Finance Minister Nirmala Sitharaman has concluded the Union Budget 2022. Most of the expectations that the entire nation had, whether in terms of personal tax relief, increasing tax deductions for health and life insurance, boosting the electric vehicle industry, etc have not been touched upon in this year’s Budget.
Besides all that, there were some key takeaways that can affect your personal finance. Let’s have a look at these announcements.
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1. Tax On Digital Assets (Crypto)
In a major setback for India’s booming crypto industry, the Finance minister has announced that any income from the transfer of digital assets (crypto) will be charged 30% tax, along with TDS on payment made in relation to the transfer of virtual digital asset at the rate of 1% of such consideration above a monetary threshold.
Even the loss from such transfer of assets cannot be set off against any other income, and the gift of such assets will be taxed in the hands of the recipient. Also, no deduction in respect of any expenditure or allowance shall be allowed while computing such income except the cost of acquisition. The Budget speech did not mention the much anticipated new Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.
Also Read: Crypto-assets Can Increase Financial Inclusion, Says Infosys’ Nandan Nilekani
2. Digital Rupee To Roll Out In Upcoming Financial Year 2022-23
In a big boost to the economy and digital India program, the Finance Minister announced that the Central Bank Digital Currency (CBDC), i.e. digital rupee will be introduced and issued by the RBI in the upcoming financial year 2022-23. This will be done using blockchain and other technologies. Digital currency is expected to be a cheaper and more efficient currency management system.
This comes amidst the RBI’s long war with crypto and emphasis on introducing its own digital currency, after having repeatedly voiced serious concerns over crypto’s threats to the country’s financial stability.
3. No Change In Income Tax
Disappointing crores of taxpayers all over the country, Budget 2022 did not provide any relief in terms of income tax. Neither the old or new tax regime’s tax slabs were revised, nor the rates were reduced.
4. Employer’s NPS Contribution For State Government Staff Hiked To 14% From 10%
At present, the Central Government contributes 14% of the salary of its employee to the National Pension System (NPS) Tier-I accounts. This is allowed as a deduction in computing the income of the employee. However, such deduction is allowed only to the extent of 10% of the salary in the case of employees of the State government.
Hence, to provide equal treatment to both Central and State government employees, Budget 2022 has proposed to increase the tax deduction limit from 10% to 14% on employer’s contribution to the NPS account of State Government employees as well. This is expected to help in enhancing the social security benefits of the state government employees and bring them at par with central government employees.
5. Introduction Of New Updated Return
Finance Minister Nirmala Sitharaman has also announced a new provision allowing taxpayers to file updated Income Tax return (ITR) on payment of additional tax. This updated return can be filed within two years from the end of the relevant assessment year. This new provision will ensure voluntary tax filing and reduce litigation and will act as a one-time window to correct omissions, mistakes or other changes in such returns.
As per the Budget announcement, instead of going through a lengthy process of adjudication when the income tax department finds omissions or other issues in your income disclosure, the taxpayers can on their own declare the income they might have missed out earlier while filing the return.
6. Tax Relief For Persons With Disability
At present, Section 80DD of the Income Tax Act provides for tax deduction to the parent or guardian only if the lump-sum payment or annuity is available to the specially-abled person on the death of the subscriber i.e. parent or guardian. But the Finance Minister pointed out that there could be situations where specially-abled dependants may need payment of annuity or lump sum amount even during the lifetime of their parents/guardians.
Hence, it is proposed to thus allow the payment of annuity and lump sum amount to the specially-abled dependent even during the lifetime of parents/guardians, i.e., on parents/ guardians attaining the age of 60 years.
7. LIC IPO To Come Shortly
In her Budget 2022 speech, the Finance Minister has again hinted that the country’s biggest IPO, LIC, will be rolled out soon. The LIC IPO, which is key to the government reaching its divestment target of this financial year, is expected to be rolled out before 31.03.2021.
The Finance Minister also mentioned that, towards the implementation of the new Public Sector Enterprise policy, the strategic transfer of ownership of Air India has been completed.
8. Introducing Green bonds
Finance Minister Nirmala Sitharaman has proposed to issue ‘sovereign green bonds’ to mobilize resources as part of the government’s borrowing program. The use of ‘green bonds’ will be for ‘green infrastructure’, keeping in mind climate change and environmental-focused projects. This is also expected to boost the financing of clean energy projects.
Sitharaman stated that these green bonds will be issued to fund green infrastructure projects and the proceeds will be used for public sector projects. The aim is to bring investors towards the domestic green bond market and eventually create a long-term financing avenue for private sector players.
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