Union Budget, 2022

The Union Budget lays down the initiatives to be taken by the Government in the upcoming financial year relating to the allocation of funds for various government projects, to different departments and the changes to direct and indirect tax.

In the Union Budget presented on 1^st February, 2022, I’ll be covering only the points relating to Direct tax. If you want to read the whole budget speech, please go to the following link: https://www.indiabudget.gov.in/doc/budget_speech.pdf

Full Finance Bill: https://www.indiabudget.gov.in/doc/Finance_Bill.pdf

Direct Tax salient points:

• Proposal of a new Updated Return allowing taxpayers to file an error free return (for those who have made an error in filing the original return) on payment of additional tax within 2 years from the end of the relevant assessment year.
• Alternate Minimum Tax to be paid by a Cooperative Society reduced from 18.5% to 15%. Surcharge on cooperative society to be reduced from 12% to 7%, for those whose total income is more than 1 Crore and up to 10 Crores
• Differently abled dependents can now receive the payment of annuity and the lump sum amount during the lifetime of their parent/ guardian i.e., when they attain the age of 60 years. Annuity and lump sum amount are on the insurance which was taken for the differently abled dependent by their parent/ guardian. Earlier it was available to the differently abled dependent on the death of subscriber i.e., parent/ guardian.
• Currently, the Central Government contributes 14% of the salary of employee to the National Pension Scheme (NPS) Tier-I and this is allowed as a deduction for computing the total income of employee. Now, the State Government employees will also receive a contribution of 14% from the State Government which earlier used to be 10%
• Tax incentives will be provided to eligible startups established up to 31.3.2023, which was earlier till 31.3.2022. They will be getting a tax incentive for 3 consecutive years.
• A concessional tax rate of 15% was introduced for newly incorporated domestic manufacturing companies. The last date for commencement of manufacturing or production under section 115BAB has been extended by one year i.e., from 31.3.2023 to 31.3.2024
• Income of a Non-resident from offshore derivative instruments, or over the counter (OTC) derivatives issued by an offshore banking unit, income from royalty and interest on account of lease of ship and income received from Portfolio Management Services in International Financial Services Centre (IFSC) shall be exempt from tax, subject to certain conditions.
•  Association of Persons (AOP’s) which are formed as a result of the terms and conditions laid down to carry out a works contract service will bear a maximum Surcharge of 15%, which was earlier 37%. Long term capital gains on transfer on any kind of asset will be subject to a maximum surcharge of 15%
• No set off shall be provided of any loss against undisclosed income detected during search and survey operations. Earlier, it’s treatment was ambiguous and people used to set off the losses of undisclosed income to evade taxes.
• Businesses often have a promotion strategy of passing on benefits to its agents which are taxable in the hands of agents. Just to provide a tracking mechanism for the same, the provider of such benefits will have to make a tax deduction if the aggregate value of such benefits exceeds 20,000 in a financial year.

 These were the brief points relating to Direct Taxes which were read out by our Finance Minister, Mrs. Nirmala Sitharaman during the Union Budget yesterday. There is one more very important issue that was introduced in the Union Budget, 2022, taxation of Virtual Digital Assets. I will be posting a separate blog for the same explaining scope of Virtual Digital Asset and its taxability in India.