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It May Affect You: Key Changes In Income Tax Rules Effective From FY 2022-23

As the new financial year ushers in on April 1, all eyes are looking for the effects the budget provisions shall have on their personal or business finance. This year is no different. Checking the budget for 2022, let us try to point out the important rules which shall affect our lives in the financial year 2022-23. Any transactions made in a financial year are assessed by the income tax authorities in the next Financial year which is called Assessment Year with regards to that particular Financial year.

1. Deduction under section 80EEA no longer applicable:

In FY 2019-20 Government had introduced section 80EEA with an intention of allowing additional tax deductions to home buyers up to Rs.150,000. The new deductions were over and above the deductions already available under section 24(b)

The 80EEA deductions could be availed if certain conditions are fulfilled. a) The loan should have been sanctioned in the year 2019-20, b) The value of the house should not exceed Rs.45 lacs and c) The taxpayer should not own any other residential house on the date of sanction of the loan.

The sanction period of the loan was extended first from 2019-20 to 2021-21 and then upto 2021-22. However, in the latest finance bill, no further extension is allowed.

2.  Tax relief on Covid-19 treatment

There are important provisions with regards to the Covid-19 treatment and Covid related deaths which devastated the country in the second wave. As such in June 2021 only, the finance ministry had announced an exemption from income tax on the amount received by a person from his/her employer for Covid treatment.

Any financial assistance up to the extent of Rs. 10 lacs received from someone or several persons, within a period of 12 months from the date of death will be exempted from income tax. However, there is no limit prescribed for the ex-gratia amount received from the employer. This amendment is effective retrospectively from AY 2020-21

3. Cryptocurrency

Any income from cryptocurrency will attract a tax rate of 30%. also, any loss arising out of the transfer of cryptocurrency will not be allowed to be set off against any income made from the transfer of cryptocurrency.

Under section 194S, from 1 July 2022, every cryptocurrency transaction at the time of redemption will attract 1% TDS.

4. Tax Benefits on NPS

State Government employees can now claim tax breaks of up to 14%, from the presently capped 10%, of their basic salary and dearness allowance on their employers’ contribution to NPS. However, for private-sector employees, the cap remains at 10%

5. Updated Income tax Returns

It will now be possible to file an updated return within two years of the end of the assessment year. A person can now pay tax on savings bank account interest or gains from equities that may have been left to be incorporated while filing the return.

However, the facility doesn’t come cheap. If the revised return is filed within one year, the applicable tax would be 25% and 50% if the return is revised from 12 to 24 months from the end of the assessment year. There would be penalties and interest as well.