The 91-minute short speech of Finance Minister Nirmala Sitharaman this morning had many provisions spelt out explicitly, but many were hidden in the detailed Finance Bill. Moneycontrol decodes some of those Budget proposals for you.
Donation deduction disallowed
Many of us donate money to charitable institutions and educational institutes. Now, if you look to claim benefits under your income tax return through Section 80G, then there are chances that you could be denied the deduction due to reasons beyond your control.
New registrations have been proposed for charitable trusts and organisations. Once that is past us, there are other documents they need to upload such as statement of donations. As per the Budget 2022 provisions, the deduction claimed by the donor will be disallowed in case the donee (research association, university, college or other institutions) fails to furnish the statement of donations. This will retrospectively come into effect from April 1.
Have you deducted any tax before making a payment, say rent, to a non-resident Indian and found that the tax was not deductible? To be sure, there are some payments made to NRIs that call for a TDS. But there are a few other payments that may not attract a TDS. If the NRI has proven to you that the tax was not deductible, then Budget 2022 provides for an amendment through which you can file an appeal starting April 1, before the assessing officer claiming a refund of the tax deducted via newly introduced Section 239A. Earlier, this appeal used to go all the way up to the commissioner of appeals, which was time-consuming. This has now been simplified.
Remember that the appeal should be filed within 30 days of making the tax payment to the government account.
No fee for delayed returns
There is a penalty of up to Rs 5,000 for furnishing returns after the due date. Budget 2022 has proposed an amendment to Section 119 to provide relief in fees imposed for not furnishing the return within the due date.
“This proposal empowers them to not impose a penalty on a specific set of people. Certain sections of the society can be excluded from the penalty for submitting returns after the due date, specifically those falling under Section 234F, which was missing from the list,” says Ameet Patel, tax partner at Manohar Chowdhry & Associates. But a clarification is yet to come on who is classified as a ‘specific person’.
Higher tax deduction at source for non-filers
Last year’s Budget had doubled the TDS rate (1-10 percent) for those who had not filed their tax returns in the past two years. Budget 2022 has tightened this window. Now, even if you haven’t filed your tax returns in the past one year, then you pay a higher TDS.
To be sure, TDS is applicable on bank account and deposit interest, stock and mutual fund dividends, property sale, rental income, NRI payments and high-value sales. It varies from 1 percent to 20 percent. Under Budget 2022, the profits from virtual digital assets or cryptocurrencies too have been subjected to 1 percent TDS.
“The income tax department has made the provisions more stringent to catch the evaders. If you have to deduct the TDS before making the payment, then you should check the income tax department’s utility to know whether the person has filed his return or not. Accordingly, the tax deduction rate would be normal or double,” says Patel.
Cess, surcharge non-deductible
The government has clarified that cess and surcharge cannot be claimed as expenses while claiming deductions for income from business and profession. This puts an end to many long-standing disputes. “All the appeals that have been filed claiming that the cess and surcharge can be deducted will be affected,” says Paras Savla, partner at KPB & Associates.
The provisions of this section would be retrospectively applicable starting 2005.
“Many professionals and companies were advised that cess is an expense and can be deducted against business gains. But now the clarification has been spelt out,” says Patel.
Wider scope of re-assessment
More re-assessments of income tax returns would be done in the future, thanks to the Budget 2022 proposals, which have widened the scope of re-assessment issuance. Last year, the re-assessment window was reduced to three years from six years earlier and only the cases involving assets could be opened for re-assessment for up to 10 years.
Budget 2022 provides that even if you have claimed expenses that are questionable, such returns can now also be opened (or reassessed) for up to 10 years, from the date of filing.
“The scope of escaping income has been widened and if your books of account exceed Rs 50 lakh, then more re-assessments can be issued for up to 10 years,” points out Savla.