With the budget every year, there are amendments to income tax and other laws. In the recent budget in Feb 2022, some significant rules have been introduced or amended to wider the scope of the Income Tax. Let's look at those rules in this article.
Filing of updated return
A new income tax provision has been passed to correct any errors or unreported income that resulted in the person paying less tax in the previous tax return. The revised return can be filed after the conclusion of the relevant assessment year but before the end of the two-year period.
Updated Return filed within 12 months from the date of completion of AY
Penalty 25% of additional Tax Liability
Updated Return filed after12 months from the date of completion of AY
Penalty 50% of additional Tax Liability
TDS on perquisites to businesses (Section 194R)
A new TDS rule specifies that anybody who gives perquisites or benefits in lieu of the usual monetary consideration due to a resident for carrying on business or exercising a profession by such resident must deduct tax (TDS) before delivering such benefit or perquisite. The clause will take effect on July 1, 2022.
If the total value of the perk or benefit granted throughout the year exceeds Rs 20,000, the individual must deduct 10% TDS on the value of the perk or benefit. Individuals and HUFs, on the other hand, are not required to deduct TDS if their total business sales or gross income from the profession are less than Rs 1 crore or Rs 50 lakh respectively, throughout the year.
New rules on EPF interest
With effect from 1st April 2022, if an employee's contribution to a provident fund account exceeds Rs 2.5 lakh during the fiscal year, the interest received on the excess contribution is taxable in the employee's hands year after year. Currently, every amount contributed to an EPF account earns tax-free interest.
Tax on Crypto
In the Union Budget 2022, the government proposed a new provision for cryptocurrency taxation. Virtual digital assets include cryptocurrency and non-fungible tokens (NFTs). Anyone who transfers virtual digital assets is subject to a 30 percent tax on the profit earned plus cess and surcharges. There are no other costs that may be subtracted from such profit except the acquisition cost.
Furthermore, losses from crypto transfers cannot be offset against other sources of income to lower the tax burden, and such losses are not eligible for carrying forward to subsequent years. Further, losses from one class of crypto-asset cannot be offset by gains from another class of crypto-asset. In the hands of the receiver, gifts in the form of cryptocurrency are also taxable.
Also, the government has clarified that the infrastructure costs associated with mining cryptocurrencies should be viewed as a capital investment rather than an acquisition cost. In addition, while paying for virtual digital assets, the individual shall subtract TDS of 1% of the value of the virtual digital assets under section 194S.
Tax Relief for Covid Treatment
Tax exemption has been offered to people who have received money for Covid medical treatment, according to a press release issued in June 2021. Similarly, money received by family members on the death of a person owing to Covid will be exempt up to Rs. 10 lakhs if the payment is received within 12 months of the death. This change will take effect retrospectively from April 1, 2020.
These are the 5 rules that you must consider while planning taxes for Financial Year 2022-23