Income Tax: Significant Changes Effective From 1st April 2022

With effect from 1st April 2022, the taxpayers need to comply with the following important income tax provisions:-

• Crypto tax

The government proposed a new section in the Union Budget 2022 for taxing cryptocurrency. Cryptocurrency and Non-fungible tokens (NFTs) are termed ‘Virtual digital assets’. Any person transferring virtual digital assets is liable to pay 30% tax on the profits. Except for the amount of the acquisition cost, no other expenses are allowed to be deducted from such income.

However, recently, the government clarified that the infrastructure expenses incurred for mining cryptocurrency should not be treated as the acquisition cost but should be considered a capital expenditure. Further, while making payment for virtual digital assets, the person should deduct TDS at 1% of the value of virtual digital assets.

Also, losses from cryptocurrency transfers cannot be adjusted against any other income to reduce the tax liability. As per further clarification, losses from one class of crypto assets cannot be set off against income from another class of crypto assets. The gifts received in the form of cryptocurrency are also taxable in the hands of the receiver. 

• Filing of updated return

A new income tax provision is introduced to fix any error or undisclosed income because of which the taxpayer paid less tax in the original tax return. The taxpayers can file the updated return after the end of the relevant assessment year but before the completion of two years. A 25% penalty of additional tax is required to be paid if the updated return is filed between 1 to 12 months or 50% of additional tax if the updated return is filed between 13 to 24 months.

• New rules on EPF interest

With effect from 1st April 2022, if the employee’s contribution to the provident fund account exceeds Rs 2.5 lakh during the financial year, the interest earned on the contribution above Rs 2.5 lakh is taxable in the hands of the employee year after year. Currently, interest on any amount of contribution to an EPF account is tax-free.

• TDS on perquisites to businesses

A new TDS provision is introduced, which states that any person who provides perquisites or benefits in place of the regular monetary consideration payable to the resident for carrying out business or exercise of the profession by such resident shall deduct tax (TDS) before providing such benefit or perquisite. The provision will be effective from 1st July 2022.

The person must deduct 10% TDS on the value of such perquisite or benefit if the aggregate value of the perk or benefit given during the year exceeds Rs 20,000. However, the individual or HUFs are not liable to deduct TDS if their total sales from business are less than Rs 1 crore or gross receipts from the profession are less than Rs 50 lakh during the year.

Hence, these are the significant changes in the Income Tax Act that the taxpayer should comply with for FY 2022-23. 

For any clarifications/feedback on the topic, please contact the writer at namita.shah@cleartax.in