Budget 2022 brought a lot of questions along with it. There were reforms across various sectors and it might have gotten a little too much to absorb. We are here to discuss all the things that shall impact your personal finance.
Surcharge Taxes on Long Term Capital Gains is going to change
Long Term Capital Gains or LTCG, are the profits that you make on selling your investment which you have held for over 12/24/36 months.
Currently, a surcharge is in place for LTCG, which essentially is a tax on tax. The surcharge for listed shares and mutual funds is capped at 15% but for the other classes, the surcharge depends on the total income.
Now, the surcharge has been capped at 15% for all Long Term Capital Assets, not just equity and mutual funds. The surcharge used to go as high as 37.5% but will now be limited to 15% which shall benefit high net worth individuals and investors who and people invested in unlisted shares and startup equity.
Provision to file Updated Return
Although Budget 2022 did not tinker with the personal Income Tax rates, it did provide some relief to taxpayers.
Finance Minister Nirmala Sitharaman pointed out that India is growing at an accelerated pace and consequently Indians are undertaking multiple financial transactions. Considering that, it is possible that they miscalculate their Income Tax liability.
So as an “affirmative step” towards “voluntary compliance”, Budget 2022 has introduced the provision of filing updated returns. Under this, if any taxpayer later finds out that they have additional tax liability due to income left out after filing their ITR, then they can pay the additional tax and file an updated return till two years of the relevant Assessment Year.
Higher Tax deduction for State Government employees for NPS
We can think of NPS as an accessible, low cost and tax-efficient retirement savings account. It is administered by the Pension Fund Regulatory and Development Authority.
As mentioned, NPS comes with tax benefits, one of which is a deduction on the employer’s contribution to NPS. A Central government employee can claim a deduction up to 14% on the employer’s contribution to the NPS account of the employee u/s 80CCD(2).
State Government employees could however only claim up to 10% deduction. Budget 2022 has now allowed State Government employees to claim a 14% deduction as well making them at par with Central Government employees. For non-government employees, the limit of deduction continues to be 10%
So which provision will be most beneficial to you? Share your thoughts with us