Apart from the host of tax-related areas that Budget 2022 touched or clarified upon, there were also a few aspects that the Finance minister said nothing about. There is a possibility that in some of these areas, the lack of clarity could make for tax shocks at some point during the financial year. Here is a look at three such areas.
‘Updated’ return
Govt will now provide a one-time window to correct omissions in ITRs filed. Such ‘updated’ returns will have to be filed within 2 years of the relevant financial year on payment of additional income tax, the FM said in her budget speech.
With this move, the government is expecting to reduce tax litigations, the line of thought being that taxpayers will voluntarily comply because there is no way to escape, given the wealth of data that the taxman has.
The budget, however, didn’t make clear whether a taxpayer can file an updated return on alterations that do not change her liability.
According to EY analysts, some examples of such tricky items would include “disclosure of foreign assets, details of bank accounts, details of directorships, holding of unlisted shares, etc.”
Could this prove costly on the tax side for individuals at some point? There is no clarity on that yet.
NPS tax deduction parity
Budget 2022 made a significant announcement with regard to the tax deduction limit on employers contribution to National Pension System (NPS).
The deduction limit will now be raised to 14 per cent on employers contribution to National Pension System (NPS) account of state government employees, it said.
Till now, the deduction available to these workers in respect of the employer’s contribution to NPS was 10 percent. This new rule will bring State government workers on par with Central Government employees in terms of the deduction limit under that head.
It, however, said nothing about private, non-government workers. That means the new rule is only applicable to government employees. For non-government employees, it remains the same as earlier, at 10 per cent.
So, going by this, the lack of parity between government and non-government workers in this area will continue.
Additional deduction on house property income
Till this year, an up to Rs 1.5 lakh additional deduction was applicable on income from house property. This facility was available for interest on home loans taken between April 1, 2019 and March 31, 2022, for purchase of affordable homes by first-time buyers.
There were expectations that this special benefit would be extended by this year’s budget, given the continuing ravages of the pandemic. But Finance minister Sitharaman chose not to touch it at all.
