Union Budget 2022: Here’s What Changed for Your Personal Finance

Apart from infrastructure, the Union Budget 2022 focused on providing a push to various segments such as Healthcare, Education, Digital Ecosystem, Agriculture, among others. Further, it laid a lot of emphasis on renewable and green energy for sustainable development. Besides, it announced measures to promote domestic manufacturing and start-up ecosystem as a part of the 'Atmanirbhar Bharat' programme.

These measures, if efficiently implemented, could potentially generate employment opportunities and get the wheels of the economy spinning in the coming years.

That said, the budget clearly disappointed the salaried class that was hoping for tax relief from the Union Budget 2022 in the form of a higher deduction limit and revision of tax slab amidst the pandemic. This indicates that consumption growth will continue to be mute in the near term. Perhaps the government's plan to increase spending did not leave much leeway for offering income tax relief.

However, the Union Budget did announce certain reforms and proposals related to personal finance for the common man...

• If a taxpayer makes an error while filing the income tax return, he/she often has to go through a lengthy adjudication process. To address this, the government has proposed to permit taxpayers to file an updated return on payment of additional tax within two years from the end of the relevant assessment year to correct any omissions or mistakes.

• The Union Budget has provided tax relief to the parent/guardian of a person with disability. The current law provides for deduction from income to the parent/guardian when they take an insurance scheme for the differently-abled person only if the lump sum payment or annuity is available to the differently-abled person on the death of the subscriber. The Finance Minister pointed out that there could be situations where differently-abled dependants may need payment of the annuity or lump sum amount even during the lifetime of their parents/guardians. Accordingly, the government has proposed to allow tax sops even if the payment of annuity and lump sum amount to the differently-abled dependent starts during the lifetime of parents/guardians, provided they have attained the age of sixty years.

• The government has proposed to increase the tax deduction limit to 14% from 10% on employer's contribution to the NPS account of State Government employees. This will be done to enhance the social security benefits of the State government employees and bring them at par with the Central government employees.

• The Finance Minister stated that any income from the transfer of any virtual digital asset (such as cryptocurrencies, non-fungible tokens, etc.) will be taxed at the rate of 30%. Additionally, no deduction will be allowed in respect of any expenditure or allowance while computing such income except the cost of acquisition. Moreover, loss from the transfer of virtual digital assets cannot be set off against any other income. It is noteworthy that the Union Budget has not announced any framework to regularise cryptocurrencies and other virtual digital assets.

• In order to capture the transaction details, the government would also make a provision to provide for TDS on payment made in relation to the transfer of the virtual digital asset at the rate of 1% of such consideration above a monetary threshold. Gift of virtual digital asset will also be taxed in the hands of the recipient.

• To boost the digital economy, the Union Budget has proposed introducing digital currency using blockchain technology. These currencies will be issued by the RBI in the financial year 2022-23. Notably, the RBI had earlier voiced concerns about private digital currencies (cryptocurrencies) on the grounds that these may cause financial instability.

• To promote financial inclusion and ensure that digital banking reaches every corner of the country, the Finance Minister has proposed that scheduled commercial banks will set up 75 digital banking units across 75 districts in India.

• Surcharge on long term capital gains tax on unlisted securities made on par with listed securities i.e. it will be capped at 15%. At present, the surcharge on unlisted securities is 25% and 37%, respectively, if the net income exceeds Rs 2 crore and Rs 5 crore. The move is likely to benefit investors falling under the highest income tax slab as well as investors in equity shares of start-ups.

• To put a curb on tax evaders, the finance minister has proposed that set-off of any loss will not be allowed on undisclosed income detected during search and seizure operations of the Income Tax Department.

Overall, the Union Budget 2022 focused on boosting economic growth through higher investments in some key segments. The common man was, however, sidelined with no major relief on the income tax front due to rising government spending.

Warm Regards,
Divya Grover
Research Analyst

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