Tax Planning
5 Income tax provisions changing from April 1, 2022

5 Income tax provisions changing from April 1, 2022

 

A new financial year began on April 1, 2022, and the income tax provisions announced in the Union Budget 2022 are now in effect. As a result, it is critical for a taxpayer to be aware of the changes in income tax provisions that will come into effect on April 1, 2022.

In this article, we shall be discussing major changes in income tax provisions applicable from the financial year 2022-23.

 

Taxation on Virtual Digital Assets (VDAs)

Perhaps the biggest announcement of Budget 2022, the government has stated that any income derived from the transfer of a virtual digital asset, such as bitcoin or NFTs, will be taxed. From April 1, cryptocurrency revenue will be taxed at a fixed rate of 30%.

Further, as per proposed Section 115 BBH of the Income-Tax Act, no set -off of loss from the transfer of a virtual digital asset will be allowed against revenue from the transfer of any other virtual digital asset.

Also Read: Taxation on Cryptocurrencies in India

Surcharge on all Long Term Capital Gains

Up to March 2022, a 15% surcharge was charged on long-term capital gains (LTCG) from the sale of listed stocks or mutual funds only. However, beginning April 1, 2022, the 15% surcharge will be extended to LTCG earned from all assets. As a result, starting in FY23, a 15% surcharge cap on LTCG tax on real estate, physical gold, debt funds, unquoted shares, and other assets is now in effect.

Thus, up to FY 2021-22, a taxpayer was subject to a surcharge which may extend up to 37% if he made an LTCG from the transfer of any unquoted shares or real estate property, or any other assets will now be liable to pay the surcharge up to 15% only.

Tax on Interest on EPFO Contributions

Commencing from FY 2023, interest earned on annual employees’ provident fund (EPF) contributions exceeding Rs 2.5 lakh (Rs 5 lakh for government employees) would be taxable. In September 2021, the Central Board of Direct Taxes (CBDT) issued rules for taxing interest received on this excess contribution, which will take effect in the assessment year 2022–23.

After the interest for FY22 is credited in April, the EPF account statement will be divided into two sections: one for the taxable component and the other for the non-taxable portion.

Tax relief on Covid treatment expenses

The finance minister has announced that the money received by a taxpayer from her employer for COVID-19 treatment charges will not be subject to income tax.

Similarly, if you accept financial support from someone else, you will not be taxed on that amount. Furthermore, any ex-gratia payment received by a family member of a deceased COVID-19-affected individual from an employer or anybody else will be tax-deductible.

The relief is subject to restrictions and requirements. There is no limit if a deceased employee’s family receives ex-gratia from his/her employer after his/her death — the entire amount is tax-free. However, the tax exemption is restricted to Rs 10 lakh if the money is paid by someone else.

Furthermore, the exemption is only effective if the money is received within a year of the death. If a household receives financial assistance from a number of people, the total amount received is tax-free up to Rs 10 lakh. The amendment is applicable retrospectively from AY 2020-21.

Withdrawal of Deduction under section 80EEA

To encourage affordable housing, the government enacted Section 80EEA, which took effect in AY 2020–21 (FY 2019–20), with the goal of providing homeowners with an additional tax deduction in addition to the deduction allowed under Section 24(b) for home loan interest payments. Section 80EEA allows a deduction of up to Rs 150,000 if certain conditions are met, such as the loan must be approved within the fiscal year 2019-20, the stamp value of the house must be less than Rs 45 lakh, and the taxpayer must not own any other residential property at the time of loan approval.

In succeeding finance bills, the loan’s sanction duration was extended from March 31, 2020, to March 31, 2021, and finally to March 31, 2022. However, no such extension for sanction of the loan was offered in the budget 2022.

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