Loksabha Passes Finance Bill, 2022 after incorporating 39 Government Amendments

Lok Sabha passed the Finance Bill, 2022 on 25.03.2022 after incorporating 39 government amendments to the Finance Bill, 2022. The Bill was introduced on 1st February 2022 by Finance Minister Nirmala Sitaramna after presenting the Union Budget 2022. The Bill intends to give effect to the financial proposals of the Central Government for the financial year 2022-23.

The salient features of the Bill include:

- Maintenance of Books in digital mode

- Number of taxpayers has increased to 9.1 crore

- Taxation of virtual digital currency 

- IFSC in Gujarat is making steady progress and several global funds and insurance companies

- Faceless Assessment revamped

- Loss from one Virtual Digital Asset (VDA) cannot be set-off against income from another VDA

- ‘Transfer’ shall apply even if VDA is not held as a capital asset

- Recomputation of income due to claim of cess as business expenditure

- Cancellation provisions extended to ‘provisionally approved’ Trusts or institutions

The Bill passed by the Loksabha on 25.03.2022 has 39 amendments out of which 32 amendments are related to Income Tax Act, 1961 as compared to the original Finance Bill, 2022 which was introduced in the Lok Sabha on February 01, 2022.

Some of the replies given by the Finance Minister during the discussion related to various provisions of taxation contained in the Finance Bill, 2022 are reproduced below.

No change in tax rates: FM stated that there was no change in the rate of income tax. The government does not want to fund the post-pandemic recovery through any additional taxes. That is why last year and this year there is continuity in not bringing newer taxation. 

She further stated that at least 32 countries increased various tax rates during the pandemic by raising personal income tax, tax on corporate income; environmental related taxes; health related taxes were raised; or excise duties. They are no less absolutely developed countries, large countries like Germany, France, Canada, UK and Russia apart from very many smaller economies. All of them depended on increasing taxation to meet the demands of the COVID-19 pandemic and also the recovery requirements. 

Relief to middle class: FM iterated that individuals are not required to pay any tax if income is below Rs. 5 lakh due to rebate. Those who earn higher income also do not pay tax after availing tax savings deductions to bring the income below Rs. 5 Lakh.

For those who do not wish to avail exemption, the government came out with an alternative tax saving scheme where one can pay lesser tax.

Corporate tax reduction: On a question about the benefit of reduction in corporate tax rates in 2019, the FM stated that the reduction of tax has actually helped the economy, it has helped the Government, and it has also helped the companies.  The country is now seeing the positive impact. 

She further provided data to state that in spite of tax reduction and COVID-19, the government has collected corporate tax of Rs. 7.30 Lakh crore till date which was at Rs. 6.60 Lakh crore in the year 2018-19. So, the reduction in corporate tax has actually now given us the reward in spite of the intervening year being under COVID-19.

Progress of IFSC: On the question related to the IFSC, the FM stated that IFSC is a premier centre through which the global financial companies are coming to India. We are seeing a rapid change in terms of kind of usages through which IFSC is benefitting all of us. We have seen very good results. A number of 21 banks have got licenses. Total banking asset sizes have increased by more than 25 billion US dollars. Asset size alone has increased by 25 billion US dollars. Total banking transaction has crossed up to 156 billion US dollars. Two stock exchanges have also been opened with daily trading value of index derivatives of 13.14 billion US dollars and daily trade value of currency derivatives are at the level of 13 million US dollars. Commodity derivatives are at 174 million US dollars. So, the footfall, the extent of business, the coverage, and the kind of generation in the activity, all are very distinctive for all of us to see. More than 50 funds have registered themselves in IFSC. The amount committed by private equity and venture capital is about 3.8 billion US dollars. Hedge funds have committed 845 million US dollars and the total amount committed by the Alternative Investment Funds (AIFs) is to the extent of 4.6 billion US dollars. A number of 19 insurance companies have started operation in the IFSC and they have underwritten insurance premium of more than 300 million US dollars including intermediaries. So, we have seen the progress in the IFSC. She concluded that the fiscal concession which had been given has shown its tangible results in the IFSC more than adequately.

Virtual Digital Currency: On questions related to virtual digital currency, she made it clear that consultation is going on whether the government wants to regulate crypto fully or wants to regulate it to some extent or wants to totally ban it. After the consultation is concluded, the result will come out.

On imposing tax on it, she stated that a lot of transactions are happening in the front.  A lot of exchanges are happening, people are putting money, people are taking money, people are creating assets, and assets are being sold and bought. 

The Government made its position clear that it shall tax the money being generated out of it and that is why, the government has come out with the proposal to tax it at 30 per cent and the TDS has also been brought in. As always, TDS is more for tracking; it is not an additional tax, it is not a new tax, it is a tax which is going to help people to track it.

Increased number of taxpayers: The Finance Minister has stated that earlier, about 5 crore and odd people were paying taxes in 2014. It has almost increased to 9.1 crore people and that is because the government is able to find the money trail of people who are spending money but they do not pay even if they are expected to pay. TDS is always a legitimate way through which the government is tracking the transactions and, therefore, it is helpful to widen the tax base.

Faceless assessment: On questions being raised on frequent amendments to faceless assessments, the FM stated that the faceless assessment had been well received. People are relieved that they do not have to go to the offices. She justified the amendments saying that it is more because the government wants to ensure that there is no nuisance. She further added that amendment related to hearing through video conferencing is more for the facilitation.

Retrospective amendment on Surcharge and Cess: There was a question raised about the retrospective aspect of the surcharge on tax and cess on tax.

As per the Finance Minister, over some years people have treated Cess as their exemption and therefore, they think that it can be used for deleting that level of income from their taxable income. She emphasised that people have ‘misued’ it to reduce their taxable income.

She further asserted that the amendment with a retrospective effect has been brought more for clarity. That is not going to burden the taxpayer. The taxpayer has the option to approach and claim that this was shown as undisclosed income; and if the taxpayer comes, there is no penalty. The Local Commissioner of Income Tax will be able to reassess your income including that which has been otherwise shown as expenditure/business expenditure. And, on the income, as assessed, the taxpayer can pay up what is got to be paid legitimately as tax. There is no penalty if the taxpayer comes on his own.

She further added that unless we take it back to the time when this misuse has started, there will always be a hiatus, and that hiatus will lead to confusion. Some people will continue to benefit from that misuse, and others would have done it fairly. So, it is only for that explanatory purpose that retrospective aspect has been brought in.

The government amendments proposed in the Finance Bill, 2022 as passed by the Lok Sabha on 25.03.2022 are listed in the following table-

Sl No.	Text of Amendment	Clause No.
1	Page 20, after line 4, insert- '(a) in clause (12A), for the words in the written form or as printouts of data stored in", the words "in the written form or in electronic form or in digital form or as print-outs of data stored in such electronic form or in digital form or in shall be substituted;'.	3
2	Page 21, after line 5, insert- (i) in clause (4D), in the Explanation, in clause (c), in subclause (i), in this item for the words "non-residents; or”, the following shall be substituted, namely: - "non- residents: Provided that the condition specified in this item shall not `` apply where any unit holder or holders, being -nonresident during the previous year when such unit or units were issued, becomes resident under clause (1) or clause (1A) of section 6 in any previous year subsequent to that year, if the aggregate value and number of the units held by such resident unitholder or unitholders do not exceed five per cent of the total units issued and fulfill such other conditions as may be prescribed; or".	4
3	Page 27, line 6, after "approved", insert "or provisionally approved".	4
4	Page 29 for line 34, substitute- "thereof for that previous year. Explanation. - Where, on or after the 1st day of April, 2022 any fund or institution referred to in sub-clause (iv) or any trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in subclause (via) is notified under clause (46) of section 10; the approval or provisional approval granted to such fund or institution or trust or university or other educational institution or hospital or other medical institution shall become inoperative from the date of notification of such fund or institution or trust or university or other educational institution or hospital or other medical institution, as the case may be, under clause (46) of the said section:",	4
5	Page 30, for line 11, substitute 'section, be deemed to be the income of such fund or institution or trust or university or other educational institution or hospital or other medical institution of’.	4
6	Page 40, after line 4, insert- ‘(ii) in sub-clause (c), after the proviso occurring after item (B) and before the Explanation, the following proviso shall be inserted with effect from the 1st day of April, 2023, namely: - "Provided further that clauses (VI) and (VII) of the first proviso shall not apply where any sum of money or any property has been received by any person referred to in subsection (3) of section 13.";'.	16
7	Page 45, line 9, after "asset,", insert "notwithstanding anything contained in any other provision of this Act,"	28
8	Page 45, lines 19 and 20, for "(other than cost of acquisition)", substitute "(other than cost of acquisition, if any)".	28
9	Page 45, line 26, omit "other".	28
10	Page 45, after line 29, insert- ‘(3) For the purposes of this section, the word "transfer" as defined in clause (47) of section 2, shall apply to any virtual digital asset, whether capital asset or not.'	28
11	Page 45, line 38, for "specified income", substitute "specified income, notwithstanding anything contained in any other provision of this Act".	28
12	Page 52, line 33, for "two assessment years", substitute "any assessment year".	38
13	Page 53, for line 31, substitute- "regard: Provided also that if any person has sustained a loss in any previous year and has furnished a return of loss in the prescribed form within the time allowed under sub-section (1) and verified in the prescribed manner and containing such other particulars as may be prescribed, he shall be allowed to furnish an updated return where such updated return is a return of income: Provided also that if the loss or any part thereof carried forward under Chapter VI or unabsorbed depreciation carried forward under sub-section (2) of section 32 or tax credit carried forward under section 115JAA or under section 115JD is to be reduced for any subsequent previous year as a result of furnishing of return of income under this sub-section for a previous year, an updated return shall be furnished for each such subsequent year.”	38
14	Page 73, after line 31, insert- ‘(a) in sub-section (1), for the second proviso, the following proviso shall be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 2021, namely: — “Provided further that in respect of an order of assessment relating to the assessment year commencing on the— (i) 1st day of Apr11, 2019, the provisions of this sub-section shall have effect, as if for the words “twenty-one months”, the words “twelve months” had been substituted; (ii) 1st day of April, 2020, the provisions of this sub-section shall have effect, as if for the words “twenty-one months”, the words “eighteen months” had been substituted:”;’.	48
15	Page 75, after line 33, insert— ‘(a) in sub-section (1), after the fifth proviso, the following proviso shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2021, namely: — “Provided also that in a case where the last of the authorisations for search under section 132 or requisition under section 132A was executed during the financial year commencing on the 1st day of April, 2020 or in case of other person referred to in section 153 C, the books of account or document or assets seized or requisitioned were handed over under section 153C to the Assessing Officer having jurisdiction over such other person during the financial year commencing on the 1st day of April, 2020, the assessment in such cases for the assessment year commencing on the 1st day of April, 2021 shall be made on or before the 30th day of September, 2022.”;’.	49
16	New Clause 49 A Page 76, after line 20, insert— Amendment of Section 155. ‘49A. In section 155 of the Income-tax Act, after sub-section (17) and before the Explanation, the following sub-section shall be inserted, namely: — ‘(18) Where any deduction in respect of any surcharge or cess, which is not allowable as deduction under section 40, has been claimed and allowed in the case of an assessee in any previous year, such claim shall be deemed to be under-reported income of the assessee for such previous year for the purposes of sub-section (3) of section 270A, notwithstanding anything contained in subsection (6) of section 270A, and the Assessing Officer shall recompute the total income of the assessee for such previous year and make necessary amendment; and the provisions of section 154 shall, so far as may be, apply thereto, the period of four years specified in sub-section (7) of section 154 being reckoned from the end of the previous year commencing on the 1st day of April 2021: Provided that in a case where the assessee makes an application to the Assessing Officer in the prescribed form and within the prescribed time, requesting for recomputation of the total income of the previous year without allowing the claim for deduction of surcharge or cess and pays the amount due thereon within the specified time, such claim shall not be deemed to be under-reported income for the purposes of sub-section (3) of section 270A.’.’.	49A (New)
17	Page 77, line 30, after’ “sub-section (1)”, insert “, notwithstanding anything contained in sub-section (3) of section 253 or clause (a) of sub-section (2) of section 260A”.	52
18	Page 77, for lines 33 to 36, substitute— “prescribed within a period of one hundred and twenty days from the date of receipt of the order of the Commissioner (Appeals) or of the Appellate Tribunal, as the case may”.	52
19	Page 78, for lines 9 and 10,' substitute “Commissioner shall, notwithstanding anything contained in sub-section (3) of section 253 or clause (a) of sub-section (2) of section 260A, proceed in accordance with the provisions contained in sub-section (2) of section 253 or in clause (c) of.”	52
20	Page 78, line 20, after “Part B”, insert “and Part CC”.	52
21	Page 78, line 23, after “sixty days”, insert “to the Appellate Tribunal or one hundred and twenty days to the High Court as the case may be,”	52
22	Page 78, for lines 25 to 27, substitute — “other case is communicated to the Principal Commissioner or the Commissioner (having jurisdiction over the relevant case), in accordance with the procedure specified by the Board in this behalf.”.	52
23	Page 78, for lines 37 to 41, substitute — “sections (1) and (2), where there is succession, the assessment or reassessment or any other proceedings, made or initiated on the predecessor during the course of pendency of such succession, shall be deemed to have been made or initiated on the successor and all the provisions of”.	53
24	Page 79, for lines 1 to 9, substitute — ‘Explanation,- For the purposes of this sub-section, the tern “pendency” means the period commencing from the date of filing of application for such succession of business before the High Court or’.	53
25	Page 79, for lines 33 to 35, substitute— ‘Explanation. - In this section, the expressions- (i) “business reorganisation” means the reorganisation of business involving the amalgamation or de-merger or merger of business of one or more persons; (ii) “successor” means all resulting companies in a business reorganisation, whether or not the company was in existence prior to such business reorganisation.’.	54
26	Page 80, line 18, for “194R” substitute “194R(1)”	58
27	Page 80, line 32, after “ensure that tax”, insert “required to be deducted”.	58
28	Page 81, after line 5, insert— ‘(2) If any difficulty arises in giving effect to the provisions of this section, the Board may, with the previous approval of the Central Government, issue guidelines for the purpose of removing the difficulty. (3) Every guideline issued by the Board under sub-section (2) shall, as soon as may be after it is issued, be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the person providing any such benefit or perquisite.’	58
29	Page 81, line 14, for “a resident”, substitute “any resident”.	59
30	Page 81, line 28, after “ensure that tax”, insert “required to be deducted”	59
31	Page 82, for lines 5 to 8, substitute – ‘(4) Notwithstanding anything contained in section 194-O, in case of a transaction to which the provisions of the said section are also applicable along with the provisions of this section, then, tax shall be deducted under sub-section (1).”.	59
32	Page 82, omit lines 24 to 27	59
33	Page 93, line 8, for “(a)”, substitute “(i)”	93
34	Page 93, line 12, for “(b)”, substitute “(ii)”	93
35	Page 93, for lines 21 to 26, substitute- “135AA. (1) If a person publishes any information, that is furnished to customs by an exporter or importer under this Act, relating to the value or classification or quantity of goods entered for export from India, or import into India, along with the identity of the persons involved or in a manner that leads to disclosure of such identity, unless required so to do under any law for the time being in force or by specific authorisation of such exporter or importer, he shall be punishable with imprisonment”.	94
36	Page 93, for lines 29 to 31, substitute- “(2) Nothing contained in this section shall apply to— any publication made by or on behalf of the Central Government; (b) data sourced from any publication made by or on behalf of the Central Government for analysis of trends in India's international trade and dissemination thereof.”;	94
37	Page 94, line 35, after “the Fourth Schedule shall”, insert “, with effect from the 1st May, 2022,”;	98
38	Page 114, for line 20, substitute– “gains referred to in section 112A exceeding one lakh rupees”.	THE FIRST SCHEDULE
39	Page 146, lines 19 and 20, after “2903 43 00”, insert “2903 44 00, 2903 45 00”.	THE THIRD SCHEDULE

Download Finance Bill, 2022 (PDF) as passed by Loksabha on 25.03.2022

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