Know the main changes to income tax rules before planning investments

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HIGHLIGHTS

  • The loss suffered by any virtual digital asset will not be able to be compensated by any other profit, including that of any other virtual digital asset, i.e. the intra-head adjustment between VDAs is not no more possible.
  • In accordance with Section 80CCD(2) of the Information Technology Act, the eligible tax deduction for state government employees has been increased from 10% to 14% of their base salary and dearness allowance for the contribution to the NPS.
  • The applicability of the 15% cap on the surcharge in relation to long-term capital gains from shares and mutual funds pursuant to Section 112A of the IT Act would now be extended to all LTCGs pursuant in article 112 of the IT law as well as from April 1, 2022. .

New Delhi: With the start of the 2022-23 fiscal year in April, it is important to consider the new Income tax rules that would come into force on April 1, 2022 to effectively monitor and manage the tax impact on financial transactions.

Suresh Surana, Founder – RSM India explained that some of the key changes that would come into effect from April 1, 2022 are as follows:-

Taxation of virtual digital assets

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The Finance Act 2022 provides for taxation of virtual digital assets at 30% u/s 115BBH of the Income Tax Act 1961 (hereinafter referred to as “the IT Act”).

The loss suffered by any virtual digital asset will not be able to be compensated by any other profit, including that of any other virtual digital asset, i.e. the intra-head adjustment between VDAs is not no more possible.

Further, no deduction for any expense (other than acquisition cost, if any) or indemnity will be allowed. However, it has been clarified that infrastructure costs incurred in mining VDA will not be treated as acquisition costs as they will be in the nature of capital expenditure.

The gift of virtual digital assets would also be taxed because the receipt of a virtual digital asset for no or insufficient consideration will be taxable in the hands of the recipient u/s 56(2)(x) of the Computer Act.

It should also be noted that the provisions of the TDS would be applicable to the transfer of a virtual digital asset. Pursuant to Section 194S of the Income Tax Act, any person responsible for the payment to a Resident of any sum in consideration for the transfer of a virtual digital asset shall, upon crediting such sum to the account of the resident or at the time of payment of this sum by any method, whichever comes first, deduct an amount equal to 1% of this sum as income tax. The TDS u/s 194S provisions of the IT law would be applicable from July 1, 2022.

Taxation of income from a retirement allowance account held in a notified country

A new Section 89A of the IT Act provides that any specified person, i.e. a person residing in India who has opened a specified account in a notified country while being a non-resident in India and residing in that country, would be liable to tax in India (at the option of the specified person) on any income derived from any account held in a notified country in respect of his retirement benefits provided that the income from such account would not be taxable under the accrual method but be taxed by that notified country at the time of withdrawal or redemption.

The CBDT has seen notification n° 25/2022/F. No. 370142/7/2022-TPL dated April 4, 2022 notified Canada, United Kingdom of Great Britain and Northern Ireland and United States of America (USA) to be notified countries for the purposes of this section.

In addition, Rule 21AAA has been notified to become effective April 1, 2022 to provide that any taxpayer exercising option u/s 89A would be required to file Form No. 10-EE and that it must be provided no later than later than the due date for the supply. u/s 139(1) computer law tax return.

In addition, this option, once exercised for an account or accounts specified in respect of a prior year in Form No. 10-EE, applies to all subsequent prior years and cannot be withdrawn by the suite for the previous year for which the option was exercised or for any previous year. year subsequent to the preceding year.

Applicability of Late fees for not binding Aadhar and PAN

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

Filing of updated IT declarations

The newly introduced Article 139(8A) in the IT law provides for the filing of updated declarations by taxpayers. In accordance with the said article, any person, whether or not he has provided a declaration, may provide an up-to-date declaration of his income or of the income of any other person in respect of which he is taxable under the computer law, in the 24 months from the end of the tax year (i.e. 36 months from the end of the financial year concerned), subject to other prescribed conditions.

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

Contribution to the National pension scheme (NPS) to increase from 10% to 14% for state government employees:

In accordance with Section 80CCD(2) of the Computer Law, the eligible tax deduction for state government employees has been increased from 10% to 14% of their base salary and the high cost allowance for contribution to the national pension scheme.

Long term capital gains tax

The applicability of the 15% cap on surtax in relation to long-term capital gains on stocks and mutual funds u/s 112A of the IT Act would now be extended to all long-term capital gains term u/s 112 of the computer law also wef 1 april 2022.

Discontinuation of interest deduction benefit u/s 80EEA:

Article 80EEE of the IT law provides for a tax deduction of Rs 1.5 lakh against interest on mortgage loans sanctioned between April 1, 2019 and March 31, 2022. This deduction was in addition to the deduction enjoyed by the taxpayer under Section 24 (b ) of the computer law.

This section would no longer be available from April 1, 2022. However, taxpayers whose mortgage loans have already been sanctioned before March 31, 2022 will be able to continue to benefit from the said deduction.


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