Budget always comes up with something new, be it new provisions or amendments in old and deletion of some of the existing ones. Budget affects every area of finance and tax. Let us check the summarised highlights of the each area of income tax and indirect tax.
INCOME TAXES
1. Health and Education Cess
From now on any surcharge or cess on income and profits will not allowable as business expenditure. Many judgements were given to include these expenses under business.
2. Deterrence against tax-evasion
If there is any undisclosed income detected during search and survey operations then these losses won’t be allowed for set off.
3. Rationalizing TDS Provision
Now benefits passed on to agents for promoting business strategy shall be taxable in hands of agents. And Tax deduction will be provided to person giving benefits, when aggregate value of such benefits exceeds Rs 20,000 during the financial year.
4. Tax on Virtual assets
30% tax would be charged on income from transfer of virtual digital assets. There will allowability of setting off in case of losses. Moreover, gifts in virtual digital assets would be taxed in the hands of the recipient.
No deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition and TDS is applicable 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.
5. New section introduced in Tax relief to persons with disability
In this budget a new tax benefit/ deduction has been introduced for the parent/guardian of a disabled person. Here, if the parent/guardian of a disabled person buys a savings life insurance policy with the latter as beneficiary then the premium paid for the same can be claimed as a deduction from gross income before tax subject to certain conditions. This can be claimed even in cases where the policy benefits/payouts start while the buyer of the policy is still alive. This is proposed to be added under Section 80DD of the income tax act.
5. Extension for Start-ups
The period of incorporation in case of startup has been extended by one year that is up to 31.03.2023 for eligible start-ups to avail tax benefit. Earlier the period of incorporation was up to 31.03.2022.
6. Incentives under concessional tax regime
The last date has been extended by one year for commencement of manufacturing or production under section 115BAB i.e. from 31st March, 2023 to 31st March, 2024.
7. Parity in National Pension Scheme Contribution
In case of pension scheme, Tax deduction limit has been increased from 10 per cent to 14 per cent in case of employer’s contribution to the NPS account of State Government employees. This will bring parity with central government employees.
8. Cooperative societies
For cooperatives societies, Alternate Minimum Tax has been brought down from 18.5 per cent to 15 per cent. This will bring a balance between cooperative societies and companies. Not just this, Surcharge on cooperative societies is also reduced from 12 per cent to 7 per cent for societies having total income of more than Rs 1 crore and up to Rs 10 crores.
Summary of Indirect tax highlights
9. Special Economic Zones
Customs Administration of SEZs will be upgraded and will be fully driven by IT and function on the Customs National Portal to be implemented by 30th September 2022.
10. Project imports and capital goods
Concessional rates in capital goods and importing of projects will be rolled out in phases. Moderate tariff of 7.5 percent will be implemented with respect to the growth of domestic sector and ‘Make in India’.
Exemptions for advanced machineries that are not manufactured within the country be continued.
Some new exemptions are introduced on inputs, like specialised castings, ball screw and linear motion guide with an intention to encourage domestic manufacturing of capital goods.
11. Review of customs exemptions and tariff simplification
Over 350 exemption entries will be phased out, like exemption on certain agricultural produce, chemicals, fabrics, medical devices, & drugs and medicines for which sufficient domestic capacity exists. Though these are proposed.
Customs rate and tariff structure are quite complicated particularly for sectors like chemicals, textiles and metals and minimise disputes so in this budget they have decided to simplify it; Exemption will be removed from the items which are or can be manufactured in India and concessional duties are provided on raw material that go into manufacturing of intermediate products – in line with the objective of ‘Make in India’ and ‘Atmanirbhar Bharat’.
Others
12. Duty on Electronics
Customs duty rates to be calibrated for providing a graded rate structure – to facilitate domestic manufacturing of wearable devices, hearable devices and electronic smart meters.
Duty concessions will be provided on parts of transformer of mobile phone chargers and camera lens of mobile camera module and certain other items for enabling domestic manufacturing of high growth electronic items.
13. Duty on Gemstones and Jewelleries
Customs duty will be reduced on cut and polished diamonds and gemstones to 5 per cent; nil customs duty will be applicable on simply sawn diamond. The objective is to boost to the Gems and Jewellery sector.
Along with the above, regulatory framework will be simplified and implemented by June this yearfor facilitating export of jewellery through e-commerce.
Duty of at least Rs 400 per Kg to be paid on imitation jewellery import for disincentivising the import of undervalued imitation jewellery.
13. Duty on Chemicals
Customs duty on certain critical chemicals namely methanol, acetic acid and heavy feed stocks for petroleum refining being reduced; Duty is to be raised on sodium cyanide for which adequate domestic capacity is present. This will help in enhancing domestic value addition.
14. MSME
Exemption on parts of umbrellas withdrawn. Customs duty on umbrellas is raised to 20 per cent. Exemption is rationalised on implements and tools for agri-sector which are manufactured in India.
Customs duty exemption is given to steel scrap last year extended for another year to provide relief to MSME secondary steel producers
Certain Anti- dumping and CVD on stainless steel and coated steel flat products, bars of alloy steel and high-speed steel are being revoked – to tackle prevailing high prices of metal in larger public interest.
15. Exports
To encourage exports Incentives are to be provided on exports, exemptions on items such as embellishment, trimming, fasteners, buttons, zipper, lining material, specified leather, furniture fittings and packaging boxes.
Duty will be reduced on certain inputs required for shrimp aquaculture – to promote its exports.
16. Encouragement of blending of fuel
Unblended fuel will attract an additional differential excise duty of Rs 2/ litre from the 1st of October 2022 – to encourage blending of fuel.
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