per cent from 37 per cent, thereby reducing the effective tax rate from 28.496 per cent to 23.92 per cent,” he added.
“However, beneficial proposals have been suggested for persons with disability on receipt of annuity or lump sum payment. Also, the State Government employees may rejoice, as the Budget has proposed to increase the percentage of deduction of employer contribution from 10 per cent to 14 per cent,” Jain further said.
Against the popular expectations, there was no increase in deduction limits as well.
“Few changes have been introduced in the proposal that impacts personal finance. Unfortunately, this is a missed opportunity, the government could have incentivised investments by amending limits under Section 80C of the Act and by providing certain deductions for expenses like work from home while increasing the standard deduction. These were also the popular expectations on the personal tax front. No alterations to housing loan deductions have also been made in the proposals,” said Ritesh Kumar, Partner, IndusLaw.
“Capping of surcharge on long term capital gains will however contribute to lowering the tax burden in the hands of the common man,” he added.