Income Tax in Budget 2022

budget 2022 taxation

Nirmala Sitharaman tabled the Union Budget for the fourth time as Finance Minister of the country. The 2022-23 budget has remained a highly anticipated one as everyone was waiting to see what the government has on its plate for the different sectors and sections of the country after the economy has started recovering from the grip and damage done by the COVID-19 pandemic. The earning class was also expecting some sort of tax relief from the Finance Minister. The budget 2022 on taxation, however, offered no change in income tax rates but it offered some relief to different earning categories in the form of higher tax deduction limits and lower tax rates. Here are the key highlights of Budget 2022 taxation:

No Change in Income Tax Slabs

There are no budget 2022 tax changes in the personal income category. The Finance Minister kept the existing tax rates and slabs applicable for the upcoming fiscal year. Thereby, the tax rate rates applicable for different income slabs remains the same as follows:

Income Tax in Budget 2022

Income CategoryTax Rate (of the total income)
Up to Rs 2.5 lakhsNil
Rs 2.5 - 5 lakhs5% of the net income
Rs 5 - 7.5 lakhs10% of the net income + Rs 12,500
Rs 7.5 - 10 lakhs15% of the net income + Rs 37,500
Rs 10 - 12.5 lakhs20% of the net income + Rs 75,000
Rs 12.5 - 15 lakhs25% of the net income + Rs 1,25,000
Above Rs 15 lakhs30% of the net income + Rs 1,87,500

Therefore, there are no income tax changes in budget 2022, which means the taxpayers have to pay tax for the upcoming financial year as per the aforementioned tax rates as applicable on their net annual income. This came against the expectation of the earning class which was hoping for some relief in the form of tax exemption for higher income slabs as well. The expectations were also around rationalization and simplification of the income tax slabs. 

Although there are no changes in the tax slab of the income tax in budget 2022, we now have two years for providing corrected tax returns. She said, “To provide an opportunity to correct an error, taxpayers can now file an updated return within 2 years from the relevant assessment year”. 

Also read: Budget 2022 Analysis: Major Announcements and their Impact

Tax Deduction for Government Employees

The Finance Minister offered tax relief to the state government employees by increasing the maximum tax deduction limit from 10% to 14% on the contributions made by the employer to the employee’s NPS account. The enhanced deduction limit will bring the state government employees at par with the central government employees in terms of tax benefits enjoyed on employer’s contributions made in the NPS account. 

Reduction in Corporate Surcharge

Nirmala Sitharaman also announced the reduction in corporate surcharge from 12% to 7%.

Also read: Budget 2022 for Salaried Investors: No change in Tax regime

Minimum Alternate Tax (MAT) Cut to 15% for Cooperative Societies

The government is going to reduce the Minimum Alternate Tax (MAT) from 18.5% to 15% for the cooperative societies and lower the surcharge from 12% to 7% for cooperatives societies having income between Rs 1 crore and Rs 10 crores. The Finance Minister said "to provide a level-playing field between cooperative societies and companies, I propose to reduce the MAT for the cooperative societies also to 15%"

Tax Relief to PWD and COVID Relief Tax Exemption

The Union Budget 2022-23 also introduced tax relief for persons with disabilities. The Finance Minister said that the guardians can take insurance covers from their children who fall under the category of persons with disabilities. The annuity paid or the lump sum maturity amount for disable dependents will be exempted from taxation during the entire lifetime.

Apart from the aforementioned changes in taxation, the government also finally introduced a tax rate for the transfer of virtual digital assets like cryptocurrencies in the taxation budget 2022.