Budget 2022: Top Changes In Personal Tax

Budget 2022 focuses on standardising tax provisions and reducing overlapping compliances under various laws. While the budget kept income tax unchanged, some proposals will benefit sections of taxpayers. Let us look at key Budget 2022 tax proposals..1. New policy on tax return: To encourage voluntary compliance and reduced litigation, a new concept of Updated Return has been introduced. Taxpayers can file updated return to voluntarily disclose income; it was either under-reported or not reported at all in return filings. The updated return can be filled within two years from the end of the assessment year, subject to certain conditions. An additional tax of 25% or 50% of the tax and interest due on the additional income being reported would be payable on such income..2. Tax on transfer of digital assets: Transactions in virtual digital currencies and assets have seen an upswing in recent years and now there is a mechanism for taxing the income from such transactions. Any income from the transfer of virtual digital assets will be taxed at 30%. Only the cost of acquisition of such an asset will be allowed as a deduction while calculating the taxable income..For a transparent tax regime, TDS at the rate of 1% on such transfers has been proposed. Also, for being gifted such assets, the recipient will be taxed. This provides certainty to a large section of individual taxpayers who have invested in digital currency, though a lower rate of tax would have been welcome.. 3. Capping of rate of surcharge on long term capital gains: As per the existing provisions, long-term capital gains on listed equity shares, equity oriented mutual fund units, etc. are liable to maximum surcharge of 15%, while the other long term capital gains are subject to a graded surcharge which may go up to 37%. Budget 2022 has proposed capping of surcharge rate at the rate 15% in case of all long-term capital gains. This will benefit taxpayers in higher income brackets who were earlier liable to surcharge at the rate of 25% or 37% on such gains. 4. Relief to those with disability: The present law provides for deduction to a taxpayer any insurance policy taken out for a disabled dependent, only if the lumpsum payment or annuity is available to the disabled person on the death of the taxpayer. It is proposed to extend the deduction with respect to such scheme as well where the lumpsum or annuity is receivable by the taxpayer upon attaining age of sixty years. 5. Tax exemption for COVID-related spend reimbursed by employer: Any sum paid by the employer for any spending by an employee on the medical treatment of any illness relating to COVID-19 will not be considered a taxable perquisite. Important to note that the press release to this effect had been announced in June 2021 and an amendment in tax laws were awaited. 6. Rationalisation of NPS provisions: To bring parity with central government employees, the benefit of deduction u/s 80C for employer's contribution to NPS up to 14% of salary has been extended to state government employees as well. The exemption limit for employer contribution to NPS in case of employees in private sector remains at 10%. .Additional inputs from Rajashree Sarna, Associate Director.(Disclaimer: These are the personal opinions of the author.)

Budget 2022: Top Changes In Personal Tax

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