7 major changes in income tax rules effective from April 1, 2022
Important changes in income tax rules
As part of the union budget 2022-23, cryptocurrency assets are proposed to be taxed at 30%. From April 1, cryptocurrency gains will be taxed at 30%, the highest tax bracket. This is the same rate as lottery winnings. All virtual digital assets, including bitcoin and non-fungible tokens (NFTs), will be taxed at the same rate. In addition, crypto received as a gift would also be taxable.
According to the proposed section 115 BBH of the Income-tax act, 1961, a loss from transferring a virtual digital asset cannot be set off against income derived from the transfer of another virtual digital asset.
Beginning July 1, 2022, every single crypto transaction will be subject to a 1 per cent tax deduction at source under Section 194S of the Income Tax Act. The TDS will be deducted regardless of whether a profit or loss is made.
IT Return: Filing an updated return
On April 1, individuals will have another chance to update their income tax returns (ITR). The updated return can be filed if additional information is missing from the original ITR. Therefore, a new subsection139(8A) has been added to the income tax act to allow the taxpayers to file an updated return. Individuals have three years from the end of the financial year to file updated returns. In any case, a person will have to file this return, regardless of whether they have to pay an additional tax of 25% to 50%.
NPS deduction to State government employees
The state govt employees will now be able to claim deduction under section 80CCD (2) for NPS contribution by the employer up to 14% of their basic salary and dearness allowance, which is in line with the deduction available to the central government employees under the said section. The state government employees are now at the same level as the central government employees.
Currently, the central government contributes 14% of the salary to the National Pension System (NPS), which is deductible from the wages of an employee. Employers contribute 10% tax-free to the state government.
Contribution to the PF account
The central board of direct taxes has implemented the income tax (25th Amendment) Rule 2021 as of April 1, 2022. This will result in a tax-free contribution limit of Rs 2.5 lakh (Rs 5 lakh for government employees) being imposed on Employee Provident Fund (EPF) accounts. If an employee earns more than this amount, then their interest will be taxable.
As of April, the statement for EPF account statements will contain two sections – one reflecting the taxable component, and another reflecting the non-taxable component of the interest portion.
No ITR Needed for Senior Citizens
Senior citizens who have reached the age of 75 will no longer have to file income tax returns (ITR) for FY 2022-23 as of April 1, 2022.
However, this exemption from filing ITR is available provided the senior citizens fulfil certain conditions. Additionally, the older citizen must submit a declaration to the bank.
Section 80U – Tax Deduction for Disabled Individuals
As of April 1st, the government will pay an annuity and lump sum to differently-abled dependents during the lifetime of their parents/guardians upon the parents reaching 60 years of age until now, a parent or guardian could claim a deduction only if a differently-abled person received a lump-sum payment or annuity upon the parent’s death. The parent or guardian can get insurance coverage for such a person.
A resident individual who has been certified as a person with a disability by the medical authority can claim the tax benefit under Section 80U.
Tax relief for covid-19 treatment expenses
The Finance Ministry announced that any financial assistance received by a taxpayer for Covid-19 treatment expenses is tax-exempt. This also applies to assistance from all other sources with a limit.
Additionally, if the family member of a deceased COVID-19 affected employee receives any ex-gratia payment from the employer, then the complete amount will be tax-exempt.
Similarly, if the financial help is received from an external source, the amount will be exempt up to 10 Lakh, provided the amount is received within 12 months from the date of death of the individual.
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