Overview of taxes on different asset classes as per 2022 budget

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The asset class is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. They are instruments that behave similarly to one another in the marketplace. There is usually very little and often negative correlation between different asset classes.

Some examples are equities (like stocks), fixed income (like bonds), cash and cash equivalents, real estate, commodities, futures, currencies, and now cryptocurrencies. Alternative asset classes include valuable inventory (artwork), hedge funds, and venture capital.

Budget 2022

A relief to individual taxpayers is the capping of surcharge on long-term capital gains on all asset types to 15% irrespective of the capital gain amount.

Virtual Digital Assets (VDA)

include cryptocurrencies, decentralized finance (Defi), and non-fungible tokens (NFTs). Any income from the transfer of VDA will be taxed at 30%. Crypto gains will be taxed at a flat rate of 30% without any deduction of expenses and without set off against other income. Many Students and Low-income earners were paying zero or very low tax on crypto income and so they will be hit by the new tax. Investors should book profits before the end of the financial year i.e 31 March 2022. The Budget 2022 has inserted Section 115BBI under the Income Tax Act to tax the income arising on account of virtual digital assets transactions at the rate of 30%. Virtual digital assets have been defined to include cryptocurrency, non-fungible tokens.

Other digital assets to be notified by the central government. While calculating income, the only deduction for the cost of acquisition shall be allowed and no other deduction of any expenditure or set-off of any loss will be allowed.

The gift of virtual digital assets above the fair market value of INR 50,000 will be taxable in the hands of the recipient, other than specified exempt cases. If cryptos and NTFS are gifted, the recipient will have to pay a flat 30% tax irrespective of his income level. Your relatives will not pay any tax if you give them property, gold, stocks, or mutual funds if it is covered under the definition of relatives in the Income Tax Act. But if you are planning to give your cryptos to them, they will need to shell out 30%.

Taxpayers may realize that they have committed omissions or mistaincorrectlyctly estimating their income for tax payment, Sitharaman said. She proposed a new provision permitting taxpayers to file an Updated Return on payment of additional tax. This updated return can be filed within two years from the end of the relevant assessment year.

Tax returns for salaried individuals whose salaries fall below a certain threshold have been simplified in India. However, data shows that the new tax scheme without exemptions and with lower tax rates has not become popular. Ins, read they are choosing the earlier scheme which leads to lower taxes in most cases.

Income Tax slabs had not been raised in a meaningful manner over the years and are not linked to inflation unlike in the case of taxation of gains from certain asset classes. Salaried individuals’ purchasing power had reduced despite its the cost of living going up significantly. Now that the economy is looking set to grow fast, one can hope the Government will improve upon last year’s tax-related announcements.

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