Budget 2022 will give financial boost and benefit to the common man

By Amarpal S. Chadha

Keeping in mind the long-term objective of steady path to progress, the finance minister while presenting the Union Budget 2022 has not made any major changes to the taxation of individuals — no change in tax rates, tax slabs, deduction or exemption limits. However, measures have been introduced to bring in reforms that will further simplify the tax system, promote voluntary compliance by taxpayers and reduce litigation.

Key amendments impacting the individual taxation are as follows:

Opportunity to file ‘updated return’

In order to reduce litigation and promote voluntary tax compliance, it has been proposed to provide an opportunity for taxpayers to file an updated tax return, for voluntary disclosure of any income which has been omitted by the taxpayer earlier. The time limit for filing such updated tax return would be two years from the end of relevant assessment year.

The new provision of filing an updated tax return will not apply:

— If the updated return is a return of loss or has the effect of decreasing the total tax liability determined on the basis of return filed previously; or
— Results in refund/ increases the refund due on the basis of tax returns filed previously; or
— In case search has been initiated and/ or survey has been conducted; or
— Other conditions as specified

Virtual digital assets (taxation of the new-age assets)

Recognising the advancement of digital economy and transactions in digital modes, it was imperative for the government to bring about a change in the traditional tax system for assets such as cryptocurrencies, non-fungible tokens, etc. Accordingly, it has been proposed to tax the proceeds of virtual digital assets at rate of 30%. The deduction from such proceeds would be limited to cost of acquisition only and any loss arising from such transaction would not be entitled to be set off with any other incomes. Further, TDS shall be attracted at the rate of 1% on transfer of virtual digital asset to a resident, subject to certain conditions. It is also proposed to tax the gift of virtual digital assets in the hands of the recipient.

Deduction for payments made to annuity schemes for disabled dependants

To grant additional relief to individuals/HUFs investing in approved insurance schemes for the benefit of a disabled dependant, it has been proposed to include schemes where payment of annuity or lump sum amount for the benefit of a dependant is made during the lifetime, i.e., upon attaining the age of 60 years or more of the individual or the member of the HUF, in whose name subscription to the scheme has been made.

Cap on surcharge on long-term capital gains

Under the existing provisions, the long-term capital gains on listed equity shares, units etc. are liable to a maximum surcharge of 15%, while the other long-term capital gains are subject to a graded surcharge, which goes up to 37%. Given the disparity, it is now proposed to cap the surcharge on long-term capital gain arising on transfer of any capital asset at 15%.

Litigation management/Faceless assessment

In order to reduce repeated litigation, it is proposed that the income-tax department shall now be required to defer the filing of appeals for identical issue(s) pending before the jurisdictional High Court (HC) or the Supreme Court (SC) until the question of law is decided by jurisdictional HC or the SC.

Deduction of tax on benefit or perquisite in respect of a business or profession

It has been proposed that any person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession shall, before providing such benefit or perquisite be required to deduct the tax at a rate of 10% on the value or aggregate of value of such benefit or perquisite. No TDS is required to be deducted if the value of such benefit or perquisite does not exceed Rs 20,000 during the financial year.

Exemption provided in relation to Covid-19

Further to the press release by the finance ministry on June 25, 2021, exempting the expenditure incurred for treatment or sum paid on account of death due to Covid-19, necessary amendments have been proposed to the Income Tax Act to give effect to the same.

To conclude, while there were minimal changes in the Budget that impacted the individual taxation, the government, with long-term focus on compliance, digitisation, and ease of doing business, is hopeful that the Budget will give financial boost and benefit to the common man with more investments and development opportunities.

The writer is Tax Partner and India Mobility Leader, EY. Shanmuga Prasad, Tax Director, EY, also contributed to the article. Views are personal.