Know Key Highlights and the Blockbuster Announcement of Union Budget 2022

On February 1, 2022, Honourable Finance Minister Nirmala Sitharaman presented the Union Budget for 20 22-23, announcing it to be the roadmap for the next 25 years of the new age India. The aim of this budget is to focus on accelerating India’s recovery from the shock of the pandemic and strengthening the country’s health care system to prevent future outbreaks. The finance budget 2022 makes the following estimates:

• Total Expenditure at INR 39.45 lakh crore
• Total Receipts at INR 22.84 lakh crore
• Fiscal Deficit at 6.4% of GDP.

Other than a few key-highlights, the Union Budget 2022 was quite straightforward mostly entailing procedural changes. Some such highlights are as follows:

• Plans to make heavy capital expenditure of 10.68 lakh crores in 2022-23.
• Extending period of incorporation to 2023 for start-ups
• concessional tax rate of 15% for newly incorporated manufacturing units.
• Expected public issue of LIC.
• Contracts for four multimodal logistics parks in PPP mode to be awarded
• Emergency Credit Line Guarantee Scheme (for MSMEs) extended till March 2023 with a total cover of INR 5 lakh Crores.
• Battery swapping policy and formulation of inter-operability standards has also been planned for efficiency of the EV ecosystem.

The blockbuster of the Union Budget 2022 was the acknowledgement of the existence of Virtual Digital Assets by making the following propositions:

• The Finance Bill 2022 proposes taxation of Cryptocurrency and Online Digital Assets or Virtual Digital Assets (VDAs) at a special tax rate of 30%. Here ‘No Deduction’ in respect of any expenditure or allowance shall be allowed while computing such income, except the cost of acquisition and set-off and carry forward of losses would not be permitted. Further, TDS of 1% will be deducted from the transaction amount.
• The Government also took the bold step of announcing the Issuance of Digital Currency or Digital Rupee using blockchain and other technologies by RBI in 2022-23. Digital rupees work like paper money, but there are no ATMs for digital currency. Users can transfer purchasing power from their savings accounts to their smartphone wallets in the form of online tokens, which, like cash, will also come under the purview of RBI.

Amendments proposed in Finance Bill 2022 to implement the above propositions surrounding taxation of cryptocurrency and virtual digital assets:

• As part of the Finance Bill 2022, an amendment to Section 2(47A) w.e.f. 01-04-2022 is proposed. It defines ‘Virtual Digital Asset’ as an Asset providing a digital representation of value exchanged with or without consideration or acting as a stored value or unit of account. It shall satisfy the following conditions:
  • any information or code or number or token other than Indian/foreign currency; &
  • cryptographically generated or otherwise; &
  • transferable, storable, or tradable electronically; This definition of VDAs includes NFTs – non-fungible tokens.
• Tax @ 30% is proposed under section 115BBH on – all gains derived from the transfer of any virtual digital asset plus any appropriate surcharge and cess, w.e.f. FY 2022-23.
• Moreover, the threshold of basic exemption limit is also not available for a person having income solely from VDA, i.e., even if one rupee gain is made by such a person, it is still taxable @ 30%.
• As mentioned above, set-off and carry forward of loss from virtual digital assets (including cryptocurrency), is not permitted. However, such loss can be adjusted against gain on other VDA, in the same financial year.
• Section 56(2)(x) is amended to include Virtual Digital Assets under the term ‘property’. As a consequence, gifting of cryptocurrencies becomes taxable in the hands of the recipient.
• Further, the applicability of tax deduction at source is proposed to be introduced w.e.f. 01-07-2022 under section 194S @1%. TDS has to be deducted by the buyer with the consideration limit of INR 50,000 for Specified Persons and INR 10,000 for others. There is no requirement to obtain TAN.

Understand the intricacies of the new provisions or amendments in existing provisions, proposed in Finance Bill 2022 under Direct Taxes (Domestic Tax and International Tax), Indirect Taxes (Custom, Excise, GST), Crypto Currency, Agriculture Sector, Startups Scheme, MSME Scheme, and other sectors at your fingertips with Master Brains.

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