Finance Act, 2022 Notified by Finance Ministry: Know the Key Changes

The Finance Act 2022 has received the assent of the President on the 30th March 2022 and has been released.

The Finance Bill 2022 was passed by Lok Sabha with 39 Amendments in the bill.

Sections 2 to 85 of the Act shall come into force on the 1st day of April, 2022 and sections 100 to 114 shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.

We have discussed some of the Key Changes:

Taxation rules for cryptocurrencies

Through Finance Act the government has made taxation rules for cryptocurrencies more strict by prohibiting any losses from being offset against profits from other virtual digital assets.

The word “other” was deleted from the clause relating to set off of losses from gains in virtual digital assets, according to revisions to the Finance Bill, 2022, distributed among Lok Sabha members.

This means that a loss resulting from the transfer of virtual digital assets (VDA) cannot be offset against a gain resulting from the transfer of another VDA.

The levy of income tax on crypto assets has been clarified in the 2022-23 Budget. From April 1, a 30% Income Tax, plus cess and surcharges, will be applied to such transactions in the same way that it is applied to horse racing winnings or other speculative transactions.

In addition, no deduction for any expenditure (other than the cost of purchase) or allowance will be permitted when calculating the revenue from the transfer of VDA.

TDS on Crypto Transactions

In addition, Budget 2022-23 suggested a 1% TDS on payments of virtual currency exceeding Rs 10,000 per year, as well as taxes on such presents in the hands of the recipient. For designated persons, such as individuals/HUFs who are required to have their accounts audited under the I-T Act, the TDS threshold limit would be Rs 50,000 per year. The laws relating to 1% TDS will take effect on July 1, 2022, and gains will be taxed on April 1 of that year.

Elimination of inconsistencies in Section 194-IA

To eliminate inconsistencies, it is proposed to amend section 194-IA of the Act to require TDS to be deducted at the rate of one percent of the sum paid or credited to the resident or the stamp duty value of the property, whichever is higher, when an immovable property (other than agricultural land) is transferred. If the consideration paid for the transfer of immovable property and the stamp duty value of such property are both less than fifty lakh rupees, section 194-IA does not apply.

10% TDS on Prerequisites to Employees

From July 1, 2022, the Finance Act of 2022 added a new clause requiring a 10% TDS deduction on the number of perquisites supplied to an employee exceeding Rs. 25,000. The value of any benefit or perquisite originating from business or the exercise of profession, whether convertible into money or not, is to be taxed as business income in the hands of the beneficiary of such benefit or perquisite, according to clause (iv) of section 28 of the Act. However, in many circumstances, such a recipient fails to record the receipt of assistance on their tax return, resulting in false income information being provided.