Top 5 Hits of the Union Budget 2022-23

Union Budget

The Budget 2022 provides the required blueprint to steer the Indian economy over the next 25 years. It focuses on growth, increasing the expenditure for infrastructure development, improved connectivity and productivity enhancement. 

Enlisted below are the top 5 hits of the Union Budget of India 2022-23:

1. The option to file updated ITR (Income Tax Return)

Now a taxpayer can file an updated tax return within 2 years from the end of the relevant Assessment Year on payment of additional tax (i.e. 25% of aggregate tax plus interest, if updated return filed within 12 months and 50% of aggregate tax plus interest beyond 12 months).

However, an updated return cannot be filed twice with respect to a particular Assessment Year. It also cannot be filed in certain cases such as:

  • Where updated return is a return of a loss;
  • Where updated return results in lower tax liability; 

Where any prosecution proceeding is initiated against assessee.

Also all assessees who fall within the tax bracket set forth by the Income Tax Department are required to TDS return filing. The official Income Tax e-filing platform may be used to submit the TDS returns electronically, which is required to do so.

2. Rationalisation of tax rates

  • Surcharge on Long Term Capital Gains

The surcharge rate on listed shares was capped at 15% earlier. Now, on transfer of any type of capital the rate of surcharge is capped at 15%. This change will bring parity between all asset classes like immoveable property, unlisted shares etc.

It will also benefit venture capitalists and angel investors who invest in start-ups and consequentially encourage investment in start-ups. Further, it will also provide relief to high net-worth individuals from the rigorous surcharges rates.

  • Surcharge on certain Association of Persons

The Surcharge on AOPs is capped at 15% where all members are companies, thereby treating a consortium of companies at par with individual companies.

  • For co-operative societies

For bringing parity between co-operative societies and companies, it has beenprovided to:

  • Reducethe rate of Alternate Minimum Tax from 18.5% to 15%.
  • Reducethe surcharge for co-operative societies with income of INR 1 crore to INR 10 crore to 7% from the existing 12%. The reduced rate is also applicable for computing withholding tax on payments made to non-resident cooperative societies.

3. Measures to reduce protracted litigation

The filing of departmental appeal may now be deferred if an appeal is pending on an identical question of law before any jurisdictional High Court or Supreme Court. However, the deferring of the appeal is subject to acceptance by the taxpayer.

This change is expected to reduce protracted litigation which in turn will leadto cost saving for tax department and taxpayers. Furthermore, it will also reduce the burden on higher courts and improve efficiency and effectiveness of the judicial processes.

4. Incentives for new domestic manufacturing companies

New domestic manufacturing companies set up on or after 1 October 2019 have an option to avail concessional tax rate of 15%.These conditions inter alia provide that the manufacturing or production shall commence by 31 March 2023.

The last date for commencement of ‘manufacturing or production of article or thing’ is extended by one year to 31 March 2024.

This change when coupled with the Production Linked Incentive scheme will help attract foreign investments and will also encourage the goal of Atmanirbhar Bharat.

5. Incentives for ‘eligible start-ups’

Eligible start-ups’ are entitled to a deduction of 100% of the profits and gains derived from ‘eligible business’ for any 3 consecutive years out of 10 years subject to certain conditions. One of the conditions provide that the ‘eligible start-up’ should be incorporated on or after 1 April 2016 but before 1 April 2022. Considering the adverse impact of the pandemic and the importance of start-up ecosystem for the economy, the budget has extended the time limit for incorporation of the eligible start-up by one year to 31 March 2023.

This would provide the necessary boost to start-up eco-system.


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