The much-awaited Budget for the year 2022 has been announced. The Budget is full of new possibilities for more infrastructure, investment, growth and jobs. Also, an important aspect of this Budget is the proposals on welfare of the poor.

The key takeaways from the 2022 Budget from a personal tax perspective are as under.

Reduction in surcharge rate on Long term capital gains

There is no change in the income tax slab rates for individuals. Erstwhile, surcharge on income earned by way of dividend (from Indian companies) and long term/ short term capital gain income derived from sale of equity shares or equity oriented mutual funds (section 111A and 112A of the Income-tax Act, 1961 (‘the Act’)), was restricted to 15 percent.

It is now proposed to extend such surcharge restriction of 15 percent to income arising from long-term capital gain from sale of any capital asset. Hence, individuals earning long term capital gains (where their total income is higher than the threshold of Rs 2 crore and Rs 5 crore) will not be needed to pay higher surcharge rate of 25 percent or 37 percent respectively.Introduction of filing of updated return

With the objective to give more time to the taxpayer to file tax returns, it is proposed that the taxpayer can file an “Updated tax return” in addition to the original, belated or revised return that may have been filed or even if no return is filed. Some of the key features in respect of such return that may be filed are as under:

Updated tax return cannot be filed for specific cases like.

Where the updated return will result in refund or additional refund as compared to the return filed earlier,

1. 
   
   1. The effect on the tax liability as compared to the original/belated/revised return is decreasing,
   2. Where the updated return is a return of loss,
   3. where a search, seizure, survey or prosecution has been initiated,
   4. Where an updated return is already filed,
   5. Where any assessment/reassessment is pending or has been completed.
2. There should be some additional tax required to be paid.
3. Updated tax returns can be filed within 24 months from the end of the relevant assessment year. For instance, for AY 2022-23, the updated return should be filed latest by 31 March 2025.
4. Return will be considered as defective return unless the return is accompanied by proof of payment of tax as required by Section 140B of the Act.
5. It is proposed that there will be additional tax on the additional income furnished of an amount equal to 25 percent or 50 percent on the tax and interest due on such income.

 It is proposed that these amendments will be effective from 1st April 2022.

Exemption on amount received for medical treatment due to COVID 19

It is proposed by the government to provide the following exemptions:

Any sum of money received by an individual, from any person (including the employer) towards COVID-19 medical treatment for self and/or family subject to certain conditions (as may be notified)

1. Any sum of money received by a member of the family of the deceased employee from the employer (without any limit) on account of COVID-19-related illness within 12 months from the date of death, subject to certain conditions (as may be notified)
2. Any sum of money received by a member of the family of the deceased individual from other persons up to Rs 1 million on account of COVID-19-related illness within 12 months from the date of death, subject to certain conditions (as may be notified)

The above amendment is proposed to be implemented retrospectively i.e. from April 1, 2020 (from AY 2020-21 and subsequent years).

TDS on immovable property

Current provision - TDS is required to be deducted on the amount of consideration paid by the transferee to the transferor. However, while taxing the capital gain on sale of immoveable property, sale consideration and stamp duty value, whichever is higher, is considered.

Proposed provision - To maintain parity, it is proposed that in case of transfer of an immovable property (other than agricultural land), TDS is to be deducted @ 1 percent on the amount paid to the resident or the stamp duty value of such property (both in excess of Rs 50 lakhs), whichever is higher.

Taxation on virtual digital asset

Virtual digital assets (VDA) have gained popularity in recent times and the volumes of trading in such digital assets has increased substantially. Accordingly, it is proposed to introduce specific provisions to provide for taxation of such virtual digital assets.

The tax payable on transfer of VDA would be @ 30 percent. In addition, surcharge and cess will be applicable

1. No deduction in respect of any expenditure (other than cost of acquisition) is allowed
2. No set off of any loss shall be allowed to the taxpayer while computing income from transfer of such asset.
3. No set off of any loss arising from transfer of virtual digital asset shall be allowed against any other income earned during the year and such loss shall not be allowed to be carried forward to subsequent assessment years.
4. TDS @ 1 percent is proposed to be imposed where the consideration paid by specified person as defined during a financial year exceeds Rs 50,000 and Rs 10,000 in case of any other person.
5. With respect to taxation of gifting of virtual digital assets, the same will be taxable under the provisions of section 56 of the Act and the recipient of the gift is liable to pay tax on the same subject to the exclusions already specified.

(Niji Arora, Senior Manager with Deloitte Haskins and Sells LLP; Tarika Agarwal, Manager with Deloitte Haskins and Sells LLP; and Priya Sadriwala, Deputy Manager with Deloitte Haskins and Sells LLP also contributed)