Know the key changes in the income tax rules before investment planning

 

With the commencement of the financial year 2022-23 in April, it is important to consider the new Income Tax rules which would be effective from 1st April 2022 in order to monitor and manage the tax implication on financial transactions effectively.

Suresh Surana, Founder – RSM India explained some of the key changes which would be effective from 1st April 2022 are as under:-

The Finance Act, 2022 provides for a taxation of virtual digital assets @ 30% u/s 115BBH of the Income Tax Act, 1961 (hereinafter referred to as ‘the IT Act’).

The loss incurred from any Virtual Digital asset would not be allowed to be set off against any other profit including that of any other Virtual Digital asset i.e. Intra head adjustment between VDAs is also not possible.

Further, no deduction in respect of any expenditure (other than cost of acquisition, if any,) or allowance shall be allowed. However, it has been clarified that Infrastructure costs incurred in the mining of VDA will not be treated as cost of acquisition as the same will be in the nature of capital expenditure.

Gifting of Virtual digital assets would also be taxed as receipt of virtual digital asset for nil or inadequate consideration shall be chargeable to tax in the hands of recipient u/s 56(2)(x) of the IT Act.

Also it is notable that the provisions of TDS would be applicable on transfer of virtual digital asset. As per section 194S of the Income Tax Act, any person responsible for paying to a resident any sum by way of consideration for transfer of a virtual digital asset, shall at the time of credit of such sum to the account of the resident or at the time of payment of such sum by any mode, whichever is earlier, deduct an amount equal to 1% of such sum as income tax thereon. The TDS provisions u/s 194S of the IT Act would be made applicable w.e.f. 1st July 2022.

Taxation of income from retirement benefit account maintained in a notified country

A newly inserted section 89A of the IT Act provides that any specified person i.e. a person resident in India who opened a specified account in a notified country while being non-resident in India and resident in that country would be subjected to tax in India (at the option of the specified person) on any income from any account maintained in a notified country in respect of his retirement benefits provided the income from such account is not taxable on accrual basis but is taxed by such notified country at the time of withdrawal or redemption.

The CBDT has vide Notification No. 25/2022/F. No. 370142/7/2022-TPL dated 4th April 2022 notified Canada, United Kingdom of Great Britain and Northern Ireland and United States of America (USA) to be notified countries for the purpose of the said section.

Further, Rule 21AAA has been notified to be made applicable w.e.f. 1st April 2022 to provide that any taxpayer exercising option u/s 89A would be required to file Form No. 10-EE and it shall be furnished on or before the due date for furnishing the return of income u/s 139(1) of the IT Act.

Also, such option once exercised for a specified account or accounts in respect of a previous year in Form No. 10- EE shall apply to all subsequent previous years and cannot be subsequently withdrawn for the previous year for which the option was exercised or any previous year subsequent to that previous year.

Applicability of Late Fees for not linking Aadhar and PAN

The last date to link Aadhar and PAN was 31st March 2022. In case any person required to link the Aadhar and PAN fails to do so, he would be subjected to a late fee of Rs. 500 where such linking is made within three months from 31st March 2022 and would be enhanced to Rs. 1000 beyond the said period of 3 months in accordance with Rule 114(5A) of the Income Tax Rules, 1961. The said rule would be made applicable w.e.f. 1st April 2022.

Filing of Updated I-T returns

The newly introduced section 139(8A) in the IT Act provides for filing of updated returns by the taxpayers. In accordance with the said section, any person, whether or not he has furnished a return, may furnish an updated return of his income or the income of any other person in respect of which he is assessable under the IT Act, within 24 months from the end of the assessment year (i.e. 36 months from the end of the relevant financial year), subject to other prescribed conditions.

Such change would not only enable the taxpayers to rectify any errors or mistakes in their original returns but also ensure voluntary tax compliance.

Contribution to the National Pension Scheme (NPS) to be hiked from 10% to 14% for State Government employees:

In accordance with Section 80CCD(2) of the IT Act, the eligible tax deduction for State government employees has been raised from 10% to 14% of their basic salary and dearness allowance for contribution to the National Pension Scheme.

Long-term capital gains tax

The applicability of the cap of 15% on surcharge w.r.t. long-term capital gains from equities and mutual funds u/s 112A of the IT Act would now be extended to all long-term capital gains u/s 112 of the IT Act as well w.e.f. 1st April 2022.

Discontinuance of Interest Deduction benefit u/s 80EEA:

Section 80EEA of the IT Act provides for tax deduction of Rs 1.5 lakh w.r.t. interest on home loans sanctioned between April 1, 2019 and March 31, 2022. Such deduction was in addition to the deduction availed by the taxpayer u/s 24(b) of the IT Act.

The said section would no longer be available w.e.f. 1st April 2022. However, taxpayers whose home loans have already been sanction before March 31, 2022 may continue to avail the said deduction.

Source:https://www.timesnownews.com/business-economy/personal-finance/know-the-key-changes-in-the-income-tax-rules-before-investment-planning-article-91370492

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