This year’s Budget carried a lot of expectations. Finally, the union budget 2022 is out now. Budgets coming after the Covid-19 pandemic are typically tough exercises for the government. It is because the Covid-19 has caused a lot of disruption in the economy. Covid-19 has affected a lot of sectors and most of which are yet to recover fully. Budget 2022 has been prepared to provide a fillip to such battered sectors, keeping in view, the economic growth trajectory that took a backseat after the onset of the pandemic. Most of the middle-class people and the salaried class eagerly wait for the budget to know about the changes to the Income Tax. In this post, we take a look at five important changes introduced to the Income Tax Act in the Budget 2022.
Table of Contents
#1 ‘Updated Return’ Filing:
While filing Income Tax Returns, it is quite possible that you may skip a particular income or show incorrect income due to calculation mistakes, etc,. At present, the provision to revise such a return is to be filed within March 31st of the relevant Assessment Year. To give relief to the taxpayers who have filed inaccurate particulars of income, a new provision has been introduced. Starting from the next financial year onwards, you can file a revised return up to 2 years from the end of the relevant Assessment Year. The caveat here is that you should pay the tax on the income that was originally missed in the ITR. This is indeed a good chance. If the Income Tax Department finds out that you have underreported or misreported your income in your ITR, the consequences are harsher. You will not only have to pay a lot of taxes and interests but also through a long and tiring process of assessment, penalty and appeals, etc,.
#2 Benefits for Co-Operative Societies:
At present, Cooperative societies pay an alternate minimum tax (AMT) of 18.5%. This gets reduced to 15% in this budget. Similarly, the surcharge for Co-op societies if income is more than Rs. 1 crore and less than Rs. 18 crores has been reduced from 12% to 7%.
#3 Benefits for State Government Employees:
National Pension Scheme (NPS) is mandatory for all the state and central government employees who joined after 2004. However, the central government contributes 14% of the employee’s salary towards NPS contribution. The same is allowed as a deduction from the salary of the employee. However, for the state government employees, the limit was 10% up until now. In this budget, the upper limit for NPS contribution by employers for state government employees has been raised to 14%. This makes the state government employees enjoy salary deductions on part with the central government employees.
#4 Tax on Cryptocurrencies:
This remains the biggest and most popular change made in the Budget 2022 announcements. Everyone is into cryptocurrencies these days! BitCoin, Ethereum, Solana, Dogecoin, etc., are now popular names across the Indian investor community. The unabated rise of the prices of cryptocurrencies and the Work From Home environment led to the meteoric rise of these investments in cryptocurrencies in India. The investors with exposure to the crypto markets multiplied by thousands of times in a short span. However, the crypto market is still unregulated in India. But a major step perhaps towards the legalization of cryptocurrencies has been taken by the Government. Henceforth, the gains from the transfer of Cryptocurrencies will be taxed at 30% without any deductions. The losses from such transfers will also not be allowed to set off against gains. A Tax Deducted at Source (TDS) of 1% will also be made on the crypto transactions. The RBI also is planning to launch its own digital currency (Digital Rupee).
#5 Surcharge on Long Term Capital Gains (LTCG):
The surcharge on the LTCG arriving as a result of the sale of shares, mutual funds, etc., is currently 15%. However, the surcharge on LTCG on sale of other assets varies going up to 37%. This budget 2022 addressed this issue. Henceforth, the surcharge on LTCG arriving on sale of any type of asset has been capped at 15%.
These are the 5 major changes brought out in Income Tax in Budget 2022. The budget is a mixed bag for the middle class and the salaried class. Thankfully, there are no new tax proposals. There are no major tax cuts as well. What do you think about Budget 2022? Let us know in the comments.