EconomyBudget 2022: Taxpayers got only thanks and gratitude, will...

Budget 2022: Taxpayers got only thanks and gratitude, will be able to rectify mistakes in two years

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Budget 2022: 

Tuesday, Nirmala Sitharaman presented the Union Budget 2022-23. Taxpayers have two years to update their returns. The State Government decided to deduct 14% of employees’ contributions to the National Pension Scheme from their tax.

Nirmala Sitharaman presented the general budget for 2022. The income tax slabs have not been changed nor have any major exemptions been granted. In a big relief to taxpayers, they are allowed to update their returns every two years. In addition to this, state government employees will receive a 14% tax exemption on their contributions to the National Pension Scheme.

There has been no change to slabs

In the budget, there are no changes to tax slabs. The basic exemption limit for individual taxpayers last changed in 2014. Then Finance Minister Arun Jaitley raised the tax-free income limit from Rs 2 lakh to Rs 2.5 lakh in the first budget of Prime Minister Narendra Modi’s government. The tax-free income limit for senior citizens has been raised from Rs 2.5 lakh to Rs 3 lakh. Since then, the limit has not been increased.

There will be two options available to taxpayers

A new tax deposit option was announced by Finance Minister Sitharaman in 2020. As a result, those who do not wish to take advantage of tax exemptions and relief will have their tax rates reduced. It was a simplification of income tax, in a sense. Taxes were based on income. Tax exemptions under investment and other necessary expenses were abolished. There were two options available to taxpayers. The tax exemption can be obtained by staying in the old regime, or the tax can be paid without exemption under the new regime.

The following are the income tax slabs

  • The first Rs 2.5 lakh of income is tax-free under both options. The tax rate for income between Rs 2.5 lakh and Rs 5 lakh is 5%. However, there is an exemption of up to Rs 12,500 under section 87A of the Income Tax Act. For both options, no tax is due on income up to Rs 5 lakh.
  • The new option imposes a 10% tax on income of Rs 5 to 7.5 lakh and a 15% tax on income of Rs 7.5 lakh to 10 lakh, while the old option imposed a 20% tax on income of Rs 5 to 10 lakh.
  • In the old option, income above Rs 10 lakh is taxed at 30%. In the new system, there is a tax of 20% on income between Rs 10 and 12.5 lakh and 25% on income between Rs 12.5 lakh and 15 lakh. Income over Rs 15 lakh is taxed at 30%. A cess and surcharge increase the effective tax rate.

Return update permission

In the budget, the major announcement is the permission to update returns every two years. A taxpayer who has made a mistake in declaring his annual income has two years to rectify it. To do so, he must update his return. This will help reduce litigation. During the update, tax must be paid. According to Sitharaman, if the department finds out that the taxpayer committed any error, it will have to go through a long process of litigation. The proposal will help increase mutual trust between taxpayers and the department. If the taxpayer made a mistake on the return, he can correct it himself.

 Alternate minimum tax rate and reduction of surcharge for cooperatives

Currently, cooperative societies pay an alternate minimum tax of 18% and 1.5%. However, companies pay it at a rate of 15%. In order to create uniform rules for cooperative societies and companies, the cooperative tax has been reduced to 15%. The surcharge on cooperative societies with incomes between Rs 1 and 10 crores has also been reduced from 12 percent to 7 percent.

Tax relief for the handicapped

Parents and guardians will be able to take advantage of an insurance scheme for the disabled. Currently, there is only a tax exemption on the lump sum amount received on the death of a parent or guardian. It may also happen that a person with disability gets a lump-sum amount regardless of whether his parent or guardian is alive, and that amount may need to be exempt from tax. The new provision states that the disabled will receive tax relief until the parent or guardian reaches the age of 60.

State government employees are relieved

Currently, the central government contributes 14% of the salaries of its employees to the National Pension Scheme (NPS). Employees can claim this deduction on their income tax returns. Employees of state governments, however, get a 10% tax exemption only. The federal government has announced a 14% tax relief on the contributions of state government employees to the NPS account, eliminating this discrimination.

Virtual property is subject to a 30% tax

According to the new proposal, virtual digital assets (crypto) will be taxed at 30%. Other than the expenses incurred on the purchase of these properties, no exemption will be granted. TDS of 1% will also apply to the transfer of these properties. Virtual currency gifts will also be taxed.

Some important facts related to budget 2022-23

Direct Tax Proposal:

  •  New updated returns within 2 years after Assessment Year with additional tax
  •  MAT reduced for cooperatives @ 15% from current 18.5%
  •  Surcharge on Copratives reduced to 7.5% between 1 cr to 10 cr
  • Higher deduction for differently abled deduction
  • NPS deduction for state govt employees upto 14% from 10%
  • Start up tax incentives extended to 1 more year
  • Newly incorporated manufacturing unit @ 15% extension of manufacturing date by 1 year
  • scheme for taxation of virtual digital assets @ 30%, no deduction only cost of acquisition, no set off, tds proposed@1%, gift also taxed
  • litigation management no multi year appeal on same question of law
  • rationalizations of charges in case of consortium finanace
  • long term capital gains surcharge capped @ 15% for all assets.
  • any cess on income is not allowable exp.
  • No set off of losses will be allowed against any income found during search

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