This document summarizes key tax proposals in the Indian Union Budget 2022. It discusses trends in direct and indirect tax collections. It proposes restrictions on claiming input tax credits under GST and amendments to tax registration cancellation rules. It provides tax exemptions for COVID-19 related receipts and increases deductions limits for national pension schemes. It introduces a 30% tax rate for income from virtual digital assets transfers. It also amends sections related to non-deductible expenditures, tax payments, and interest expenses.

1. Budget 2022 –
Tax Proposals
M SARAVANA PRABHU ACMA , FCA
+91 94453 81071
M S A R AVA N A P R A B H U @ O U T LO O K .C O M

3. Trend of Tax Collections
3
0
100000
200000
300000
400000
500000
600000
700000
800000
2019-2020
(RE)
2020-21
(RE)
2021-22 (RE) 2022-23 (BE)
Axis
Title
Axis Title
Tax collections – Direct and Indirect Taxes
Corporation Tax Income Tax Customs Excise Duty GST

5. Restriction on Availment of ITC u/s
16 [Clause 99 of Finance Bill]
5
Restriction on Availment of ITC u/s 16 r.w.s 38 [Clause 99 of Finance Bill]
Simultaneously, GSTR 2 and GSTR3 and 2 way communication process in return filing
finally removed from Statute and replaced with matching process u/s 38.
Sect. 41 being substituted so as to do away with the concept of “claim” of eligible
input tax credit on a “provisional” basis and to provide for availment of Self -
assessed ITC subject to such conditions and restrictions as may be prescribed.
However, ITC can now be claimed by 30th November of next FY instead of
September of next FY and 2 months extra time has been provided.
 Time Limits u/s 16(4), 34 & 37, 52 has been extended by 2 months

6. Amendments to Sec. 49 and 50
[Clause 109]
 Interest u/s 50(3) to be charged only if wrong ITC is availed and utilised.
Though interest rate fixed through notifications at 18%, the presence of
upper cap of 24% in the Act, is worrying
 Amount lying as balance in the Electronic Cash Ledger can now be
transferred to the distinct person for utilization – Tax Payer friendly
amendment. Validation of Rule 86B

7. Registration of a person is liable for
cancellation – S.29 [Clause 100]
 Sec. 29(2)(b)/(c) amended so as to provide that the registration of a person is liable
for cancellation, where –
 Composition Taxpayers: a person paying tax u/s 10 has not furnished the return for a
Financial Year beyond 3 months from the due date of furnishing of the said return;
 Normal Tax Payers: has not furnished returns for such continuous tax period as may
be prescribed.
Impact: Earlier Category (i) above – 3 consecutive tax periods and (ii) above 6
consecutive months were prescribed. Consequent to overhaul of return filing system,
these amendments have been made

9. Covid Receipts
 Proposal to S.17 to state that any sum paid by the employer in respect of
any expenditure actually incurred by the employee on his medical
treatment or treatment of any member of his family in respect of any illness
relating to COVID-19 subject to such conditions, as may be notified by the
Central Govt., shall not be forming part of “perquisite”.
 Any sum of money received by an individual, from any person, in respect of
any expenditure actually incurred by him on his medical treatment or
treatment of any member of his family, in respect of any illness related to
COVID-19 subject to such conditions, as may be notified by the Central
Government in this behalf, shall not be the income of such person;

10. Covid Receipts
 Any sum of money received by a member of the family of a deceased
person, from the employer of the deceased person (without limit), or from
any other person or persons to the extent that such sum or aggregate of
such sums does not exceed ten lakh rupees, where the cause of death of
such person is illness [AY 20-21]

11. Covid Receipts
 Any sum of money received by a member of the family of a deceased
person, from the employer of the deceased person (without limit), or from
any other person or persons to the extent that such sum or aggregate of
such sums does not exceed ten lakh rupees, where the cause of death of
such person is illness [AY 20-21]

12. NPS, Sec. 80DD
 National Pension Scheme: Proposal to increase the limit of deduction u/s
80CCD of the Act from the existing 10% to 14% w.r.t. contribution made by
the State Govt to the A/c of its employee. [AY 20-21]
 80DD: Proposal to allow the deduction also during the lifetime, i.e., upon
attaining age of 60 years or more of the individual or the member of the
HUF in whose name subscription to the scheme has been made and where
payment or deposit has been discontinued.
 Further, it is proposed that the provisions of sub-section (3) shall not apply
to the amount received by the dependant, before his death, by way of
annuity or lump sum by application of the condition referred to in the
proposed amendment [AY 23-24]

13. Virtual Digital Assets
 The proposed S.115BBH seeks to provide that where the total income of an assessee
includes any income from transfer of any virtual digital asset, the income tax payable shall
be the aggregate of the amount of income-tax calculated on income of transfer of any
virtual digital asset at the rate of 30% and the amount of income-tax with which the
assessee would have been chargeable had the total income of the assessee been reduced
by the aggregate of the income from transfer of virtual digital asset.
 However, no deduction in respect of any expenditure (other than cost of acquisition) or
allowance or set off of any loss shall be allowed to the assessee under any provision of the
Act while computing income from transfer of such asset

14. Virtual Digital Assets
 Further, no set off of any loss arising from transfer of virtual digital asset shall be allowed
against any income computed under any other provision of the Act and such loss shall not
be allowed to be carried forward to subsequent assessment years [AY 23-24]
 Further, in order to widen the tax base from the transactions so carried out in relation to
these assets, it is proposed to insert S.194S to the Act to provide for deduction of tax on
payment for transfer of virtual digital asset to a resident at the rate of one per cent of such
sum. [w.e.f. 1st of July, 2022]

15. Amendment to S.37
“Expenditure incurred by an assessee for any purpose which is an offence or which is
prohibited by law”, shall include and shall be deemed to have always included the
expenditure incurred by an assessee, —
i. for any purpose which is an offence under, or which is prohibited by, any law for the time
being in force, in India or outside India; or
ii. to provide any benefit or perquisite, in whatever form, to a person, whether or not
carrying on a business or exercising a profession, and acceptance of such benefit or
perquisite by such person is in violation of any law or rule or regulation or guidelines, as the
case may be, for the time being in force, governing the conduct of such person; or
iii. to compound an offence under any law for the time being in force, in India or outside
India.

16. Amendment to S.43B
Disallowance of Tax to include Cess
Tax payment disallowed as Deduction from PGBP for Sec. 40. Proposal to clarify that “Tax”
includes and shall be deemed to have always included any surcharge or cess, by whatever
name called, on such tax. [AY 05-06]
Allowance of Interest Expense only on Actual Payment
Proposal to amend Explanation 3C/ 3CA /3D of section 43B to provide that conversion of
interest payable under clause (d), clause (da), and clause (e) of section 43B, into debenture
or any other instrument by which liability to pay is deferred to a future date, shall also not be
deemed to have been actually paid. [AY 23-24]

17. Thank You
M SARAVANA PRABHU ACMA,
FCA | +91 94453 81071
MSARAVANAPRABHU@OUTLOOK.
COM