Key Highlights of Union Budget 2022-23

Tax Proposals

Direct Tax

Tax Rate Rationalisation:

• Reduction in rate of the alternate minimum tax rate for Co-operative societies from 18.5% to 15% and surcharge from present 12% to 7% for those having total income of more than 1 crore and up to 10 crores.
• Surcharge to be capped at 15% for long-term capital gains on all assets.
• Concessional rate of 15% on dividends received by Indian companies from specified foreign companies has been proposed to be withdrawn.

Clarifications and Explanations:

• Insertion of an explanation effective retrospectively from April 2005 which clarifies that deduction in respect of cess paid on income tax is not allowable as business expenditure. Further, the term “tax” includes and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax.
• Insertion of an explanation to clarify that expenditure incurred during a previous year in relation to an exempt income shall not be allowed under Section 14A of the Income Tax Act (the Act) even in case such exempt income has not accrued or arisen or has not been received during the previous year.
• Any loss, whether brought forward or otherwise, or unabsorbed depreciation shall not be allowed to be adjusted against any undisclosed income identified consequent to a search initiated or a requisition made or survey conducted.
• Insertion of an explanation to clarify that conversion of the outstanding interest liability into debentures or other instrument to defer the payment shall not be deemed to be actual payment and hence not allowable as deduction until actual payment under Section 43B of the Act.
• If a question of law in the case of an assessee is identical to a question of law already pending in appeal before the jurisdictional High Court or the Supreme Court in any other case, the filing of further appeal in the case of the assessee by the department shall be deferred till such question of law is decided by the jurisdictional High Court or the Supreme Court.

Tax Deduction / Collection at Source:

• In case “specified person” does not file return of income for the preceding financial year, the amount of tax collected and deducted at source is Rs. 50,000/- or more for the said year and the due date has expired, tax is to be deducted or collected, as the case may be, at higher rates.
• In case of transfer of an immovable property (other than agricultural land), tax is to be deducted at 1% of higher of the sum paid or credited or the stamp duty value (SDV) of such property, provided the SDV and the consideration both are INR 50 lacs or more.
• Income on transfer of any “Virtual Digital Asset” (VDA) net of cost of acquisition proposed to be taxed @ 30% with no deduction or set off of any loss against any income. Further, tax @ 1% to be deducted at source on payment for such transfer. VDA includes crypto currencies, NFTs and other similar tokens.
• Tax to be deducted at source @ 10% by the person giving any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession if the aggregate value of such benefits exceed INR 20,000 during a financial year.

Other Key Proposals:

• Filing of an updated return of income by any person has been proposed to permit filing of updated return within a period of 2 years from the end of relevant assessment year in case where there is no reduction in liability or increase in refund or losses in such updated return.
• Provisions pertaining to bonus stripping and dividend stripping proposed to be made applicable to securities and units. The definition of “Units” has been modified to include the Units of Business Trusts such as InvIT, REIT and AIF.
• Income of a non-resident from offshore derivative instruments, or over the counter derivatives issued by an offshore banking unit, income from royalty and interest on account of lease of ship and income received from portfolio management services in International Financial Services Centre shall be exempt from tax, subject to specified conditions.
• The period of incorporation for eligible start-ups who are provided tax incentives for three consecutive years out of ten years to be increased up to the 31st day of March, 2023.
• Extension of the last date for commencement of manufacturing or production for new domestic manufacturing companies exercising the option for concessional tax of 15% till 31st March, 2024.

Indirect Taxes

Goods and Service Tax

• The time limit for availing of input tax credit by a registered person in respect of any invoice or debit note, issue of credit notes, the rectification of errors in the return of outward supply or in GSTR 3B or return of TCS, pertaining to a financial year has been extended till 30th November of the following financial year.
• The registration of a person shall be liable for cancellation, where a person paying tax (other than a person opting for composition scheme) has not furnished returns for a financial year beyond 3 months from the due date and a person opting for a composition scheme has not furnished returns for such continuous tax period as may be prescribed.
• Transfer of amount available in electronic cash ledger (ECL) of a registered person to the ECL of a distinct person to be allowed in case the registered person has no unpaid liability in electronic liability register. Such transfer is to be deemed as a refund from the electronic cash ledger.

• Restrictions will be prescribed for utilization of the amount available in the electronic credit ledger.
• GST Council empowered to prescribe the maximum proportion of output tax liability which may be discharged through the electronic credit ledger.

Customs

• Customs duty on import of certain items has been proposed to be modified and the concessional rates of duty have been proposed to be phased out.

Non-Tax Budget Highlights

Ease of Doing Business and Digitisation:

• Ease of Doing Business EODB 2.0 and Ease of Living, to be launched to improve productive efficiency of capital and human resources by active involvement of States, digitisation of manual processes and interventions, integration of the Central and State-level systems through IT bridges, a single point access for all citizen-centric services, along with the standardization and removal of overlapping compliances.
• Scope of PARIVESH (single window portal for all green clearances), will be expanded to provide information to the applicants on specific approvals based on location of units to enable application for approvals through a single form, and tracking of the process through Centralized Processing Centre-Green (CPC-Green).
• An open platform for the National Digital Health Ecosystem to be rolled out consisting of digital registries of health providers and health facilities, unique health identity, consent framework, and universal access to health facilities.
• The adoption or linkage with National Generic Document Registration System (NGDRS) with the ‘One-Nation One-Registration Software’ will be promoted as an option for uniform process for registration and ‘anywhere registration’ of deeds & documents.

• Paperless, end-to-end online e-Bill System will be launched for use by all central ministries for their procurements to enhance transparency, reduce delays in payments and enable the suppliers and contractors to submit digitally signed bills online and claim and track their status from anywhere.
• Use of surety bonds as a substitute for bank guarantee will be made acceptable in government procurements. IRDAI has come up with the framework for the issue of surety bonds by insurance companies.
• The Central Government will work with the state governments for the reduction of time required for all land and construction-related approvals.

Digital Payments and Digital Economy:

• Central Bank Digital Currency (CBDC) – Digital Rupee to be introduced using blockchain and other technologies. To be issued by the Reserve Bank of India starting 2022-23.
• The financial support for digital payment ecosystem announced in the Budget for the financial year 2021-22 will continue in 2022-23 to encourage further adoption of digital payments and promote the use of payment platforms.

Other Key Highlights:

• The Special Economic Zones Act will be replaced with a new legislation to enable the States to become partners in ‘Development of Enterprise and Service Hubs’ which will cover all large existing and new industrial enclaves to optimally utilise available infrastructure and enhance competitiveness of exports.
• The Centre for Processing Accelerated Corporate Exit (C-PACE) with process re-engineering, will be established to facilitate and speed up the voluntary winding-up of companies from the current requirement of 2 years to less than 6 months.
• Amendments in the Insolvency and Bankruptcy Code will be carried out to enhance the efficacy of the resolution process and facilitate cross border insolvency resolution.
• Energy efficiency and savings measures will be promoted in large commercial buildings through the Energy Service Company (ESCO) business model to facilitate capacity building and awareness for energy audits, performance contracts, and common measurement & verification protocol.

As a part of the Union Budget 2022-23, we would like to take you through the upcoming legislations/ policies/ regulations/ ease of doing business/digitization initiatives proposed by the Government of India. Please also take note of the impetus proposed to be given to start-ups and MSMEs and the areas where the private sector will be encouraged to get involved. Click on the link below to read more:

Budget 2022-2023 Key Highlights Part 2

Budget 2022-2023 Key Highlights Part 3 – Industry Specific Impact

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