There are numerous modifications to the income tax regulations that will take effect in the coming fiscal year. Some of the significant changes that will take effect on April 1, 2022, are income tax on crypto assets, submission of updated returns, revised tax rules on the EPF interest, plus tax relief on Covid-19 treatment. Let’s take a look at the latest tax rules that will take effect in the coming fiscal year.
1. Crypto Tax
In India, the crypto asset tax regime will be phased in over the course of the fiscal year, beginning April 1. The provisions relating to the 30% tax will take effect at the start of the fiscal year, while those relating to the 1% TDS will take effect on July 1, 2022. The levy of taxable income on crypto assets has been clarified in the 2022-23 Budget. For designated persons, such as individuals/HUFs who are obliged to have their financial statements audited under the I-T Act, the TDS threshold limit would be $50,000 per year.
2. Crypto received as gifts will be taxable
Furthermore, if you receive a gift in the form of cryptocurrencies or any virtual digital asset, it will be taxed as a gift.
3. Losses in cryptocurrency cannot be offset by gains in cryptocurrency or other assets.
The Indian government has intensified crypto regulations by prohibiting losses in one digital asset from being offset against gains from another type of crypto investment. The government will not grant tax deductions for infrastructure costs spent when mining crypto assets because they are not considered acquisition costs. For example, if you make a $1,000 gain on bitcoin and a $700 loss on Ethereum, you must pay tax on the $1,000 gain rather than the $300 net profit. Similarly, gains and losses in cryptocurrencies cannot be offset against losses and gains in other assets such as stocks, mutual funds, or real estate.
4. Filing of updated IT Return
If a taxpayer’s income tax filings contain errors or mistakes, a new option has been provided that allows them to file an updated return. Taxpayers now have two years to file a revised return after the conclusion of an assessment year.
5. NPS deduction to State government employees
State government employees will now be allowed to deduct up to 14 percent of their basic pay and dearness allowance for NPS contributions made by their employers under Section 80CCD(2), which is the same as the deduction available to Central Government employees under the same section.
6. Tax on PF account
From April 1, 2022, the Central Board of Direct Taxes (CBDT) will apply Income-tax (25th Amendment) Rule 2021. It means that the Employee Provident Fund (EPF) accounts will have a limit of up to 2.5 lakh in tax-free contributions. If you contribute more than this, the interest you earn will be taxed.
7. Surcharge on LTCG
Long-term capital gains on the sale of listed equities or mutual funds are currently subject to a 15% fee. This cap will be extended to long-term capital gains on all assets beginning April 1, 2022.
8. Removal of benefit under section 80EEA
For first-time home purchasers, there was a further deduction of up to 1.5 lakh on home loan interest on properties worth less than 45 lakh. This scheme will not be extended beyond March 31, 2022, according to FM. As a result, beginning April 1, 2022, taxpayers will no longer be able to take advantage of the additional deduction of 1.5 lakh. Other existing deductions for house loan interest up to $2 lakh would be maintained under section 24 of the I-T Act.
9. Tax relief on Covid-19 treatment expenses
Tax exemption has been granted to people having obtained money for Covid medical treatment, according to a press release issued in June 2021. Similarly, the money gained by family members on the death of an individual due to Covid will be exempted up to Rs. 10 lakhs if the payment is received within 12 months of the death. This will take effect from April 1, 2022, and will be retroactive.
Wrapping Up
Several Income Tax and financial reforms will take effect on April 1 as the new fiscal year (FY) 2022-23 begins. We’ve compiled a list of such modifications that will take effect on April 1, 2022.
