Income Tax : Highlights of the budget 2022-23

The Union Budget seeks to complement macro-economic level growth with a focus on micro-economic level all inclusive welfare. The Union Minister for Finance & Corporate Affairs, Smt Nirmala Sitharaman tabled the Union Budget 2022-23 in Parliament today.The key highlights of the Income Tax budget are as follows:

PART B

DIRECT TAXES

To take forward the policy of stable and predictable tax regime:

• Vision to establish a trustworthy tax regime.
• To further simplify tax system and reduce litigation.

Introducing 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.

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 total income of more than Rs 1 crore and up to Rs 10 crores.

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.

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 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 31^st March, 2023 to 31^st March, 2024.

Scheme for taxation of virtual digital assets

• Specific tax regime for virtual digital assets introduced.
• Any income from transfer of any virtual digital asset 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 cost of acquisition.
• Loss from transfer of virtual digital asset 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 asset at the rate of 1 per cent of such consideration above a monetary threshold.
• Gift of virtual digital asset also to be taxed in the hands of the recipient.

Litigation Management

• In cases where question of law is identical to the one pending in 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 lease of ship.
  • Income received from portfolio management services in IFSC.

Rationalization of Surcharge

• Surcharge on AOPs (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 start up community.

Health and Education Cess

• Any surcharge or cess on income and profits 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.
• Tax deduction provided to person giving benefits, if the aggregate value of such benefits exceeds Rs 20,000 during the financial year.