Finance Minister Nirmala Sitaraman presented her fourth Union Budget for the FY 2022-23 on 1st February 2022 which is followed by the Finance Bill, 2022.
The Finance Bill, 2022 proposed to amend various provisions of the Income-tax Act, 1961 (‘Act’) which are related to personal taxation or which impacts tax behaviour of individuals or HUF or non-corporate assessees.
Certain new provisions are also proposed to be introduced in the Act which affects personal taxation.
The Changes or Amendments which impacts Personal Taxation are outlined below-
Introducing filing of ‘Updated Returns’
Section 139 of the Act is related to the provisions for filing Income Tax returns by the taxpayers. Section 139(4) of the Act facilitates the filing of a belated return after the expiry of the due date. Section 139(5) of the Act provides the taxpayer with an opportunity to revise the return filed under sub-section (1) or sub-section (4) of section 139 in case of any omission or wrong statement, after the due date.
As per the amended provisions of section 139 as introduced by the Finance Act, 2021, no belated or revised return can be filed after the 31st Day of December of the Assessment Year.
In case any assessee has committed omissions or any mistakes in correctly estimating their income, a new provision section 139(8A) is introduced 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.
However, one needs to pay an additional tax to file an ‘updated return’ over and above the normal tax that the assessee has to pay on his total income.
It is proposed that additional tax equal to 25% of the unpaid tax on additional income is payable if the updated return is filed within 1 year. This will go up to 50% if the updated return is filed after 1 year.
More other provisions are also made with respect to updated returns which will be discussed in detail in another article on this topic.
Tax relief on Annuity/Lumpsum payment to person with disability
Section 80DD allows a deduction to a resident individual for depositing an amount into an insurance scheme if the scheme pays an annuity or lump sum amount to the beneficiary who is a disabled dependant of the individual in the event of death of such individual.
No such deduction will be allowed if the scheme provides for payment of the annuity or lump sum amount to the beneficiary who is a disabled dependant of the individual during the lifetime of such individual.
Finance Bill, 2022 proposed to amend section 80DD to provide that deduction will also be allowed where the scheme pays annuity or lump sum amount to the beneficiary who is a disabled dependant of the individual during the lifetime of the individual on attaining 60 years of age of the individual and the individual discontinues the payment of contribution or premium to the scheme.
Increase in deduction for NPS Contribution for State Government Employees
In order to bring parity between employees of state government and central government with respect to deduction for contribution to NPS, section 80CCD is proposed to be amended to allow a higher rate of 14% deduction to state government employees too.
Under the existing provisions of the Act, any contribution by the Central Government or any other employer to the account referred to in section 80CCD of the Act (NPS account), shall be allowed as a deduction to the assesses in the computation of his total income, if it does not exceed 14% of his salary where such contribution is made by the Central Government. This limit is presently 10% of his salary where such contribution is made by any other employer.
In order to ensure that the State Government employees also get a full deduction of the enhanced contribution by the State Government, it is proposed to increase the limit of deduction under section 80CCD of the Act from the existing ten per cent to fourteen per cent in respect of contribution made by the State Government to the account of its employee.
However, private-sector employees shall continue with a 10% deduction.
This increased deduction for NPS contribution by the State Government shall be available with retrospective effect from AY 2020-21.
TDS on Immovable Property on Stamp Duty
Section 194-IA of the Act provides for deduction of tax (TDS) on payment of consideration on transfer of certain immovable property other than agricultural land if the amount of consideration exceeds Rs. 50 Lakh and the seller is a resident.
The existing provisions required deduction of tax or TDS on the basis of actual consideration being paid to the resident seller of the immovable property. There is no reference to the stamp duty value adopted by the authority for the purpose of payment of stamp duty.
Section 194-IA proposed to be amended by the Finance Bill, 2022 to provide that in case of transfer of an immovable property (other than agricultural land), TDS is to be deducted at the rate of 1% of such sum paid or credited to the resident or the stamp duty value of such property, whichever is higher.
In case the consideration paid for the transfer of immovable property and the stamp duty value of such property are both less than fifty lakh rupees, then no tax is to be deducted under section 194-IA.
Exemption of amount received for medical treatment of COVID-19 and on account of death due to COVID-19
In case an employee receives money from employer: Any amount received by an employee from his employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family in respect of any illness relating to COVID-19 shall not be treated as “perquisite” under section 17(2). Thus, such receipt of the amount shall not be subject to tax as ‘Salary’ income.
In case of any other person, any sum of money received by an individual, from any person, in respect of any expenditure actually incurred by him on his medical treatment or treatment of any member of his family, in respect of any illness related to COVID-19 shall not be the income of such person under section 56(2)(x).
Amount received by family member on death due to COVID-19: Any amount received by a member of the family of a deceased person, from the employer of the deceased person (without limit), or from any other person or persons to the extent that such sum or aggregate of such sums does not exceed Rs. 10 Lakh, where the cause of death of such person is illness relating to COVID-19 and the payment is, received within 12 months from the date of death of such person shall not be the income of such person.
Surcharge on Lon Term Capital gains Capped at 15%
The long-term capital gains (LTCG) on listed equity shares, units etc. are liable to a 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. It is proposed to cap the surcharge on long term capital gains arising on the transfer of any type of assets and chargeable to tax under section 112 at 15 per cent.
Tax on virtual digital assets (VDA) or Cryptocurrency
It is proposed that any income from transfer of any virtual digital asset (which includes cryptocurrency) shall be taxed at a flat rate of 30%.
No deduction in respect of any expenditure or allowance shall be allowed while computing such income except the cost of acquisition.
Further, loss from transfer of virtual digital asset cannot be set off against any other income. This is proposed in new section 115BBH.
Hence, in a financial year if you have profit, pay tax @ 30%. In case of loss, no carry forward is allowed.
TDS on payment for transfer of virtual digital assets (VDA): Effective from 1st July 2022, it is proposed to provide for TDS on payment made in relation to transfer of virtual digital asset at the rate of 1% of such consideration above a monetary threshold which is given below:
This is proposed in Section 194S.
VDA to be taxed as Gift: It is also proposed to amend section 56(2)(x) to provide for the taxation of the gift of virtual digital asset in the hands of the recipient.
Other related articles on Budget 2022
Finance Minister Presents Finance Bill 2022 after Union Budget 2022 in Loksabha
Download Finance Bill, 2022 (PDF) as introduced in Loksabha
Download Memorandum Explaining the Provisions in the Financial Bill 2022
Income Tax announcements in Budget Speech: Union Budget 2022
New Income Tax Slab Rates after Union Budget 2022
Changes in Personal Taxation by Union Budget 2022
0 Comments