Catch the Budget 2022 Highlights
What is a Union Budget?
According to ARTICLE 112 of the Indian Constitution, the Union Budget of a year is an Annual Budget of India or the annual financial statement of the country. It is an estimate of income and expenditure of our country for the financial year.
Union Budget 2022, Date and Time
The Union Finance Minister of India, Nirmala Sitharaman, will present the Union Budget for the Financial Year 2022-2023 on February 1, 2022, at 11 am. It will be broadcast live on Lok Sabha TV and social media channels of the Finance Ministry such as Twitter and Youtube. The Union Budget 2022-2023 will be presented on February 1 2022, in the paperless form to go green. Also, details will be available on the Union Budget Mobile App by the National Informatics Centre.
Budget Expectations for Direct Taxes
Increase in Basic Exemption Limit
It is expected that this budget will see reduced tax rates. For individuals small taxpayers, to provide relief currently, the tax rates range from 5 per cent to 35 per cent plus the surcharges and cess.
The basic exemption limit for Income Tax, which is currently INR 2.5 Lac, is also expected to increase.
Standard Deduction for Income From Salaries
Since our economy at a larger scale is struggling with financial needs, majorly the salaried class, budget 2022 is also expected to bring some exemptions and thereby increase the citizens’ retained income on a larger scale.
Due to the pandemic, many faced a reduction in salaries or no increment, and also many people lost their jobs due to shut down. The standard deduction available to salaried employees under the Income Tax is INR Fifty Thousand. This is expected to increase so that the salaried class can retain money in hand.
Budget Expectations For Indirect Taxes
- Due to the effects of the pandemic, the focus is expected on benefits and schemes to the healthcare medicine sectors.
- Cess is expected to be levied on positively affected industries due to the pandemic.
- Due to the pandemic, many faced a reduction in salaries or no increment, and also many people lost their jobs due to shut down. The standard deduction available to salaried employees under the Income Tax is INR Fifty Thousand. This is expected to increase so that the salaried class can retain money in hand.
Customs and Duties
- Because of the pandemic, international trade was severely affected due to increased costs, which hampered imports and exports, leading to many small international traders having higher business costs. So, easements in customs duties and other import duties are expected from the budget.
Budget Expectations 2022 : Start-ups and MSMEs
Expectation of lower tax rates
SMEs and MSMEs are the highest employment generating sector in our country. Thus, benefits for this industry means benefits to the employees and the stakeholders, becoming a vast constituent of our population.
Since MSMEs and SMEs are the backbone of our country, it is expected that more schemes will be launched and the existing ones to make capital available easily. Loans with lower or no interest rates, ease in raw material procurement via imports, lower GST rate than the existing one at 18 per cent.
The pandemic hit the start-ups hard; the unforeseen epidemic that affected globally washed out many of their business plans and expansion strategies.
Currently, Income Tax provides various benefits to start-ups such as deduction under Section 80-IAC which provides deduction to the eligible start-up as defined under the act up to 100% of the business profits for three consecutive assessment years, which is also subject to prescribed conditions.
Expectations of Lesser Compliances
Exemptions in compliances are also expected to be reduced and made flexible to provide relief in managing the businesses.
Also, new policies and schemes are expected to be rolled out that promote the vision of Digital India. These relaxations help ease doing business, support working capital, and fulfil the capital requirements of start-ups.
The policies and legal framework that cause hurdles in setting up a business are expected to be eased to push the country towards the Make in India movement. Once implemented, these policies will boost entrepreneurship, profits retained within the country, generate employment across various goods and services sectors, and increase exports that contribute to a higher GDP of the nation.
Other expectations from Union Budget 2022
- There is expected clarification of income Tax slab rates between the old regime and the new regime, which has been confusing to the public.
- Ever since the pandemic, most organisations have asked their staff to work from home, which has caused employees additional expenses of setting up their working environment at home such as internet connections, work desks, work stations etc. Tax rates on purchasing such products and services are expected to be reduced.
- During the pandemic, we saw a shift in the education system from the traditional approach to an online schooling method. This system provoked an increased need for electronic devices such as tabs, mobile phones, computers, laptops and their accessories as study material. In line with the pandemic situation, domestically and globally, electronic devices have become a necessity for education at all levels. And thus, to promote education, the expenses are expected to be allowed to claim a deduction. The GST rates on purchasing such study materials are expected to be reduced.
- Provisions of Section 80DD are also expected to be in place, which allows a deduction to a resident individual or HUF (Hindu Undivided Family) who has incurred any expenditure for treatment of a dependent person with a disability. The deduction under this section is also allowed for the amount paid or deposited in a scheme of LIC or another insurer for maintenance of such a dependent person. However, the assessee cannot get the maturity amount of the policy, for which he has paid all the premiums, till the dependent is alive.
- These conditions under Section 80DD are expected to be relaxed.
- It is expected that there will be no Dividend Distribution Tax (DDT) on the dividend income from domestic companies for the year 2022-2023 as well.
- Partnerships Firms and Limited Liability Partnerships (LLPs) which are taxable at a flat rate of 30 per cent are expected to have a lower tax rate.
- India currently has many investors in cryptocurrency, with an estimated investment of ten billion dollars. Today, there is ambiguity regarding the taxability of income and gains through cryptocurrency and other crypto assets. Besides, there is no clarity regarding the nature of the income tax head under which it will fall and the rate applicable to such incomes. It is expected that Crypto-currencies will be taxed, along with it, there will be clarifications on issues mentioned above.
All things considered, the budget is expected to be a mix of certain levies and reliefs with a primary focus to provide ease to the businesses and households affected due to COVID-19. Initiatives and schemes are expected to be launched to help start-ups and small businesses recover from the losses due to the ongoing pandemic. Industries that enjoyed a boom due to and during the pandemic may face an increase in tax rates. It is also expected that there will be a change in the general income tax slabs and rates.