The Budget 2022 will be the year when Digital Assets started to be taxed! A new acceptance. Let’s check what Union Budget 2022 has for us as an investor? Here is the main highlights of Budget 2022 Impact on Savings Investments & Tax.
Common Men’s Sec 80 C (sometime I wonder if “C” in Section 80 C stands for common man?) remains unchanged. It is like the 3rd year when we are demanding it to increase the limit to 2.5 or 3 lakhs. But NO again this time.
No changes or relaxation for Sec 80 D (Health) or WFM (work from home) provisions.
No extension of LTC Voucher Scheme.
Income Tax Slab Rates for FY 2022-23 / AY 2023-24
No change has been proposed. We will continue to run the existing tax structure.
We have 2 structures running based on whether you avail of Deductions (Option 1) or Forgo Deductions (Option 2). Both continue to be followed with no changes in slabs.
Tax on Crypto Assets
It covers all Cryptocurrencies & NFTs working through Blockchain Technology.
Gift of cryptocurrencies to be taxed at receiver’s end.
A flat rate of 30% will be levied on gains arising by selling any virtual digital assets. No long term or short term differentiation.
This is regardless of your existing tax slab.
No Indexation benefits will be provided.
Losses or gains cannot be set off with any other losses or gains
No recipient will be excluded from taxation.
A 1% TDS will be there? Why just 1%? So that it is captured in the Annual Information Report. TDS is also applicable only if the aggregate sale consideration is over Rs 10,000 in a year.
Surcharge capped to 15%% on LTCG
At present, long term capital gains on listed equity shares, equity oriented mutual fund units etc are subject to a maximum surcharge of 15 percent. Other long term capital gains are subject to surcharge up to maximum of 37 percent depending on the taxable income of the individual. The Budget proposes to cap the surcharge on all long-term capital gains at 15 percent. This is a small relief to investors with large LTCG.
No more bonus stripping!
Bonus stripping means – we could defer taxes and reduce them by buying bonus shares before the record date. Bonus will increase shares. We can sell original shares for a “notional” loss after. This was allowed for shares, MFs & REITS but has now been removed as per the budget. In MFs this is already difficult as one has to buy 3 months before and hold 9 months from the bonus date.
Dividend stripping extended to REITS InvITs and AIFs
Similar to bonus stripping, dividend stripping as a practice was curbed through Section 94(7) of the Income Tax Act. This section is now being extended to new investment classes like real estate investment trusts and infrastructure investment trusts besides alternative investment funds. In effect, anyone using this as a means to book losses and use them as set off will now be unable to.
National Digital Health Ecosystem will be rolled out
It will consist of digital registries of health providers and health facilities, unique health identity, and universal access to health facilities. We as a nation cannot rely on government alone. There needs to be a system of health where the government can participate with private insurers so that everyone in social strata gets health & treatment. A welcome step but huge planning is required.
Relief for Very Senior Citizens
On the occasion of 75th year of Independence, it has been proposed that a person of 75 & above, an exemption to file income tax returns will be provided. This is only if a person has Interest Income & Pension. The paying bank will deduct the necessary tax on their income.
Green Bonds & Zero-Coupon Bonds
The Budget has proposed the issuance of Green Bonds & Zero-Coupon Bonds to fund Infrastructure projects. This is interesting as the announcement collides when Central Markets will face rate rising times.
But it gives a new investment option for investors in the fixed income segment. Let us hope these benefit Indian Savers and especially senior citizens who are facing low-interest tenure.
Housing Loan Party continues
In the July 2019 Budget, an additional deduction of interest, amounting to `1.5 lakh, for loan taken to purchase an affordable house. This is extended till one more year, to 31st March 2022.
New Reliefs while dealing with Income Tax Department
The first proposal is to allow revision of ITR up to 2 years. The two years period will start when the financial year-end for the return is filed.
Details on tax on the revised income is still awaited.
The second proposal is – details of salary income, tax payments, TDS, etc. already come pre-filled in income tax returns. Now details of capital gains from listed securities, dividend income, and interest from banks, post offices, etc. will also be pre-filled.
State Government Employees Benefit on NPS
Central Government employees were already getting a 14% from their employer. Now for state government employees to NPS raised from 10% to 14%.
Covid Relief Measures
Relief measures were announced via a press statement on 25 June 2021 towards medical treatment expenditure and
compensation received by family members in relation to death of an individual. These measures have now been introduced in the Act with effect from Assessment Year 2020 21 to provide clarity on various aspects.
- All reliefs received from Employers are not to be part of income. No limit.
- Income received from other sources as relief for Covid 19 will be tax-free up to Rs 10 Lakh.
The compensation received only within 12 months from the death of an individual eligible for exemption.
Some Small Announcements Impacting your Budget
- Electric Vehicles battery-swapping policy to be brought out with interoperability standards.
- Long Term Capital Gains surcharge – to be capped at 15%. A small concession is given.
- Investments in Post Office Schemes will be made easy by modernizing Post Offices and connecting them online.
- Additional excise duty of Rs 2 per liter on unblended fuel w e f October 1 2022.
I am constantly adding new information… so keep visiting.
For our clients – no change is sometimes a good move.
In a budget for a country coming out of Covid, these moves are only good for the country overall. So, remain invested and continue on your financial goal-linked investments. Stay away from things which are complex, you don’t understand, and too good to be true. Keep clear view of the income tax rebates, exemptions and all capital gains implications. Looking at the overall economic growth projections, stay positive.
