On Tuesday, Finance Minister Nirmala Sitharaman presented the Union Budget 2022. There were a slew of measures aimed at stimulating growth in the face of high and growing prices, as well as ongoing Covid concerns. However, there were astonishingly few changes to the personal income tax structure in a year that saw requests from numerous sides for some type of relief in the face of a pandemic.
The Budget 2022 focuses on ‘digital and technology,’ as well as sectors like as infrastructure, health, education, and the delivery of e-services to the general public. This Union Budget established the framework and roadmap for the economy over the next 25 years – from India at 75 to India at 100.
India had the highest GDP growth rate of any economy, at 9.2 percent. We are in the midst of the Omicron wave, and the rapidity of our vaccination effort has greatly aided us. The FM claimed that ‘Sabka Prayaas’ will continue to develop rapidly. A few important highlights of Budget 2022 in the major area are:
Income Tax – Direct Tax
- A new provision allows taxpayers to alter previous returns and include omitted income by making an extra tax payment. The revised return must be filed within two years of the end of the assessment year in question.
- For startups, the tax incentive term is extended by one year. Eligible businesses formed under Section 80-IAC will now be eligible for tax breaks until March 31, 2023.
- The corporate surcharge will be decreased from 12% to 7%.
- The Alternate Minimum Tax (AMT) will be decreased to 15% for co-operative societies.
- Income from the transfer of digital assets such as crypto currency will be taxed at a rate of 30%. There will be no deductions allowed, save for the cost of purchasing digital assets. Losses incurred from the sale of digital assets cannot be mitigated against other sources of revenue. Above the threshold, a 1% TDS will be imposed. Gifting digital assets is also taxable in the recipient’s hands.
- To achieve parity between central and state government employees, the Finance Ministry recommended raising the employer contribution level to the National Pension Scheme (NPS) Tier-I account from 10% to 14%.
- Once the parent or guardian of a differently-abled child reaches the age of 60, the parent or guardian can claim a tax deduction for payments of an annuity or lump sum made during the parent’s or guardian’s lifetime.
- Any surcharge or cess levied on income is not deductible as a business expense.
- Brought forward loss cannot be offset against unreported income discovered during any survey or search.
Indirect Taxes: GST and Customs
- Sections 16, 34, 37, 39, and 52 of the Central Goods and Services Tax Act make significant changes. The deadline for making modifications, corrections, uploading missed sales invoices or notes, or claiming any lost Input Tax Credit or ITC of one fiscal year is no longer September 30th of the following year, but November 30th of the following year.
- Section 29 of the CGST Act has been changed to allow for the cancellation of a GSTIN by an officer. If a composition taxable person fails to file an annual return for three months after the due date of April 30th of the following year, his registration may be revoked. Similarly, for every other taxpayer, the six-month consecutive default in return filing is replaced with the specified consecutive tax period default.
- Section 38, formerly known as supplying of inward supplies, has been fully altered to eliminate all references to GSTR-2 and replace them with GSTR-2A and GSTR-2B, with a new title of ‘Communication of details of inbound supplies and input tax credit.’ The deadline for non-resident taxable persons to file GSTR-5 has been pushed back from the 20th of the next month to the 13th.
- Sections 42, 43, and 43A, which deal with matching and reversing tax credits, have been removed.
- The gross GST revenue collection of Rs.1,40,986 crore in January 2022 was the highest since the start of GST.
- Concessional customs duty on capital goods imports would be phased off, with an initial rate of 7.5 percent imposed.
- More than 350 import exemptions for agricultural products, chemicals, pharmaceuticals, and other items will be phased out.
- Duty reductions on imports of phone chargers, transformers, and other electronic components promote domestic manufacturing.
- Imports of fake jewelry have been subjected to higher customs duties in order to discourage their sale. Duty on selected leather and packaging boxes has been cut to encourage exports.
- Customs duty on cut and polished diamonds and stones will be reduced to 5%.
- To assist MSMEs, the duty exemption on steel scrap has been extended by a year.
- Methanol’s customs duty will be decreased.
- To encourage gasoline blending, an additional excise fee of Rs.2 per litre will be levied on unblended fuel.
Allocation of funds
- India’s fiscal deficit is expected to reach 6.4 percent in FY23.
- The revised budget deficit is expected to be 6.9 percent of GDP.
- States will receive Rs 1 lakh crore in interest-free loans for 50 years to assist fund PM Gati Shakti-related investments.
- In 2022-23, the government’s effective capital spending is expected to be Rs 10.68 lakh crore, or around 4.1 percent of GDP.
- Capital spending will be increased by 35.4 percent in 2022-23, from Rs 4.54 lakh crore to Rs 7.50 lakh crore.
- 2 lakh Anganwadis will be improved in order to improve child health.
- After two years of education regression for school-age children, we must increase our efforts and spending to close the education gap. The NEP had called for a 6% GDP allocation for education. While we are still far short, the introduction of PM eVIDYA’s ‘One class, one TV channel’ program for schoolchildren and the construction of a digital university were both urgently needed.
- A hub-and-spoke strategy will be used to establish a digital university for online education centred on ICT.
- Choose ITIs in each state that will provide skilling courses.
- This will allow all states to provide extra education in regional languages to students in grades 1 through 12.
- The government will push funds for blended finance (the government’s contribution will be limited to 20%) for sunrise prospects such as climate action, agri-tech, and so on.
- NABARD will support a fund to finance agricultural and rural enterprise startups relevant to the farm produce value chain. Startups will assist FPOs and supply farmers with technology.
- Kisan Drones will be promoted for crop appraisal, digitization of land records, and insecticide and nutrient spraying.
- The procurement of wheat in Rabi season 2021-22 and the expected procurement of paddy in Kharif season 2021-22 will cover 1208 lakh metric tonnes of wheat and paddy from 163 lakh farmers, with Rs 2.37 lakh crore being paid directly to their accounts as MSP value.
- Farmers will soon be able to use high-tech services.
- Farmers’ MSP will be sent straight into their bank accounts.
- Natural farming without chemicals will be promoted in India.
- An open platform will be used to build the National Digital Health Ecosystem. It will consist of digital health provider and facility registries, a unique health identity, and universal access to health care facilities.
- The pandemic has moved mental health to the centre of public discourse. There will be the launch of a nationwide telemental health program.
Infrastructure, roads, railways, waterways, and logistics
- Over the next three years, new rail products in the form of ‘One Station – One Product,’ 400 next-generation Vande Bharat trains, and 100 PM Gati Shakti cargo terminals will provide integration of NIP with Gati Shakti and is likely to prove crucial in terms of employment generation because the transport network is rich in terms of backward and forward linkages with the rest of the economy.
- The draught DPRs for five river connections have been completed.
- In the next three years, 400 Vande Bharat trains with improved passenger efficiency would be created.
- The Budget prioritizes public investment in infrastructure modernization over the medium term, leveraging Gati Shakti’s ICT platform through a multi-modal approach.
- The PM Gatishakti master plan for expressways will be developed in the coming fiscal year.
- The scope of PM Gatishakti’s master plan will include the seven economic development engines.