Decoding Budget 2022-23?s Tax Slabs and Cryptocurrency Stance

Understanding Why the Budget is Important

February 1, 2022, saw India’s finance minister, Nirmala Sitharaman, present the Union Budget for the new year. The value of the budget lies in the fact that it enables the government to control and allocate the taxation policies applicable to various industries. Each government budget outlines the government’s expected revenues as well as their projected expenditures. By acquainting yourself with the finer details pertaining to the budget, you can understand how the income you earn will be taxed. 

A Few Fast Facts Pertinent to the Budget

Some of the many suggestions proposed by the finance minister in the 2022-2023 budget have been examined below. 

• The tax deduction limit imposed on employees of the central as well as state governments ought to rise from 10 to 14 per cent
• Corporate surcharge should fall from 12 to 7 per cent
• Income drawn from virtual digital assets to be taxed at a 30 per cent rate with no deductions applicable to expenditure or allowance other than the cost of acquisition
• No changes to be made to the income tax slabs 

Assessing the Unchanged Tax Slabs

While the income tax slabs and rates have not altered since 2014, the new tax regime issued in the 2020 budget is available to taxpayers should they choose to deviate from the old tax regime. The new tax regime provides reduced tax rates to those that are amenable to the idea of foregoing tax deductions and exemptions.

• Thus far, both tax regimes old and new exempt incomes of up to INR 2.5 lakhs from being taxed.
• Income that falls in the range of INR 2.5 to INR 5 lakhs is taxed at a 5 per cent rate under the old as well as new tax regime.
• The new regime levies a 10 per cent tax on personal income that amounts anywhere between INR 5 to INR 7.5 lakhs. In contrast, the old regime has a 15 per cent tax rate applicable to this amount of income.
• Income ranging between INR 7.5 to INR 10 lakhs has a 15 per cent tax levied on it as per the new regime. The old regime on the other hand has a tax rate of 20 per cent levied on this income amount.
• This new regime has a 20 per cent tax rate applicable to personal income that falls between INR 10 to INR 12.5 lakhs.
• Income that ranges from INR 12.5 to INR 15 lakhs has a 25 per cent tax rate applicable to it under the new regime.
• The new regime states that income exceeding INR 15 lakhs has a 30 per cent tax rate applicable to it. 
• As per the old income tax regime, any personal income that exceeds INR 10 lakhs has a tax rate of 30 per cent applicable to it.

While income tax slabs haven’t experienced any major changes, the finance minister did propose a two-year window for taxpayers to fix any errors they might have made to their filings for a given assessment year.

Clarity on Cryptocurrency Taxation 

The 2022-2023 budget was the first Indian budget that made clear how virtual and digital assets such as cryptocurrency ought to be taxed. The basic premise outlined here is the fact that any income drawn from the transfer of virtual digital assets of any kind is to be taxed at a rate of 30 per cent. Deductions of any kind other than cost of acquisition aren’t permitted under this new tax. Furthermore, any losses incurred owing to transfer aren’t to be offset against alternative streams of income. 

This proposed taxation policy makes clear that in the event that any virtual digital assets are provided to others as a gift, the burden of paying taxes on the same falls in the hands of the recipient. Finally, a TDS is applicable on the payment made such that these assets can be transferred and amounts to a rate of 1 per cent. This holds true in case of transfers that fall above the monetary threshold.  

Final Thoughts

The 92-minute budget outlined by Nirmala Sitharaman was the shortest one delivered thus far. As the pandemic-era stressors begin to decline, the impending fiscal is anticipated to have a critical impact on the Indian economy. 

While the fact that tax brackets remain unchanged is problematic as inflation is on the rise and salaried individuals are to bear the brunt of this, the 2022-2023 budget did bring with it several positive changes. For starters, clarity provided on virtual digital assets will make the process of taxing cryptocurrency far more straightforward. Some of the other beneficial highlights associated with this budget have been examined below.

• The government recognizes the importance of affordable housing and has allocated INR 480 billion towards setting this up in 2022-2023
• Climate action and the transition to energy efficient sources has been highlighted as a government priority 
• INR 195 billion is to be allocated towards production-linked incentives that focus on the manufacture of solar equipment
• The import duty applicable to certain chemicals is going to be reduced
• A digital rupee that relies on blockchain technology will be launched in 2022-2023
• A co-investment model will be funded by the government with blended capital such that agriculture start-ups can be financed