No change in tax slab; tax deduction limit of govt employees increased to 14%

Hyderabad: Presenting the Union Budget 2022 on 1 February, finance minister Nirmala Sitharaman announced that there will be no changes in the existing Income Tax slabs. But Budget 2022 proposed permission to allow individuals to file an updated tax return within two years of the relevant assessment year, i.e. those who have committed errors while filing Income Tax returns can correct them within two years.

In a move to bring parity between state and Central government employees, Budget 2022 proposed an increase in the tax deduction limit for state government employees from 10% to 14%. That is, hereafter 14% of the income will be deducted and sent to the National Pension System (NPS) for state government employees. This will enhance the social security benefits of state government employees, too.

Start-ups

Tax incentives were available for start-ups established before 31 March 2022 but considering the pandemic and its impacts, the finance minister announced that this eligibility criterion has been extended to another year, i.e. start-ups established before 31 March 2023 will also be eligible for this reduction.

The government had introduced a concessional tax regime of 15% for domestic manufacturing companies but the last date for commencement of manufacturing for these companies was set as 31 March 2023. But Tuesday's budget has extended this to 31 March 2024.

Besides, to offer a level playing field between cooperatives and companies, the Income Tax rates of cooperatives have been reduced to 15% and the cooperative surcharge will also be reduced from 12% to 7%

Virtual digital assets

Considering the increased digital asset transactions, the government has decided to tax 30% of the income from any transaction made via digital assets. Another step towards a digital economy is the proposal to introduce Digital Rupee in 2022-23. Ms. Sitharaman said digital currency will lead to a more efficient and cheaper currency management system.

The finance minister said 2022 has seen the highest gross collection of GST since its inception, around Rs. 1.4 lakh crore. "GST revenues are buoyant despite the pandemic," she said.

Customs duty

In order to boost the gems and jewellery sector, the finance minister announced that Customs duty on cut and polished diamonds and gemstones is reduced to 5%.

Duty on umbrellas is being raised to 20%. Exemption on parts of umbrellas is being withdrawn.

An exemption is also rationalized on implements and tools for the agricultural sector that are manufactured in India.

The minister also assured that Customs duty on electronic devices has been carefully assessed and marked so as to promote its domestic manufacturing.

Customs duty exemption given to steel scrap last year is being extended for another year to provide relief to MSME secondary steel producers.

To incentivize exports, exemptions are being provided on items such as buttons, zippers, specified leather, lining material, furniture fittings, and packaging boxes that may be needed for exporters of handicrafts, textiles, footwear, and other goods. Duty is being reduced on certain inputs required for shrimp aquaculture so as to promote its exports.