Union Budget 2022-23 | Union Budget 2022-23 Highlights

Table of Contents

Union Budget 2022-23: Relevance for UPSC Exam

GS Paper 3: Indian Economy- Government Budgeting.

Union Budget 2022-23 | Union Budget 2022-23 Highlights | Part A

Union Budget 2022-23: Context

Recently, the Union Minister for Finance & Corporate Affairs tabled the Union Budget 2022-23 in Parliament.
The Union Budget seeks to complement macro-economic level growth with a focus on micro-economic level all-inclusive welfare.

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Union Budget 2022-23 Highlights: Key Points about Direct Taxes

To take forward the policy of a stable and predictable tax regime:
- Vision To establish a trustworthy tax regime.
- To further simplify the tax system and reduce litigation.
Introducing new ‘Updated return’
- Provision to file an Updated Return on payment of additional tax.
- Will enable the assessee to declare income missed out earlier.
- Can be filed within two years from the end of the relevant assessment year.
Cooperative societies
- Alternate Minimum Tax paid by cooperatives brought down from 5 per cent to 15 per cent.
- To provide a level playing field between cooperative societies and companies.
- Surcharge on cooperative societies reduced from 12 per cent to 7 per cent for those having total income of more than Rs 1 crore and up to Rs 10 crores.
Tax relief to persons with disability
- Payment of annuity and lump sum amount from insurance scheme to be allowed to differently-abled dependent during the lifetime of parents/guardians, i.e., on parents/ guardian attaining the age of 60 years.
Parity in National Pension Scheme Contribution
- Tax deduction limit increased from 10 per cent to 14 per cent on employer’s contribution to the NPS account of State Government employees.
- Brings them at par with central government employees.
- Would help in enhancing social security benefits.
Incentives for Start-ups
- Period of incorporation extended by one year, up to 31.03.2023for eligible start-ups to avail tax benefit.
- Previously the period of incorporation was valid up to 31.03.2022.
Incentives under concessional tax regime
- Last date for commencement of manufacturing or production under section 115BAB extended by one year i.e. from 31st March 2023 to 31^st March 2024.
Scheme for taxation of virtual digital assets
- The specific tax regime for virtual digital assets was introduced.
- Any income from the transfer of any virtual digital asset is to be taxed at the rate of 30 per cent.
- No deduction in respect of any expenditure or allowance to be allowed while computing such income except the cost of acquisition.
- Loss from the transfer of virtual digital assets cannot be set off against any other income.
- To capture the transaction details, TDS to be provided on payment made in relation to transfer of virtual digital assets at the rate of 1 per cent of such consideration above a monetary threshold.
- Gift of virtual digital assets also to be taxed in the hands of the recipient.
Litigation Management
- In cases where a question of law is identical to the one pending in the High Court or Supreme Court, the filing of appeal by the department shall be deferred till such question of law is decided by the court.
- To greatly help in reducing repeated litigation between taxpayers and the department.
Tax incentives to IFSC
- Subject to specified conditions, the following to be exempt from tax
  - Income of a non-resident from offshore derivative instruments.
  - Income from over the counter derivatives issued by an offshore banking unit.
  - Income from royalty and interest on account of lease of a ship.
  - Income received from portfolio management services in IFSC.
Rationalization of Surcharge
- Surcharge on AOPs (a consortium formed to execute a contract) capped at 15 per cent.
- Done to reduce the disparity in surcharge between individual companies and AOPs.
- Surcharge on long term capital gains arising on transfer of any type of assets capped at 15 per cent.
- To give a boost to the start-up community.
Health and Education Cess
- Any surcharge or cess on income and profits is not allowable as business expenditure.
Deterrence against tax-evasion
- No set-off, of any loss to be allowed against undisclosed income detected during search and survey operations.
Rationalizing TDS Provisions
- Benefits passed on to agents as business promotion strategy taxable in hands of agents.
- Tax deduction is provided to the person giving benefits, if the aggregate value of such benefits exceeds Rs 20,000 during the financial year.

Economic Survey 2021-22 | Economic Survey 2021-22 Highlights | Download Economic Survey 2021-22 PDF

Union Budget 2022-23 Highlights: Key Points about Indirect Taxes

Remarkable progress in GST
- GST revenues are buoyant despite the pandemic – Taxpayers deserve applause for this growth.
Special Economic Zones
- Customs Administration of SEZs to be fully IT driven and function on the Customs National Portal – shall be implemented by 30^thSeptember 2022.
Customs Reforms and duty rate changes
- Faceless Customs has been fully established. During Covid-19 pandemic, Customs formations have done exceptional frontline work against all odds displaying agility and purpose.
Project imports and capital goods
- Gradually phasing out of the concessional rates in capital goods and project imports; and applying a moderate tariff of 5 percent – conducive to the growth of the domestic sector and ‘Make in India’.
- Certain exemptions for advanced types of machinery that are not manufactured within the country shall continue.
- A few exemptions were introduced on inputs, like specialised castings, ball screw and linear motion guide – to encourage domestic manufacturing of capital goods.
Review of customs exemptions and tariff simplification
- More than 350 exemption entries proposed to be gradually phased out, like exemption on certain agricultural products, chemicals, fabrics, medical devices, & drugs and medicines for which sufficient domestic capacity exists.
- Simplifying the Customs rate and tariff structure particularly for sectors like chemicals, textiles and metals and minimise disputes;
- Removal of exemption on items which are or can be manufactured in India and providing concessional duties on the raw material that go into the manufacturing of intermediate products – in line with the objective of ‘Make in India’ and ‘Atmanirbhar Bharat’.

Union Budget 2022-23 | Union Budget 2022-23 Highlights | Part A

Union Budget 2022-23 Highlights: Sector-specific proposals

Electronics
- Customs duty rates to be calibrated to provide a graded rate structure – to facilitate domestic manufacturing of wearable devices, hearable devices and electronic smart meters.
- Duty concessions to parts of the transformer of mobile phone chargers and camera lens of mobile camera module and certain other items – To enable domestic manufacturing of high growth electronic items.
Gems and Jewellery
- Customs duty on cut and polished diamonds and gemstones being reduced to 5 per cent; Nil customs duty to simply sawn diamond – To give a boost to the Gems and Jewellery sector
- A simplified regulatory framework to be implemented by June this year – To facilitate the export of jewellery through e-commerce.
- Customs duty of at least Rs 400 per Kg to be paid on imitation jewellery import – To disincentivise import of undervalued imitation jewellery.
Chemicals
- Customs duty on certain critical chemicals namely methanol, acetic acid and heavy feedstocks for petroleum refining being reduced;
- Duty is being raised on sodium cyanide for which adequate domestic capacity exists – This will help in enhancing domestic value addition.
MSME
- Customs duty on umbrellas being raised to 20 per cent. Exemption to parts of umbrellas being withdrawn.
- Exemption being rationalised on implements and tools for agri-sector which are manufactured in India
- Customs duty exemption given to steel scrap last year extended for another year to provide relief to MSME secondary steel producers
- Certain Antidumping and CVD on stainless steel and coated steel flat products, bars of alloy steel and high-speed steel are being revoked – to tackle prevailing high prices of metal in larger public interest.
Exports
- To incentivise exports, exemptions being provided on items such as embellishment, trimming, fasteners, buttons, zipper, lining material, specified leather, furniture fittings and packaging boxes.
- Duty being reduced on certain inputs required for shrimp aquaculture– to promote its exports.
Tariff measures to encourage the blending of fuel
- Unblended fuel to attract an additional differential excise duty of Rs 2/ litre from the 1^st of October 2022 – to encourage the blending of fuel.