The finance minister presented the much-awaited Union Budget on 1st Feb 2022.While there has been no change in the tax slab, this time the focus appeared to be more on being a curator, providing stability to taxpayers and encouraging voluntary compliance.
However, there were a few proposals which would impact the middle class and on the personal taxation front which we are highlighting as follows:
Reduction of Surcharge on long term capital gains
The rate of surcharge on long term capital gains from any long-term capital asset has now been capped at 15%.The capping was earlier applicable only on long term capital gains from listed securities i.e., u/s 112A.However, the same was not applicable for other LTCG i.e., LTCG taxable u/s 112 like that arising from sale of unlisted securities, property, etc.The surcharge in these cases went upto 37% in case of LTCG over Rs 2 crore.This may result in a saving of 2% – 4% in LTCG taxes depending upon the value of sale of your property.
Filing updated income tax return within 2 years in case you forget to report any income
The finance minister has proposed to introduce a new provision to enable the taxpayer to file an updated return which will give an opportunity to report additional income which he may have missed to report inadvertently in the original tax return.While individual taxpayers have the avenue of revising their tax returns in a limited window of five months from the due date of filing of tax return, the updated return can be filed within a period of two years from the end of relevant assessment year.
Taxation of virtual digital assets (Crypto Currencies)
It is proposed to introduce new provisions for taxation of income from transfer virtual digital assets.Any income from transfer of virtual digital assets would be taxed at the rate of 30%.
No deductions for any expenditure is permitted except the cost of acquisition.Further, loss from such transactions cannot be set off against any other income.Gift of digital assets would be taxable in the hands of recipients.In order to track transactions of digital assets, TDS at 1% on sale considerations would be applicable on payments subject to certain threshold.
With the increase in transaction and popularity of virtual digital assets, this would bring clarity on taxation of virtual digital assets like crypto currency.It would help Millennials especially, who invest in crypto currencies and now who can regularize payment of their taxes on such transactions.
Exemption of Amount received for medical treatment and on account of death due to Covid-19
Exemption of up to Rs 10 lakh in aggregate for assistance received from any other person for medical treatment or for ex gratia received for the deceased.
Further, any Amounts received from employer for medical treatment or as ex gratia for the deceased shall be exempt.It has been clarified through provisions that such payment has to be received within 12 months from the date of death to qualify for exemption.These amendments will take effect retrospectively from 1st April, 2020 and will accordingly apply in relation to the earlier years also.
Relief to the releasing of Annuity under section 80DD for the differently abled
Currently, the deduction to resident individuals and HUF under Section 80DD is allowed only with regard to any amount paid under a scheme issued by LIC or any other insurer and the scheme provides for payment of annuity or lump sum only in case of death of the subscriber (Parent/Guardian) to the dependent.However, in some cases, the person with a disability may need payment of annuity or lump sum during the lifetime of the parent and guardians also.Hence, in order to remove such genuine hardship, it has been proposed to allow deduction during the lifetime of the parent/guardian upon attaining the age of 60 years.
Incentive to NPS (National Pension System) subscribers for state government employees
Limit for deduction of tax was increased from 10 percent to 14 percent on employers’ contribution to the National Pension System (NPS) account of the state government employees.The decision has been taken to bring in parity between the state as well as central government employees and enhance their social security benefits, the finance minister announced.
(By Vivek Jalan, Partner, Tax Connect Advisory)
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