The Budget 2022, which was presented in the Parliament, brought about various changes in the tax slabs, which included a hike in the standard deduction and the exemption limit.
While none of these was mentioned in the budget speech, the Finance Minister got something else instead.
Honourable FM Nirmala Sitharaman said that the government will give a one-time window to address the omissions in income tax returns. Taxpayers will be allowed to file an updated return within two years of the end of their assessment year.
Here are some of the changes brought in Income Tax Law.
Taxpayers can update their ITR status within two years of the applicable assessment year, the FM said while reading the Budget 2022. If there are errors or omissions in the returns, taxpayers can file an updated return and pay the appropriate taxes within two years from the end of the relevant assessment year.
30% Tax on Sale of Digital/Virtual Assets
The virtual or digital assets will now be taxed at a flat rate of 30%. No deductions are permitted for other expenses. Tax withheld on sale will apply to purchases beyond a certain threshold. Although the tax regime for virtual assets is not clear, it is a bold move that will discourage transactions in the space.
Parity Between State and Central Government Employees
The tax deduction limit for state employees’ contribution to the National Pension System was raised to 14% from 10%. This new guideline will benefit the millions of individuals who are contributing to the National Pension System as state government employees. It also allows individuals to file their taxes at the end of the assessment year instead of the beginning of it. For startups, this benefit is extended to one more year. It will allow them to claim it for three consecutive years.
Cap on Surcharge in certain cases
Long-term capital gains are subject to a limit of 15% surcharge only. Currently, this is only available for mutual funds and listed shares. Currently, the long-term capital gains surcharge on listed shares and mutual funds is capped at 15%. The FM has proposed a cap on all long-term capital gains, not just listed shares and equity-oriented funds.
Tax Relief for Disabled Person
An insurance policy for a person with a disability can be purchased by their parents or guardians. However, under the present law, a person with a disability can only be deducted from their parents’ or guardians’ income if the lump-sum payment or an annuity is available to them upon their death. In certain circumstances, a person with a disability may need the lump sum or an annuity payment even after their parents or guardians die. So, the FM proposed to allow the payment of lump sum or annuity amounts to a dependent person with a disability during the lifetime of their parents or guardians.
When can you update your income tax return as per the new provision?
You can update your income tax return within a period of up to two years from the end of the relevant assessment year.
What is the assessment year?
The year that comes after the financial year is called the assessment year. The income earned throughout the financial year is assessed and taxed in the following year and therefore, it is called an assessment year.
Is there any change in the income slabs or basic exemption limit?
There has been no change announced by Finance Minister Nirmala Sitharaman in the income slabs or the basic exemption limit.
Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.