5 MAJOR CHANGES UNDER INCOME TAX LAW w.e.f. 1 April 2022
In India, as the new financial year (2022-23) begins on 1 April. There are some major changes in Income Tax Laws that are effective from 01-04-2022 and applicable for the FY 2022-23. These new rules will affect how much you save, spend, and pay in taxes.
Here is a look at these major changes and how they may impact an individual taxpayer:-
1. Tax on crypto assets – All gains from cryptocurrency and other various virtual digital (VDA) assets will now be taxed at a fixed rate of 30%. This includes gifts in the form of cryptocurrency. Furthermore, the government has enacted regulations prohibiting the offset of losses in one virtual digital asset against profits in another.
2. Filing of updated ITRs (Income Tax Returns) – After the deadline for filing ITRs has passed, individuals will have an additional opportunity to update their tax returns to increase their income and pay additional tax on income which has not been covered in their original ITRs. If further information was missing when the ITR was filed, this updated return will be filed. The Income Tax Act has been amended to include a new subsection 139 (8A).
Individuals have three years from the end of the fiscal year to file an updated return. Regardless of whether a person has submitted an initial or late ITR, the updated ITR will be filed. An individual will be required to pay an additional tax of 25% in the first year and 50% on the tax in the second year after the Assessment Year, along with interest when filing an updated ITR.
3. EPF new rule – With effect from 1 April 2022, if an employee’s contribution to a Provident Fund account during a financial year exceeds Rs 2.5 lakh, the interest generated on the excess contribution will be taxable in the hands of the employees. A new EPF account will be created to calculate the interest that will be taxable in the hands of an employee.
On 31 August 2021, the Central Board of Direct Taxes (CBDT) released a statement clarifying how interest on excess contributions will be taxed. According to the announcement, all contributions made by an employee before 31 March 2021 will be tax-free. Interest will be credited to the current EPF account for contributions up to Rs 2.5 lakh in FY 2021-22. The interest that is credited to this account is tax-free. If EPF contributions in FY 2021-22 exceed Rs 2.5 lakh, a new EPF account would be formed. The employee would be taxed on the interest credited on the excess contribution (i.e. EPF Contribution less Rs 2.5 lakh). For individuals not having employer’s contribution to their EPF accounts, such as government employees, the threshold is Rs 5 lakh.
4. Home loan deduction benefit removed - Until the Financial Year 2021-22, taxpayers and assessee could take an additional deduction [in addition to Rs. 2 Lakhs permitted u/s 24(b)] on home loans interest up to Rs 1.5 lakh u/s 80 EEA for properties worth less than Rs 45 lakh. This scheme has not been continued for the FY 2022-23.
5. Non-KYC compliant bank accounts to have restrictions – Individuals who do not have a KYC-compliant bank account will not be able to use it after April 1, 2022. Cash deposits, withdrawals, and other transactions will be restricted.