Budget 2022: 80C deduction limit to crypto tax, key things to watch out

As Union Finance Minister Nirmala Sitharaman prepares to present her fourth Union Budget on February 1, 2022, several sectors of the economy, including individual taxpayers, will keenly watch how the government balances populist measures and fiscal consolidation.

Here are the top 5 tax expectations from Union Budget 2022-2023:
 

Direct taxes

Increase threshold of 80C deduction: Keeping the pandemic and the rising inflation in mind, the government should increase the tax exemption limit under section 80C to at least Rs 2.5 lakh per annum. The section 80C benefit is the go-to tax-saving route many taxpayers take. Till FY2013-14, the maximum deduction available under section 80C of the Income-tax Act, 1961 was Rs 1 lakh per annum. This was increased to Rs 1.5 lakh per annum in FY2014-15.

Promote concessional tax regime: To make the optional concessionary tax regime, which came into effect from April 2021, more acceptable, raise the threshold of Rs 15 lakh income for the highest tax rate of 30 per cent.

New regime for crypto taxation: As Web 3.0 unfolds, crypto assets encompassing a wide array of digital assets like non-fungible tokens (NFTs), wrapped asset token etc, will gain tremendous traction. It is being expected that a specialised regime for taxation of cryptocurrency will be introduced in the Budget.

Scrap LTCG: The burden of long-term capital gains tax (LTCG), introduced vide Finance Act 2018, has somewhat dented investor confidence. Major economies do not have LTCG tax. In India too, it is expected that LTCG on sale of Indian-listed equity shares will be exempted as it would boost investment through the stock exchange.

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Tax relief on COVID expenditure: Corporates are expecting that the entire amount, or an appropriate proportion of expenditure incurred for helping the society and employee welfare during COVID-19 will be allowed as deductible expenditure. Also, the government is expected to reduce the tax rates for companies engaged in R&D activities to 15 per cent or less and allow weighted deduction on in-house R&D expenditure.

Indirect taxes

Rationalise customs duty on EV: Rationalisation of customs duty structure for EV and ancillary components, renewable energy generation devices and related components is expected.

Concessions for semi-conductor industry: Sector specific concessions for semi-conductor manufacturers with focus on exports is expected.

PLI scheme expansion: Budget allocation for expansion of PLI scheme for sectors such as leather and laminates is expected. Additional incentive schemes will also lure companies into setting up additional manufacturing in sectors that were not the focus in previous Budgets and can help reverse the impact of the pandemic on the economy.

Review customs duty exemptions: The government is already reviewing 400 customs duty exemptions (as announced in the previous budget). The final list is expected to be proposed as part of the 2022 Budget and industry is awaiting it so that there is no adverse impact on trade as a result of this exercise.

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Ease customs compliances: Extension of customs duty exemption on goods imported for testing, and setting up of a customs dispute resolution forum, ease compliances under customs, and integration of the current ICEGATE, DGFT and SEZ online portal into a common digital platform.

In Budget 2020-21, around 70 exemptions and deductions of different nature were removed. The finance minister had announced that the "remaining exemptions and deductions will be reviewed and rationalised in the coming years with a view to further simplifying the tax system and lowering the tax rate." In the 2021-22 Budget, the finance minister did not make any significant change in the income tax rates or slabs.

(With inputs from agencies)