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BUDGET PROPOSALS FOR FY 2022-23
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UNION BUDGET 2022-23 AND PERSONAL FINANCE
PARTS OF FINANCE MINISTER'S BUDGET SPEECH DATED 01.02.2022 AFFECTING PERSONAL FINANCE
DATED ON 02.02.2022 : New Finance Minister Ms Nirmala Sitharaman presented fresh budget proposals to the parliament on 01.02.2022 . There are no changes in personal income tax slabs , rates and rebates . However there are certain changes that affect certain sections of people like state Government employees , cryptocurrency holders , Long term capital gains and who buy fuels like petrol & Diesel which is enhanced by Rs 2 / - per litre . Further new provisions allowing submission updated tax returns . This article enlists such measures through the extracts of FM's budget speech .
PARTS OF FM'S SPEECH AFFECTING PERSONAL FINANCE
TRUSTWORTHY TAX REGIME :
" The proposals in this budget, while continuing with our declared policy of stable and predictable tax regime, intend to bring more reforms that will take ahead our vision to establish a trustworthy tax regime. This will further simplify the tax system, promote voluntary compliance by taxpayers, and reduce litigation. "
UPDATED RETURNS ON PAYMENT OF ADDITIONAL TAX :
"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 22 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. "
Reduced Alternate minimum tax rate and Surcharge for Cooperatives
" Currently, cooperative societies are required to pay Alternate Minimum Tax at the rate of eighteen and one half per cent. However, companies pay the same at the rate of fifteen per cent. To provide a level playing field between co-operative societies and companies, I, propose to reduce this rate for the cooperative societies also to fifteen per cent.
I also propose to reduce the surcharge on co-operative societies from present 12 per cent to 7 per cent for those having total income of more than ` 1 crore and up to ` 10 crores. "
Tax relief to persons with disability .
The parent or guardian of a differently abled person can take an insurance scheme for such person. The present law provides for deduction to the parent or guardian only if the lump sum payment or annuity is available to the differently abled person on the death of the subscriber i.e. parent or guardian. There could be situations where differently abled dependents may need payment of annuity or lump sum amount even during the lifetime of their parents/guardians. I propose to thus allow the payment of annuity and lump sum amount to the differently abled dependent during the lifetime of parents/guardians, i.e., on parents/ guardians attaining the age of sixty years
TRUSTWORTHY TAX REGIME :
" The proposals in this budget, while continuing with our declared policy of stable and predictable tax regime, intend to bring more reforms that will take ahead our vision to establish a trustworthy tax regime. This will further simplify the tax system, promote voluntary compliance by taxpayers, and reduce litigation. "
UPDATED RETURNS ON PAYMENT OF ADDITIONAL TAX :
"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 22 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. "
Reduced Alternate minimum tax rate and Surcharge for Cooperatives
" Currently, cooperative societies are required to pay Alternate Minimum Tax at the rate of eighteen and one half per cent. However, companies pay the same at the rate of fifteen per cent. To provide a level playing field between co-operative societies and companies, I, propose to reduce this rate for the cooperative societies also to fifteen per cent.
I also propose to reduce the surcharge on co-operative societies from present 12 per cent to 7 per cent for those having total income of more than ` 1 crore and up to ` 10 crores. "
Tax relief to persons with disability .
The parent or guardian of a differently abled person can take an insurance scheme for such person. The present law provides for deduction to the parent or guardian only if the lump sum payment or annuity is available to the differently abled person on the death of the subscriber i.e. parent or guardian. There could be situations where differently abled dependents may need payment of annuity or lump sum amount even during the lifetime of their parents/guardians. I propose to thus allow the payment of annuity and lump sum amount to the differently abled dependent during the lifetime of parents/guardians, i.e., on parents/ guardians attaining the age of sixty years
Parity between employees of State and Central government
" At present, the Central Government contributes 14 per cent of the salary of its employee to the National Pension System (NPS) Tier-I. This is allowed as a deduction in computing the income of the employee. However, such deduction is allowed only to the extent of 10 per cent of the salary in case of employees of the State government. To provide equal treatment to both Central and State government employees, I propose to increase the tax deduction limit from 10 per cent to 14 per cent on employer’s contribution to the NPS account of State Government employees as well. "
Scheme for taxation of virtual digital assets .
There has been a phenomenal increase in transactions in virtual digital assets. The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime. Accordingly, for the taxation of virtual digital assets,
1. I propose to provide that any income from transfer of any virtual digital asset shall be taxed at the rate of 30 per cent.
2. No deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition.
3. Further, loss from transfer of virtual digital asset cannot be set off against any other income.
4. Further, in order to capture the transaction details, I also propose to provide for TDS on payment made in relation to transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold.
5. Gift of virtual digital asset is also proposed to be taxed in the hands of the recipient.
Rationalization of Surcharge : TO BE CAPPED AT 15 % for LTCG
In the globalized business world, there are several works contracts whose terms and conditions mandatorily require formation of a consortium. The members in the consortium are generally companies. In such cases, the income of these AOPs has to suffer a graded surcharge upto 37 per cent, which is a lot more than the surcharge on the individual companies. Accordingly, I propose to cap the Surcharge of these AOP’s at 15 per cent. Further, the long-term capital gains on listed equity shares, units etc. are liable to maximum surcharge of 15 per cent, while the other long term capital gains are subjected to a graded surcharge which goes up to 37 per cent. I propose to cap the surcharge on long term capital gains arising on transfer of any type of assets at 15 per cent. This step will give a boost to the start up community and along with my 25 proposal on extending tax benefits to manufacturing companies and start ups re affirms our commitment to Atma Nirbhar Bharat.
Other Notable proposals Made by FM
OTHER NOTABLE ANNOUNCEMENTS :
Tariff measure to encourage blending of fuel - unblended to cost Rs2 / litre more
. Blending of fuel is a priority of this Government. To encourage the efforts for blending of fuel, unblended fuel shall attract an additional differential excise duty of ` 2/ litre from the 1st day of October 2022.
Clarification in relation to ‘Health and Education cess’ as business expenditure
The income-tax is not an allowable expenditure for computation of business income. This includes tax as well as surcharges. The ‘Health and Education Cess’ is imposed as an additional surcharge on the taxpayer for funding specific government welfare programs. However, some courts have allowed ‘Health and education ‘cess’ as business expenditure, which is against the legislative intent. To reiterate the legislative intent, I propose to clarify that any surcharge or cess on income and profits is not allowable as business expenditure.
Rationalizing TDS Provisions
. It has been noticed that as a business promotion strategy, there is a tendency on businesses to pass on benefits to their agents. Such benefits are taxable in the hands of the agents. In order to track such transactions, I propose to provide for tax deduction by the person giving benefits, if the aggregate value of such benefits exceeds ` 20,000 during the financial year.
TO READ COMPLETE SPEECH , CLICK HERE
INCOME TAX SLABS / RATES FOR FY 2022-23
There is no change proposed in tax SLABS / RATES for the year fy 2022-23 . The Rates / slabs which are already prevalent in year 2021-22 can be used to reduce the taxable income for the financial year 2022-23 also .
For the tax slabs / rates of FY 21-22 , CLICK HERE
There is no change proposed in tax SLABS / RATES for the year fy 2022-23 . The Rates / slabs which are already prevalent in year 2021-22 can be used to reduce the taxable income for the financial year 2022-23 also .
For the tax slabs / rates of FY 21-22 , CLICK HERE
FOR SALARIED , MIDDLE CLASS PERSONS AND PENSIONERS
There is no change proposed in tax rebates for the year fy 2022-23 . The following rebates which are already prevalent in year 2021-22 can be used to reduce the taxable income for the financial year 2022-23 also :
SENIOR CITIZENS can use following rebates if their taxable income is more than Rs 5.00 lakhs and save tax on another Rs 5.00 lakhs , provided they opt for Old tax regime .
SENIOR CITIZENS can use following rebates if their taxable income is more than Rs 5.00 lakhs and save tax on another Rs 5.00 lakhs , provided they opt for Old tax regime .
TYPE OF INCOME / INVESTMENT /EXPENSES |
MAXIMUM REBATE ALLOWED IN RS |
INCOME TAX SECTION |
STANDARD DEDUCTION ON PENSION / SALARY |
50,000 |
16 |
INTEREST ON FIXED DEPOSIT FROM BANKS / POST OFFICES |
50,000 |
80 TTB |
INSURANCE PREMIA / PPF / POST OFFICE DEPOSITS / TUITION FEES ETC |
1,50,000 |
80C |
MEDICAL INSURANCE INCLUDING PARENTS |
50,000 + 50,000 |
80D |
INTEREST ON HOUSING LOANS |
2,00,000 |
24 |
Other than Senior Citizens can utilise following tax rebates to reduce the tax liability :
TYPE OF INCOME / INVESTMENT / EXPENSES |
MAXIMUM REBATES ALLOWED IN RS |
INCOME TAX SECTION |
STANDARD DEDUCTION ON SALARY / PENSION |
50,000 |
16 |
INTEREST ON SAVINGS BANK |
10,000 |
80TTA |
INSURANCE PREMIA / TUITION FEES / PPF / TUITION FEES |
1,50,000 |
80C |
MEDICAL INSURANCE FOR SELF AND PARENTS |
25,000 + 50,000 |
80D |
INTEREST ON HOUSING LOANS |
2,00,000 |
24 |
NATIONAL PENSION SCHEME |
50,000 |
80CCD |
So technically a person other than senior citizen can pay no income tax if he utilises the above rebates which will off-set Rs 5,35,000 of his income making total 10,35,000 income non-taxable .
EDITOR'S NOTE :
1. If taxable income crosses even by a rupee above Rs 5.00 lakhs , one will not be eligible for rebate under section 87A and he has to continue tax payment as hitherto .
2. Though one can utilise the rebates quoted above , all may not be able to take adavntage of all the rebates and hence there will be limitations on the utilisation .
3. One can try to use the maximum possible rebates to bring himself / herself to no tax bracket , but it may put strain on their lifestyle and spending capacity .
1. If taxable income crosses even by a rupee above Rs 5.00 lakhs , one will not be eligible for rebate under section 87A and he has to continue tax payment as hitherto .
2. Though one can utilise the rebates quoted above , all may not be able to take adavntage of all the rebates and hence there will be limitations on the utilisation .
3. One can try to use the maximum possible rebates to bring himself / herself to no tax bracket , but it may put strain on their lifestyle and spending capacity .
TAX PLANNING FOR FY 2021-22 ( AY 2022-23 )
Comprehensive Article on Income tax changes in Rules, Rates , Slabs , Rebates and Estimation
CLICK HERE TO READ
Comprehensive Article on Income tax changes in Rules, Rates , Slabs , Rebates and Estimation
CLICK HERE TO READ
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SMALL FINANCE BANKS PAYMENT BANKS
UNIFIED PAYMENT INTERFACE BHARAT BILL PAYMENT SYSTEM
BHIM APP
e-INSURANCE Account ( eIA ) SWIFT
