Today, i.e. 1st February 2022, Finance Minister of India presented Union budget 2022 . The Finance bill is the part of union budget which includes various tax proposal for next FY i.e. 1st April 2022 to 31st March 2023.
The Finance bill is a weapon under Fiscal policy to control economic conditions in the country. For understanding by common man, union budget can be understood as annual accounts of country. It includes revenue budget and capital budget for last year, current year and next year. For example, union budget 2022, shows figures of revenue and capital budget with fiscal deficit for following years:-
- Actual Figures for FY 2020-21
- Budget Estimates for FY 2021-22
- Revised Estimates for FY 2021-22
- Budget Estimates for FY 2022–23
As per budget documents, Fiscal Deficit target set at 6.4% for FY 2022-23.
- FY2022-23 total expenditure estimated at Rs 39.45 lakh crore.
- Total Receipts other than borrowing estimated at Rs 22.84 lakh crore.
Finance bill provides supporting details to budget estimates for next year i.e. FY 2022-23. Highlights of Union Budget 2022 is given below:-
Tax proposals in Union budget 2022
- In Budget 20222, No change is proposed in personal tax rates/slabs.
- The concept of “Updated Return” is introduced. An “Updated return” can be filed within two years from the end of the relevant assessment year. Some taxpayers may realize that they have committed omissions or mistakes in correctly estimating their income for tax payment. Updated Return will provide an opportunity to correct such errors, Assessee file an Updated Return on payment of additional tax.
- Currently, cooperative societies are required to pay Alternate Minimum Tax at the rate of18.5%. However, companies pay the same at the rate of 15%. To provide a level playing field between co-operative societies and companies, It is proposed to reduce this rate for the cooperative societies also to 15%..
- It is proposed to reduce surcharge on cooperative societies to 7% from 12%, for those whose income is between Rs 1 crore and Rs 10 crore.
- In an effort to establish a globally competitive business environment for certain domestic companies, a concessional tax regime of 15 per cent tax was introduced by government for newly incorporated domestic manufacturing companies. It is proposed to extend the last date for commencement of manufacturing or production under section 115BAB by one year i.e. from 31st March, 2023 to 31st March, 2024.
- Deduction for employer contribution to NPS increased to 14% from 10% earlier for State govt employees on par with central govt employees
- There has been a phenomenal increase in transactions in virtual digital assets (like crypto currencies). The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime. Accordingly, for the taxation of virtual digital assets, It is proposed to provide that any income from transfer of any virtual digital asset shall be taxed at the rate of 30 per cent. · No deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition. Further, loss from transfer of virtual digital asset cannot be set off against any other income. · Further, in order to capture the transaction details, I also propose to provide for TDS on payment made in relation to transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold. · Gift of virtual digital asset is also proposed to be taxed in the hands of the recipient.
- The present law provides for deduction to the parent or guardian only if the lump sum payment or annuity is available to the differently abled person on the death of the subscriber i.e. parent or guardian. It is proposed to s allow the payment of annuity and lump sum amount to the differently abled dependent during the lifetime of parents/guardians.
- In the globalized business world, there are several works contracts whose terms and conditions mandatorily require formation of a consortium. The members in the consortium are generally companies. In such cases, the income of these AOPs has to suffer a graded surcharge upto 37 per cent, which is a lot more than the surcharge on the individual companies. Accordingly, It is propose to cap the Surcharge of these AOP’s at 15 per cent.
- The long-term capital gains on listed equity shares, units etc. are liable to maximum surcharge of 15 per cent, while the other long term capital gains are subjected to a graded surcharge which goes upto 37 per cent. I propose to cap the surcharge on long term capital gains arising on transfer of any type of assets at 15 per cent.
- It is proposed that no set off, of any loss shall be allowed against undisclosed income detected during search and survey operations.
- It is proposed to provide for tax deduction by the person giving benefits under business promotion strategy, if the aggregate value of such benefits exceeds ` 20,000 during the financial year.
- It is proposed to provide that, if a question of law in the case of an assessee is identical to a question of law which is pending in appeal before the jurisdictional High Court or the Supreme Court in any case, the filing of further appeal in the case of this assessee by the department shall be deferred till such question of law is decided by the jurisdictional High Court or the Supreme Court.
- Duty concessions being given to promote electronics manufacturing, wearables and hearables devices included. Duty concessions to parts of mobile phones including camera module etc
- More than 350 exemptions on some agri products, chemicals, drugs, etc to be phased out.
- Concessional customs duty on capital goods to be phased out, initial rate of 7.5% to be imposed.
Some other Announcements of Union budget 2022
- Introduction of Central Bank Digital Currency (CBDC) will give a big boost to digital economy. Digital currency will also lead to a more efficient and cheaper currency management system. It is, therefore, proposed to introduce Digital Rupee, using blockchain and other technologies, to be issued by the Reserve Bank of India starting 2022-23
- India to launch sovereign green bonds:- Funds will be used for projects that will help reduce carbon intensity of the economy.Sovereign green bonds will be part of government’s borrowing programme in FY23.Proceeds to be deployed in public sector projects
- National Ropeways Development Programme to be taken up in PPP mode with the aim to improve connectivity, besides promoting Tourism
- Contracts for laying optical fibre in villages to be awarded under BharatNet project under PPP in 2022-23
- Amendments for the Bankruptcy Code:- (i) IBC amendments to enhance efficiency of resolution process (ii) facilitate cross-border insolvency resolution (iii) To speed up voluntary winding up of companies
- A push for Electric Vehicles:- A battery-swapping policy to be brought out with interoperability standards to boost EV ecosystem. Battery Swapping Policy will be brought out and inter operational service will be formulated. Private sector will be encouraged to create sustainable and innovative business models for battery and energy as a service, improving the efficiency in the EV ecosystem.
- E-passports, the issuance of E passports using embedded ship and futuristic technology will be rolled out in 2022-23 to enhance the convenience for the citizens in their overseas travel.
- 100% of 1.5 lakh post offices will come on the core banking system, enabling financial inclusion and access to accounts through net banking, mobile banking, ATMs, and also provide online transfer of funds between post office accounts and bank accounts.
- ‘One Class One TV Channel‘ will be increased from 12 to 200 TV Channels to provide supplementary education in regional languages for class 1-12.
- A digital university will be developed to provide access to students for world-class quality education with ISTE Standards. Digital University to be set up to provide access to students across country, to world class quality universal education, with personalised learning experience
- Hospitality services by the small & medium sector are yet to bounce back, therefore, the government has decided to extend the ECGL service for this sector by March 2023 with an increased cover of Rs 50,000.
- 5G spectrum auctions to be conducted this year.
- For urban capacity building, modernization of building by laws, town planning schemes and transit oriented development will be implemented.
- Centres of Excellence will be established with an outlay of 250 crore for urban sector development.
- ‘One Nation, One Registration‘ will be established for anywhere registration to facilitate ease of living & doing business.
Source and Application of funds for Government
Income tax along with others like GST, Excise duty, Customs, corporation tax and non-tax revenue, form the the part of total revenue of government. This revenue is used by the government in various forms like pensions, defence, social security schemes, subsidy, Interest on loan and state transfers etc. As per budget 2022, following are the sources of revenue along with their percentage shares in Total Revenue:-
- Income tax (15%)
- Union Excise duties (7%)
- Corporation tax (15%)
- GST (16%)
- Customs (5%)
- Non-tax Revenue (5%)
- Non-Debt capital Receipts (2%)
- Borrowings and other liabilities (35%)
Total Revenue so collected is applied for following expenditure (also showing their percentage share in Total Expenditure):-
- Pensions (4%)
- Interest payment (20%)
- Defence (8%)
- Subsidies (8%)
- Central Sector Schemes (15%)
- Centrally sponsored schemes (9%)
- Finance commissions and other transfers (10%)
- States’s Share of taxes and duties (17%)
- Other expenditure (9%)
Click below given link for Complete budget documents:-