Know These 10 Income Tax Rules That Are in Effect From 1st April

India begins its financial year on the 1st of April each year, and for taxpayers in India, it’s a new beginning to invest in various tax-saving schemes and follow new income tax rules. This year, too, is no different, except that in addition to the usual rules governing housing loans, Provident Fund, etc., cryptocurrency laws will also apply for the first time. In this article, we decode all the new income tax rules that are in effect from 1st April 2022.

1. Filing of updated tax returns

The government added a new subsection to Section 139 of the Income Tax Act. Effective 1st April, taxpayers can file an updated return within two years from the end of the relevant assessment year. The individual will also be required to pay 25% to 50% additional tax and interest on the additional income while filing the updated return.

2. Tax on Employees’ Provident Fund

The government has introduced a new rule stating that if an employee’s contribution to the Provident Fund (PF) exceeds Rs 2.5 lakh per annum, then the interest on the same will be taxed. However, if there is no employer’s contribution, the threshold will be Rs.5 lakh per annum.

3. Long-term capital gains

The existing cap of 15% surcharge on long-term capital gains on the sale of listed equity or mutual funds will now be extended to long-term capital gains on all assets from 1st April 2022.

4. Additional deduction for first-time homeowners

Effective 1st April 2022, the income tax benefit under Section 80EEA that was available to all first time home-buyers has been discontinued for the first time in recent years. The additional deduction of Rs.1.5 lakh was allowed to first-time homeowners whose property had a stamp duty valuation of up to Rs.45 lakh

5. Taxation on cryptocurrencies

Effective 1st April 2022, a 30% tax rate will be levied on virtual digital assets, including cryptocurrencies. 

6. Transfer of virtual digital assets

Any losses incurred on the transfer of a virtual asset cannot be set off against any other income. In fact, investors will not be allowed to set off losses made on one type of cryptocurrency against the other either. 

7. Gifting rules for cryptocurrencies

Any cryptocurrencies received as a gift will also be taxable effective 1st April 2022 in the hands of the receiver.

8. Benefits for state government employees

State government employees can now deduct up to 14% of their dearness allowance (DA) and basic salary for the National Pension Scheme (NPS). This will help them get a higher tax deduction against the 10% that was previously allowed.

9. COVID-19 treatment expenditure

Any amounts received by a person for the treatment of COVID-19 will be tax-free. Further, money received by the family in case of death due to COVID-19 is also free from tax up to a limit of Rs.10 lakh.

10. Insurance premium benefits for a dependent’s caregivers

Budget 2022 introduced a new tax benefit for the parents or guardians of a disabled person. According to this, if the parent/guardian can buy a savings life insurance policy with the disabled person as the beneficiary, they would be able to deduct the policy amount from their gross income before tax. This is subject to fulfilling certain conditions.

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