Budget 2022 for Salaried Investors: No change in Tax regime
Finance Minister Nirmala Sitharaman presented the Union Budget 2022-23 today. Against the budget 2022 expectations for salaried employees of reforms in the existing tax slabs, the 2022 budget for salaried employees proposed no changes in the existing tax regime or the income tax slabs. However, the budget 2022 for salaried employees introduced a few tax changes and revised deduction limits. Furthermore, we now finally have a new tax rate of 30% on gains made from the transfer of any virtual digital asset, being the main highlight of budget 2022 highlights for salaried employees.
No Changes in Income Tax Slabs
The Union Budget 2022-23 did not propose any change in tax slabs for the personal income category. The budget 2021 taxation slabs remain the same as follows:
Income Tax in Budget 2022
|Income Slab (in Rs)||Tax Rate (of the total income)|
|Up to 2.5 lakhs||Nil|
|2.5 - 5 lakhs||5%|
|5 - 7.5 lakhs||10% + Rs 12,500|
|7.5 - 10 lakhs||15% + Rs 37,500|
|10 - 12.5 lakhs||20% + Rs 75,000|
|12.5 - 15 lakhs||25% + Rs 1,25,000|
|Above 15 lakhs||30% + Rs 1,87,500|
The taxation budget 2022 with no changes in the tax rates came against the prevalent expectation, particularly from the salaried employees section. There were hopes that the Finance Minister is going to introduce a new tax regime with a tax exemption for higher income slabs and rationalization of the tax rates. However, there are no such Union budget 2021 highlights for salaried employees in terms of income tax.
Nirmala Sitharaman, though updated that taxpayers can now update their ITR within up to 2 years of the assessment year, which is one of the key budget highlights 2022 for salaried employees. She said, "To provide an opportunity to correct an error, taxpayers can now file an updated return within two years from the relevant assessment year"
Taxation on Virtual Digital Assets
The long awaited tax rate on transfer of digital assets is now with us. The Union Budget 2022-23 proposed a tax rate of 30% on the gains made from the transfer of digital assets. The cryptocurrency trader community now has some clarification on the crypto tax. The Finance Minister further added that the losses made from the transfer of crypto assets cannot be set off against any type of income or gains. Also, the digital assets transferred as gifts will be taxed in the hands of the recipient.
She also proposed a TDS rate of 1% on payments made in relation to the transfer of virtual digital assets, above a certain threshold.
Apart from introducing the new tax rate, the Finance Minister also revealed that a Central Bank Digital Currency (CBDC) backed by RBI will be introduced by the next year.
Besides, the Budget also proposed that the Long Term Capital Gains will attract a surcharge only at 15% for all asset classes. The other changes include an increased deduction limit for contributions made in NPS by state government employees, tax relief to persons with disability, and tax exemption on money received on COVID-19 treatment and compensation for death.
Here was the pre-budget expectations for salaried investors.