The Top 10 Changes in the Tax Laws applicable from 1^st April 2022

 

Every financial year begins with new changes & amendments in the tax laws. Let us have a glimpse of a few key changes that would be applicable w.e.f. 1^st April 2022:

  

1. Filing of an Updated Return:
The concept of “Updated Return” has been made effective from 1^st April 2022. In last minute return filing exercises, various errors or omissions are often committed. Taxpayers now can rectify the return for the FY 2019-20 & 2020-21 by filing the “Updated Return” if there is any omission or error at the time of filing earlier returns. However, this updated return would be subject to the payment of additional tax of 25% or 50% along with interest.

2. Taxation of Interest of EPF account:
With a view to tax High-Net worth Individual (HNI), the cap of Rs. 2.50 lakh has been imposed for contribution in the Employee Provident Fund (EPF) account. Now, interest on Employee provident fund will be subject to income tax if the contribution in the EPF Account exceeds the ceiling of Rs. 2.50 Lakh p.a. As per the new Rule 9D, the existing EPF account shall be divided into two parts for taxation purposes. In one account, the entire interest will be tax free if the contribution is not exceeding Rs 2.50 lakh p.a. In another account, the contribution of more than Rs 2.50 Lakh p.a. will be reflected and the interest of such an account will be taxable. In case of Government employees, the tax-free GPF contributions shall be Rs 5 lakh p.a. and not Rs. 2.50 Lakh. It may be noted that only the interest amount on the excess contribution will be considered for tax calculation, and not the contribution amount.

 3. Taxation of Crypto-Currency [Section 115BBH]:
a) All income from investment or trading in Crypto currency (virtual digital assets-VDA)  will be taxable at a flat rate of 30% without any deduction towards any expenditure or allowance incurred for earning such income except for the cost of acquisition (COA).

b) At the time of passing the Finance Bill- 2022, it has been categorically provided that the loss incurred in a particular digital asset cannot be set off against income from another version of a crypto asset.

c) Further, Loss from the transfer of any other digital asset will not be allowed to be set off against any other income. In short, taxpayers cannot set off gains and losses on cryptocurrency against gains and losses in other assets like shares, real estate, or other commodities.

Further, losses from virtual digital asset transactions can’t be carried forward.

d) It has also been provided that if any virtual digital asset is provided as a gift, it will be taxed in the hands of the recipient.

e) Further, it is also now specifically provided that no deduction towards infrastructure costs or other expenses during the mining crypto assets shall be available.

f) TDS mechanism is also provided on crypto transaction U/s 194S. The threshold limit is Rs. 50,000 in the case of specified persons and Rs. 10,000 in case of non-specified persons. The TDS rate shall be 1% & will be effective from July 1, 2022.

4. Extension of the Benefits to Start-ups:
The tax benefit to start up has been extended by one more year. Earlier, Start-ups established before 31.03.2022 were eligible for 100% tax exemption for 3 consecutive years out of ten years from incorporation. This period of incorporation of eligible start-ups has now been extended by one more year i.e., till 31.03.2023, for availing of such tax benefits. It means all startups established between 01.04.2022 to 31.03.2023 will be eligible for tax exemption.

5. TDS On Benefit or Perquisite in the course of Business:
Now, TDS will be applicable on any benefit or perquisite which is provided in cash or kind if such value exceeds Rs. 20,000/- in a year. In short, various schemes like Gold coin, Gift, etc by the business houses (which may be insurance companies, Home appliances companies, etc) will be subject to TDS @ 1% w.e.f. 1^st July 2022.

6. No extra relief to homebuyers:
There was an additional deduction U/s 80EEA up to Rs. 1.50 Lakh in respect of housing loan sanctioned between 01.04.2019 to 31.03.2022. The period of deduction has not been extended. In short, any taxpayers who have been sanctioned the housing loan after 01.04.2022 will not be able to avail the addition up to Rs. 1.50 Lakh.

7. Tax relief on Covid-19 treatment expenses and compensation:
No income tax shall be payable if the salaried taxpayers has received any money for Covid medical treatment. Similarly, any money received by the family members on the death of the employee due to Covid will be exempt up to Rs. 10 lakhs if such payment is received within 12 months from the date of death. This amendment has been made effective retrospectively from April 1, 2020.

8. Widening the scope of the e-invoice in GST:
The scope of E-invoicing has been widened w.e.f. 01.04.2022. The limit of turnover for issuance of e-invoice (e-invoice) under the GST has been reduced from the earlier fixed limit of Rs 50 crore to 20 crore w.e.f. April 1, 2022.

9. NPS deduction to State government employees:

Starting from 01.04.2022, State government employees will be able to claim deduction under Section 80CCD(2) for NPS contribution by the employer up to 14% of their basic salary and dearness allowance, which is in line with the deduction available to the Central government employees under the said section. Earlier, this was capped at 10%

10. Tax Relief for person with disability:
Earlier, Section 80DD was providing for deduction towards any insurance policy taken out for a disabled dependent only if the lump-sum payment or annuity is available to the disabled person on the death of the taxpayer. W.e.f. 01.04.2022, the scope has been extended by providing that the benefit would be available if the lump-sum or annuity is receivable by the taxpayer upon attaining age of sixty years.

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