Specific relief for taxpayers limited –Parizad Sirwalla

By Parizad Sirwalla

The ongoing pandemic, coupled with the rising inflation, has adversely effected the household expenses of the common man for an elongated period now. Thus, the individual taxpayers were hoping that Budget 2022 could pave the way for more disposable income in their hands. However, with the higher capex and fiscal deficit target the finance minister has limited specific relief for the individual taxpayers.

Some of the key personal tax proposals pronounced in the Budget 2022 are as under:

Introduction of updated return: In order to promote ease of voluntary compliance by the taxpayers (including individuals) and reduce litigation, for taxpayers who may have omitted or incorrectly estimated their taxable income for any particular financial year (FY), a new provision has been introduced enabling such taxpayers to furnish an updated return by reporting the additional income/ details upon payment of additional taxes viz. 25% or 50% of incremental tax and incremental interest as the case may be, within three years from the end of the relevant FY.

However, such facility is not available to a taxpayer if the updated return is a return of loss or results in the decrease of total tax liability or increase in refund. Also, a person shall not be eligible to file an updated return if he/she is undergoing any survey or search or if the assessment or reassessment proceedings for such FY is pending or has been already completed.

Taxation of virtual digital assets: Due to the recent surge in transactions in varied digital assets like cryptocurrencies, non-fungible tokens, etc., a specific tax regime has been proposed for the taxation of virtual digital assets. A few salient features of this regime inter alia include:

—Any income arising on transfer of such assets would attract an income-tax of 30% (along with applicable surcharge and health and education cess);

—No deduction in respect of any expenditure or allowance shall be allowed while computing such income except for cost of acquisition;

—No set off of loss from transfer of such assets shall be allowed against income under any other head and no carry forward to successive assessment years for set-off will be allowed;

—Taxes are required to be deducted at source at the rate of 1% of the consideration payable to resident on transfer of such asset.

Even gift of such assets to non-specified relatives will be taxable in the hands of the recipient subject to prescribed conditions.

Rationalisation of surcharge on long-term capital gains: Under the existing provisions of the Income-tax Act, 1961, the surcharge applicable on Long term capital gains arising on transfer of any long-term asset can be 10%/15%/25%/37% as the case may be, depending upon the income level of the taxpayer. However, on long term capital gains arising from listed equity shares, and equity-oriented units/units of specified business trust, the surcharge is capped at 15% even if the taxpayer falls in higher tax bracket i.e. total income exceeds Rs 2 crore. It is now proposed to cap the surcharge at 15% on long-term capital gains on other specified long term assets from existing graduated rates.

Relief to persons with disability: Under the current provisions of the Act, a deduction is allowed under Section 80DD, if the payment of annuity is made for the benefit of the differently-abled person, only upon death of the parent or guardian, who contributed to such scheme. It is now proposed that the deduction would be allowed on the payment of annuity or lumpsum amount during the lifetime of the parent or guardian upon attaining the age of sixty years, as the differently-abled persons might need such amount even during the lifetime of their parent or guardian.

Relief for Covid-19-induced illness or death: The central government provided various income tax exemptions through the press release dated 25th June 2021 to give relief to the taxpayers and families impacted due to the Covid-19 pandemic. Enabling provisions under the Act have been introduced in the Budget 2022, to pave way for the implementation of such provisions:

Retrospective amendment has been proposed from FY2019-20 to exclude the sum paid by the employer or any other person to employee or to any other person in respect of any expenditure incurred on his medical treatment or his family’s medical treatment relating to Covid-19 from ‘perquisite’/other income taxation.

Similarly, retrospective amendment has been proposed from FY2019-20 to exclude such sum received by family of a deceased person, from employer or any other person (up to Rs 10 lakh), if such amount has been received within 12 months from the date of death of such person.

Overall, a Budget that focuses on capital expenditure for the government and stability in the tax regime and at the same time emphasising on voluntary compliance by and trust in the taxpayer.

The author is Partner & head, Global Mobility Services, Tax, KPMG in India