Union Finance Minister Nirmala Sitharaman announced the Union Budget 2022 on Tuesday. While there were no changes in the income tax slab or standard deductions, the budget announced some reforms for digital assets, and also relaxation in the correction of ITR filings. Â
Let us look at the announcements made by the Finance Minister that relate to investments and may be helpful for investors.
Launch of digital rupee
The Indian government has been discussing launching a digital currency for quite some time. It looks like it might finally see the light of the day.
In today’s budget, finance minister Nirmala Sitharaman announced that the government is planning to launch a digital rupee based on blockchain and other technologies in the financial year 2022-23. The Reserve Bank of India will issue it.
“The introduction of central bank digital currency will give a big boost to the digital economy. Digital currency will also be a cheaper and more efficient currency management system,” the finance minister said today.
This move comes after the RBI voiced its concern regarding the rise of private cryptocurrencies and its frenzy among individuals.
Tax on cryptocurrency
The tax on gains from digital assets, i.e., cryptocurrency, had lacked clarity.
However, in this budget, the Finance Minister announced that the profits from digital assets would fall in the highest tax bracket of 30%. She also mentioned that the crypto investors could not set off in case of losses. Moreover, only the acquisition cost would be included while calculating the income from digital assets.
As per her speech, 1% TDS will also be deducted on the transfer of digital assets. The person receiving the digital assets as gifts will also have to pay tax.
Tax deduction on NPS for state govt employees increased to 14%
People who work for the state governments will get a tax break of 14% on the NPS contributions made by their employer, which is the state government. Currently, state government employees can get a tax break of 10% for their employer’s contribution. This new update will start in FY 2022-23.
Currently, only the people who work for the central government can get a tax break of 14% for money the central government puts into their NPS account.
The goal is to ensure that the state and central government employees get the same tax benefits for their employer contributions.
Contribution to NPS can reduce taxable income in three different ways.
Section 80CCD allows you to deduct up to Rs 1.5 lakh in NPS contributions in a single financial year. This deduction is limited to Rs 1.5 lakh under section 80C’s maximum limit.
Section 80CCD(1B) allows for an extra deduction of up to Rs 50,000.
Besides the Rs, 2 lakh maximum, any contribution from the employer is deductible under section 80CCD (2) of the Act.
Your employer’s contribution to your NPS account is the only tax break available under both the new and old tax regimes.
Opportunity to correct an error in income tax Â
The budget also announced that taxpayers can now file an updated return within two years from the relevant assessment year.
“We have further simplified the tax system. Introducing a new updated return where people can file updated returns within two years of the filed IT Return,” the Finance Minister said.
This means that the individual taxpayers will have more time to complete revised income tax returns if they have missed disclosing income at the time of filing.
Currently, an individual has until December 31 (unless the government extends the deadline) to amend their ITR to provide a complete picture of the income obtained from various sources during the fiscal year. Taxpayers will have two years from the end of the relevant assessment year to file their proper ITR.