Insights on Indian Union Budget 2022-23

An overview of the Budget-2022

Though the budget continues the past initiatives, it has also taken bold moves towards improving infrastructure. This includes aligning laws to increase demand and support manufacturing to meet the same. Key announcements include:

• Policies for energy transition ambitions with battery swapping, e-mobility, blended fuels, etc.
• Amendments to improve the efficiency of the direct and indirect tax process
• Policies to further propel ‘Make In India’
• Announcement of projects for lower-income housing

Key announcements in Direct taxation

• An aim to reduce the fiscal deficit to 4-4.5% was announced.
• Capital expenditure is pegged at INR 7.5 trillion, which is 2.9% of GDP.
• Commitment to achieving 280 Gigawatts by 2030 via PLI schemes.
• SEZ act to be revamped with a partnership between state and central.
• Introduction of digital rupee for efficient currency management

No changes in individual taxation, though new initiatives were announced like:

• Alignment of cooperative society taxation with corporate taxes
• Surcharge on LTGC restricted to 15% for all asset classes
• COVID-19 related tax exemptions through Corporates or other means brought into law
• No changes in corporate tax rates

Clarifications shared for mergers include:

• When a merger appeal is pending approval, the successor entity would be considered for proceedings
• Provisions enable filing modified returns on successor entity within 6 months of order.
• Goodwill needs to be treated as a sale of the asset.
• Slump transfer definition modified to include ‘sale’ aspect.

Expense deduction was rationalized via:

• Making surcharge and cess no more taxable.
• Section 14A disallowance is now applicable, including in the case of no exempt income.
• It was clarified that for section 43B allowance, conversion of interest liability into debentures is not constructive payment.
• Disallowance of expenditures done for illegal payments, for India or abroad.

Virtual digital assets are made taxable, though not lega -lTransfer of digital assets taxed at 30%:

• No loss carry forward is allowed.
• 1% TDS applicable on transfer of digital assets.
• Gifting of digital assets is also taxable.
• No deductions, except the cost of acquisition, is allowed.

Announcements for withholding taxes include:

• WHT on the transfer of immovable property with a rate of 1% of transfer value or stamp duty value - whichever is higher
• Period of non-filing of tax returns reduced to 1 year.
• 10% tax applicable on the corporate gift, incentives, or benefit receivers
• Non-resident taxpayers can approach an assessing officer to appeal for grossed-up cases

Other announcements include:

• Only in case of an increase in income taxpayers can update their tax returns with a 25-50% surcharge + cess with applicable interest.
• Amendments made in litigation procedures.
• Equity shares, AIFs, REITs, etc. come with bonus and dividend stripping.
• Changes in compliance processes for charitable trusts.

Key announcements in Indirect Taxation

Changes in GST and ease of doing business are a focus on this section of the budget:

• Extensions or changes in timelines for GST credit, refunds, filing, etc. announced.
• To make the ecosystem responsible, non-filing of a GST in a particular month would result in locking for the next month.
• Restrictions on the utilization of ITC for tax payments were introduced.
• Stricter vendor qualification in their compliance needs to be done to ensure one doesn’t get their credit denied.
• Late fee applicable in case of delay in filing TCS returns.
• An 18% interest is applicable on using incorrect ITC.

Legislative changes in customs were announced as follows:

• Provisions to provide more power to customs officials.
• Facilitation of faceless proceedings can be done by two or more officers jointly.
• Changes in advance ruling introduced validity, timelines, application fees, etc.
• Automation and digitization via custom portals.
• Tariff changes across imports to promote local manufacturing.

Other changes across SEZ laws to enable enterprises were also announced.

Overall, the Budget-2022 aims to enhance the cause of ‘Make In India’ and optimize present processes via clarifications and amendments. Watch the webinar for a detailed explanation.