BUDGET 2022 HIGHLIGHT’s

Change of Rates in the Financial Year 2022-23 and the Assessment Year 2023-24:-

1. Rates of Income Tax for the Financial Year 2022-23 and the Assessment Year 2023-24 is same as for the Previous Financial Year 2021-22 and the Previous Assessment Year 2022-23.
   • Few changes in Surcharge has been made as on the Long Term Capital Gain (LTCG) and Association of Persons (AOP) of ONLY Company as member is capped @15% i.e. reduced to 15% from 25% or 37% as the case may be.
     • As comparing it with the provision in previous financial year i.e. 2021-22 such benefit was there only on the Long Term Capital Gain (LTCG) arising from the Transfer of Equity-Oriented Mutual Funds, Unit of Business Trust and Listed Equity Shares which as per the Budget 2022 has been changed by having surcharge rate @15% for Long Term Capital Gain (LTCG) on transfer of any Long Term Capital Asset (LTCA).
     • Whereas the Surcharge Rate on AOP where the members consist of ONLY Companies the rate on such AOP will be @15% when the Income is above Rs. 1 Crore which was earlier charged @25%.
   • Change in rate of surcharge on Co-operative Societies which are not opting for Section 115BAD whose income is between Rs. 1 Crore to Rs. 10 Crore is reduced to 7% from 12% but where the Income exceeds Rs. 10 Crore in such case the surcharge shall be taxed @12% and not @7%.
   • The Alternate Minimum Tax (AMT) is reduced to 15% from 18.5% in case of co-operative societies.
   • Commencement of manufacturing or production under section 115BAB has been extended to 31/03/2024 from 31/03/2023.

Virtual Digital Asset

1. As per the Budget 2022 a scheme to tax on the Gains from the Transfer of the Virtual Digital Assets on or after 01/04/2022 has been proposed for the Financial Year 2022-23.
2. The tax to be charged on such transfer of Virtual Digital Assets under Section 115BBH is @30% has been proposed to be inserted in the Budget 2022 but on such Gains from such virtual assets NO Deduction of any expenditure related to digital assets will be allowed to be set-off from the Gains.
3. Following Virtual Digital Assets will be covered under the above said provision:
   • Cryptocurrencies
   • NFTs
   • Any other Digital Assets as notified by the Central Government. And the central government has the power to exclude any digital assets from the definition of digital asset.
4. Another section in relation to the digital assets has been proposed to be inserted i.e. 194S which talks about the deduction of tax @1% from the payment to a resident to transfer of virtual digital asset.
5. Furhter no set-off of any Loss will be allowed to be made from the gains on such digital assets and no carry forward of such loss to subsequent assessment years will be allowed.
6. As per the provision under section 56(2)(x) where the meaning of “Property” is given now shall include the Digital Assets under the definition of which includes under the term Property i.e. where such assets received without consideration or inadequate consideration, it shall be taxable in hands of the recipient if it exceeds Rs. 50,000.

Changes in the 2 Heads out of 5 Heads of the Income

• INCOME UNDER THE HEAD SALARIES
  • Section 17 has been amended stating that any sum received from the employer by the employee towards the medical treatment of the employee or his family member in respect of any illness relating to COVID-19 shall NOT BE TAXED as a Perquisite.
  • Threshold limit for deduction in respect of the employer’s contribution to NPS is increased to 14% of SALARY in case of the State Government Employees.
• INCOME FROM BUSINESS or PROFESSION
  • An amendment under section 37 have been proposed that any expenditure incurred to provide any benefit or perquisite to a person shall not be allowed to have a deduction if such acceptance of benefit or perquisite by such person violates any law governing the conduct of such person in INDIA or outside INDIA. Medical practitioners are prohibited from taking any gifts from pharmaceutical companies i.e. no deduction on such gifts will be allowed.
  • Conversion of outstanding interest liability into debentures is not an actual payment and therefore the deduction on such will not be allowed as a deduction as per the amendment under Section43B.
  • NO deduction will be there for payment of any rate or tax while computing the income from a business or profession under section 40(a)(ii) and such amendment shall be applicable retrospectively from 01/04/2005.

CHARITABLE TRUST

1. Application of the income will be allowed on a payment basis as the trust need to spend 85% of the income on the specified purpose of the Trust. The payment made will be considered to be a pert of such previous year in which the payment was made and not to the year to which the liability was incurred.
2. The Computation of the Income of Trust in certain situations where the commercial receiving is exceeding 20% of the annual receipts in violation of the provision of the proviso to section2(15) or the trust who are not getting their books of accounts audited when required or not filling the return of income. In such cases the taxable income will be calculated after deducting the expenditure other than the Capital Expenditure incurred in INDIA, for the objects of the Trust or Institution.
3. A list of the Incomes of the Trust or institutions where the income shall be chargeable to Tax at the Special Rate of 30% as per the Newly Proposed Section 115BBI:
   • Income applied outside INDIA.
   • Deemed income under Section 11(1B) or Section 11(3).
   • Benefit to the Interested person.
   • Income accumulated or set apart in excess of 15%.
   • Investment of Funds in an Unspecified manner.
4. Provisions relating to the Taxation of Accreted Income under Section 115TD,115TE, and 115TF now made applicable to Trusts or Institutions under Section 10(23C).
   • Imposing restrictions on the Institutions claiming exemptions under Section 10(23C) to pass on any unreasonable benefit to the trustee or any other specified person.
   • Such Institutions allowed to accumulate income for application in subsequent years by submitting the statement stating the purpose for which the income is being accumulated and the period for which the income to be set apart, which shall not exceed 5 years. The money accumulated to be invested in the forms or modes specified in Section 11(5).
   • To claim such exemption under Section 10(23C) filling of Return of Income under Section 139(4C) is MANDATORY.
5. Trust or institution shall keep and maintain prescribed Books of Accounts where the Total Income of Trust or Institution without giving the effect to the provisions of Section 10(23C) or Section 11 and Section 12, exceeds the maximum amount which is not chargeable to tax.
6. The income accumulated under Section 11(2) which is not utilized for the specified purpose for which it was accumulated or set apart in such a case it shall form part of the income of such person.
7. A PCIT/CIT can cancel the registration of the Trust when the PCIT/CIT notices one or more specified violations during any previous year or has received a reference from the AO or case selected as per the board’s risk management strategy. To satisfy the occurrence of violation the PCIT/CIT can call for such documents as they deem fit and before cancelling the registration the Reasonable Opportunity of Being Heard will be given before reaching to any conclusions.

COMPUTATION OF INCOME

• Section 14A is proposed to be amended to disallow Any Expenditure incurred in relation to an EXEMPT INCOME even if NO EXEMPT INCOME has received or arisen or accrued during the said previous year.
• The amount received from Employer or well-wisher or any other person to meet the expenses incurred on treatment of COVID-19 will be eligible for an exemption as on any such amount there will be NO TAX i.e. amount received for the treatment of COVID-19 would be TAX-FREE. And in case where the Taxpayer dies due to COVID an on such event any financial assistance is received from the employer would be EXEMPT without any limit but where the financial assistance received from any other person other than the Employer in such a case the Limit of Rs. 10,00,000 in aggregate and such can be seen in the amendment made in the Section 17 and Section 56 of the Income-Tax Act.
• Any Expenditure incurred for the treatment of a dependent person with a disability in such a situation an Individual or HUF is allowed to have a deduction under section 80DD. To claim such deduction following conditions need to be satisfied:
  • Assessee nominating either the dependent or any other person or a trust to receive the payment on his behalf for the benefit of the independent; and
  • The scheme must provide for payment of the annuity or lump sum amount for the benefit of a dependent only in the event of the death of such resident individual or member of Hindu Undivided Family (HUF).
  • These conditions are bit harsh as till the person is alive the person does not get any lump sum or annuity amount of an Insurance Policy and even where all the premiums has been paid the benefit of such policies can not be taken by the person himself as these are the benefits available after the death of such person. This budget has taken into consideration this issue and made appropriate amendments under section 80DD.
• Withdrawal of Exemption under Sections 10(8), 10(8A), 10(8B) and 10(9)
  • Section 10(8) talks about the co-operative technical assistance programmes and projects which are in accordance with an agreement entered by the CG i.e. the Central Government and the Government of a Foreign State and in such programmes and projects the exemption to the income of an Individual assigned duties in India in connection with any co-operative technical assistance programmes and projects.
  • Whereas the other sections as refered above other than Section 10(8) which talks about the exemptions allowed to a Consultant, his Employees and their Family Members.
  • The above provisions shall not apply to Remuneration, fee or income of the previous year relevant to the assessment year beginning on or after the 1st day of April 2023.

CHANGES IN TAX DEDUCTIBLE AT SOURCE (TDS)/ TAX COLLECTED AT SOURCE (TCS)

1. In case of transfer of an Immovable Property other than the Agricultural Land a TDS @1% under Section 194-IA was deducted on sum paid or credited to the seller whichever was higher but after the amendment under Section 194-IA on such transfer the same TDS is being charged but on sum paid or credited to the seller or THE STAMP DUTY VALUE OF SUCH PROPERTY. Earlier, stamp duty value wasn’t considered for TDS under this provision.
2. The provision related to the defaulters who makes the default in Deduction or Deposit of TDS or TCS has been amended as to provide that where any order is made by the Assessing Officer the above said default, the Interest shall be paid by the person in accordance with the said order.
3. Higher rates of taxes will be levied on the ones who do not file the Return and provisions stated under section 206AB and 2026CCA is applicable which provides deduction or collection of tax at higher rates. Such is applicable to the specified persons who has not filed the return of income for 2 assessment year relevant to the previous years immediately before the previous year in which tax is required to be deducted. It is proposed to reduce two years requirement to one year under Section 206AB and Section 206CCA.