Budget 2022 – Highlights

Budget 2022 – Highlights

Honourable Finance Minister, Smt Nirmala Sitaraman, has presented the Annual Budget for the Financial Year 2022 – 2023 in the Parliament today ie 1st February, 2022.

The budget is presented in the context of an omicron wave and the nation is in the final stage of our vaccination drive and is in the process of eliminating the Covid restrictions and facilitating revival of our economy to adapt with the post covid world.

The budget lays down following goals for a 25-year-long Amrit Kaal leadup to India@100:

• Complementing the macro-economic level growth focus with a micro-economic level all-inclusive welfare focus,
• Promoting digital economy & fintech, technology enabled development, energy transition, and climate action, and
• Relying on virtuous cycle starting from private investment with public capital investment helping to crowd-in private investment.

During the budget, the finance minister pointed out that as a result of the government’s strong commitment for ‘minimum government & maximum governance, over 25000 compliances were reduced and 1486 Union laws were repealed in past years and has announced that with the advent of Amrit Kaal, the next phase of Ease of Doing Business EODB 2.0 and Ease of Living, will be launched.

Budget 2022-23 shows an increase in capital expenditure by 35.4% (`1,96,010 crore) over the year 2021-22. 4. In year 2021-22, the total expenditure has been estimated at `37,70,000 crore and is more than Actual (2020-21) by `2,60,164 crore

The budget recognizes following four priorities:

• PM GatiShakti
• Inclusive Development
• Productivity Enhancement & Investment, Sunrise Opportunities, Energy Transition, and Climate Action
• Financing of Investments

Expenditure

Here are the Highlights of measures from legal compliance and business perspective:

Logistics

• The data exchange among all mode operators will be brought on Unified Logistics Interface Platform (ULIP), designed for Application Programming Interface (API). Contracts for implementation of Multimodal Logistics Parks at four locations through PPP mode will be awarded in 2022-23.  ‘One Station-One Product’ concept will be popularized in railways to help local businesses & supply chains.

Agriculture

• States will be encouraged to revise syllabi of agricultural universities to meet the needs of natural, zero-budget and organic farming, modern-day agriculture, value addition and management.
• A fund with blended capital, raised under the co-investment model, will be facilitated through NABARD. This is to finance startups for agriculture & rural enterprise, relevant for farm produce value chain.

MSMEs

• Udyam, e-Shram, NCS and ASEEM portals will be interlinked.  They will now perform as portals with live, organic databases, providing G2C, B2C and B2B services. These services will relate to credit facilitation, skilling, and recruitment.
• Emergency Credit Line Guarantee Scheme (ECLGS) will be extended up to March 2023 and its guarantee cover will be expanded by ` 50,000 crore. Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) scheme will be revamped with required infusion of funds.

Digitalization and E – governance

• It is, therefore, proposed to introduce Digital Rupee, using blockchain and other technologies, to be issued by the Reserve Bank of India starting 2022-23.
• It is proposed to set up 75 Digital Banking Units (DBUs) in 75 districts of the country by Scheduled Commercial Banks. There will also be a focus to promote use of payment platforms that are economical and user friendly.
• A Digital University will be established to provide access to students across the country and best public universities and institutions in the country will collaborate as a network of hub-spokes.
• A ‘National Tele Mental Health Programme’ will be launched.
• A single window portal, PARIVESH, for all green clearances was launched in 2018. The scope of this portal will now be expanded, to provide information about specific approvals. It will enable application for all four approvals through a single form, and tracking of the process through Centralized Processing Centre-Green (CPC-Green).

Corporate

• Necessary amendments in the Insolvency and Bankruptcy Code will be carried out to enhance the efficacy of the resolution process and facilitate cross border insolvency resolution.
• The Centre for Processing Accelerated Corporate Exit (C-PACE) with process re-engineering, will be established to facilitate and speed up the voluntary winding-up of these companies from the currently required 2 years to less than 6 months.

Foreign Trade and investment

• The Special Economic Zones Act , 2005 will be replaced with a new legislation that will enable the states to become partners in ‘Development of Enterprise and Service Hubs’.
• World-class foreign universities and institutions will be allowed in the GIFT City to offer courses in Financial Management, FinTech, Science, Technology, Engineering and Mathematics free from domestic regulations.
• An International Arbitration Centre will be set up in the GIFT City for timely settlement of disputes under international jurisprudence.

Finance

• An expert committee will be set up to examine and suggest appropriate measures to reduce regulatory burden of venture capitals and private equity investments.
• New Public Sector Enterprise policy declared in last year’s budget shall continue this year and the public issue of the LIC shall follow.

Building Byelaws

• A high-level committee of reputed urban planners, urban economists and institutions will be formed to make recommendations on urban sector policies, capacity building, planning, implementation and governance.
• Modernization of building byelaws, Town Planning Schemes (TPS), and Transit Oriented Development (TOD) will be implemented. This will facilitate reforms for people to live and work closer to mass transit systems.
• States will be encouraged to adopt Unique Land Parcel Identification Number to facilitate IT-based management of records. The facility for transliteration of land records across any of the Schedule VIII languages will also be rolled out.
• The adoption or linkage with National Generic Document Registration System (NGDRS) with the ‘One-Nation One-Registration Software’ will be promoted as an option for uniform process for registration and ‘anywhere registration’ of deeds & documents.
• The Central Government will work with the state governments for reduction of time required for all land and construction related approvals, for promoting affordable housing for middle class and Economically Weaker Sections in urban areas.
• Finance Minister proposed an allocation of Rs. 1 lakh crore to assist the states in catalysing overall investments in the economy.This allocation will be used for PM GatiShakti related and other productive capital investment of the states. It will also include components for reforms related to building byelaws, town planning schemes, transit-oriented development, and transferable development rights.

Revenue

Here are the Highlights of measures from Tax compliance perspective:

Income tax

• To provide an opportunity to correct omissions or mistakes in correctly estimating their income for tax payment, a new provision permitting taxpayers to file an Updated Return on payment of additional tax will be introduced. This updated return can be filed within two years from the end of the relevant assessment year and any undeclared income can be disclosed.
• Any income from transfer of any virtual digital asset shall be taxed at the rate of 30 per cent. Loss from transfer of virtual digital asset cannot be set off against any other income. Proposal to provide for TDS on payment made in relation to transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold. Gift of virtual digital asset is also proposed to be taxed in the hands of the recipient.
• Income of a non-resident from offshore derivative instruments, or over the counter derivatives issued by an offshore banking unit, income from royalty and interest on account of lease of ship and income received from portfolio management services in IFSC shall be exempt from tax, subject to specified conditions.
• If a question of law in the case of an assessee is identical to a question of law which is pending in appeal before the jurisdictional High Court or the Supreme Court in any case, the filing of further appeal in the case of this assessee by the department shall be deferred till such question of law is decided by the jurisdictional High Court or the Supreme Court.
• Some courts have allowed ‘Health and education ‘cess’ as business expenditure, which is against the legislative intent. To reiterate the legislative intent, I propose to clarify that any surcharge or cess on income and profits is not allowable as business expenditure.
• There is ambiguity regarding set off, of brought forward loss against undisclosed income detected in search operations. It is clarified that no set off, of any loss shall be allowed against undisclosed income detected during search and survey operations.
• The parent or guardian of a differently abled person can take an insurance scheme for such person. The present law provides for deduction to the parent or guardian only if the lump sum payment or annuity is available to the differently abled person on the death of the subscriber i.e. parent or guardian. Budget proposes to allow the payment of annuity and lump sum amount to the differently abled dependent during the lifetime of parents/guardians, i.e., on parents/ guardians attaining the age of sixty years.

Corporate Tax

• Proposal to cap the surcharge on long term capital gains arising on transfer of any type of assets at 15 per cent.
• Cap the surcharge on long term capital gains arising on transfer of any type of assets at 15 per cent.
• There is a tendency on businesses to pass on benefits to their agents. In order to track such transactions, it is proposed to provide for tax deduction by the person giving benefits, if the aggregate value of such benefits exceeds` 20,000 during the financial year.
• Cooperative societies are required to pay Alternate Minimum Tax at reduced rate of fifteen per cent. Reduced surcharge on co-operative societies from present 12 per cent to 7 per cent for those having total income of more than ` 1 crore and up to ` 10 crores.

Start-ups

• Eligible start-ups established before 31.3.2022 had been provided a tax incentive for three consecutive years out of ten years from incorporation. In view of the Covid pandemic, it is extended by one more year, that is, up to 31.03.2023 for providing such tax incentive.

SEZs

• Reforms in Customs Administration of SEZs to ensure that it shall henceforth be fully IT driven and function on the Customs National Portal with a focus on higher facilitation and with only risk-based checks.

Import Export Tax

• It is proposed to phase out the concessional rates in capital goods and project imports gradually and apply a moderate tariff of 7.5 per cent.
• More than 350 customs exemption entries are proposed to be gradually phased out. These include exemption on certain agricultural produce, chemicals, fabrics, medical devices and drugs and medicines for which sufficient domestic capacity exists.  Further, as a simplification measure, several concessional rates are being incorporated in the Customs Tariff Schedule itself instead of prescribing them through various notifications.
• A few exemptions are being introduced on inputs, like specialised castings, ball screw and linear motion guide, to encourage domestic manufacturing of capital goods.

Authors:

Alby Stephan. K, Legal executive at Legality Simplified

Keerthana Kumar