Union Budget 2022-23: Measures on Direct Taxes

Finance Minister Nirmala Sitharaman today while presenting the Union Budget 2022-23 talked about direct taxes as part of her Budget Speech. She also thanked the taxpayers of this country and said that they have contributed immensely.

To take forward the policy of a stable and predictable tax regime she talked about a vision to establish a trustworthy tax regime and further simplify the tax system and reduce litigation.

Here is a highlight of the announcement that the Union Finance Minister made on India's direct taxation regime in her Budget Speech 2022-23:

Introduction new 'Updated return'

♦    Provision to file an Updated Return on payment of additional tax.

♦    Will enable the assessee to declare income missed out earlier.

♦    Can be filed within two years from the end of the relevant assessment year.

Tax relief to persons with disability

♦    Payment of annuity and lump sum amount from insurance scheme to be allowed to differently-abled dependent during the lifetime of parents/guardians, i.e., on parents/ guardian attaining the age of 60 years.

Parity in National Pension Scheme Contribution

♦    Tax deduction limit increased from 10 per cent to 14 per cent on employer's contribution to the NPS account of State Government employees.

♦    Brings them at par with central government employees.

♦    Would help in enhancing social security benefits.

Cooperative societies

♦    Alternate Minimum Tax paid by cooperatives brought down from 18.5 per cent to 15 per cent.

♦    To provide a level playing field between cooperative societies and companies.

♦    Surcharge on cooperative societies reduced from 12 per cent to 7 per cent for those having a total income of more than Rs 1 crore and up to Rs 10 crores.

Incentives for Start-ups

♦    Period of incorporation extended by one year, up to 31.03.2023 for eligible start-ups to avail tax benefit.

♦    Previously the period of incorporation was valid up to 31.03.2022.

Incentives under concessional tax regime

♦    Last date for commencement of manufacturing or production under section 115BAB extended by one year i.e., from 31st March 2023 to 31st March 2024.

Scheme for taxation of virtual digital assets

♦    The specific tax regime for virtual digital assets is introduced.

♦    Any income from the transfer of any virtual digital asset is to be taxed at the rate of 30 per cent.

♦    No deduction in respect of any expenditure or allowance to be allowed while computing such income except the cost of acquisition.

♦    Loss from the transfer of virtual digital assets cannot be set off against any other income.

♦    To capture the transaction details, TDS to be provided on payment made in relation to transfer of virtual digital assets at the rate of 1 per cent of such consideration above a monetary threshold.

♦    Gift of virtual digital assets also to be taxed in the hands of the recipient.

Litigation Management

♦    In cases where a question of law is identical to the one pending in the High Court or Supreme Court, the filing of appeal by the department shall be deferred till such question of law is decided by the court.

♦    To greatly help in reducing repeated litigation between taxpayers and the department.

Tax incentives to IFSC

♦    Subject to specified conditions, the following to be exempt from tax

♦    Income of a non-resident from offshore derivative instruments.

♦    Income from over-the-counter derivatives issued by an offshore banking unit.

♦    Income from royalty and interest on account of the lease of the ship.

♦    Income received from portfolio management services in IFSC.

Rationalization of Surcharge

♦    Surcharge on AOPs (a consortium formed to execute a contract) capped at 15 per cent.

♦    Done to reduce the disparity in surcharge between individual companies and AOPs.

♦    Surcharge on long term capital gains arising on transfer of any type of assets capped at 15 per cent.

♦    To give a boost to the startup community.

Health and Education Cess

♦    Any surcharge or cess on income and profits is not allowable as business expenditure.

Deterrence against tax-evasion

♦    No set-off, of any loss to be allowed against undisclosed income detected during search and survey operations.

Rationalizing TDS Provisions

♦    Benefits passed on to agents as business promotion strategy taxable in hands of agents.

♦    A tax deduction is provided to the person giving benefits if the aggregate value of such benefits exceeds Rs 20,000 during the financial year.