Union Budget 2022-23 – Key Takeaways

The Union Budget 2022 of India mainly focused on “technology and digital” along with sectors like health, education, infrastructure and provision of e-services to the masses. This union budget 2022 has laid down a foundation and structure of the economy over ‘Amrit Kal’ of the next 25 years- from India at 75 to India at 100.

The finance minister, Smt. Nirmala Sitharaman also stated that ‘Sabka Prayaas’ will still continue with strong growth. The Indian economy had the highest GDP growth of 9.2% GDP among all economies. Amid the Omicron wave, the speed of our vaccination campaigns has also helped a lot. The strategic transfer of the ownership of Air India to the Tata Group has been completed successfully. 

The Union Budget 2022 has provided a dramatic boost in public investment and capital expenditure provision.

Some of the key takeaways of the Union Budget 2022 

Direct tax:

• Taking forward the policy of a stable and predictable tax regime

• Vision to establish a trustworthy tax regime
• To further simplify the tax system and reduce litigation

• Updated return

• Provision to file an Updated Return in the payment of additional tax
• This will enable the assessee to declare income missed out earlier
• This can be filed within two years from the ending date of the relevant year

• Tax benefit to persons with disability
• The payment of lump sum or annuity amount from insurance scheme to be allowed to the differently-abled dependent during the entire lifetime of the parent or guardian, that is, if the parent or guardian is over 60 years of age.

• Cooperative societies

• Alternate Minimum Tax or AMT that is paid by cooperatives to be reduced from 18.5% to 15%
• In order to provide a levelled playing field between the companies and societies
• The surcharges on cooperative societies to be brought down from 12% to 7% for those having a total income of more than 1 crore and up to 10 crore

• Start-ups incentive

• The period of incorporation is to be extended by a year, up to the 31st of March, 2023 for all startups that are eligible to avail of tax benefit
• Prior to this, the incorporation period was valid up to the 31st of March, 2022

• National Pension Scheme (NPS) Contribution

• A tax deduction of limit is to be increased from 10% to 14% on employer’s contribution to have NPS account of State Government employees
• This will bring the state government employees at par with the central government employees
• This will also help in enhancing the employee’s social security benefits

• Taxation on virtual digitals assets

• Tax regimes for virtual digital assets have also been introduced
• The income generated from the transfer of virtual digital assets are taxable at the rate of 30%
• There will be no deduction whatsoever in respect to any expenditure or allowance that is allowed while computing such gains, except the cost of acquisition
• The loss from the transfer of virtual digital assets cannot be set off against any other income
• In order to capture the transaction details, TDS to be provided on payment made in relation to the transfer of virtual digital assets at the rate of 1% of such consideration above a monetary threshold
• Gifting of virtual digital assets will result in taxing them in the hands of the recipient

• Litigation Management

• In situations where the question of law is similar to the one pending in the High court or Supreme court, the filling of the appeal by the department is to be deferred till such question of law is decided by the court
• In order to greatly help in reducing repeated litigation between the taxpayers and the department

• Concessional tax regime
• The last date for commencement of manufacturing or production under section 115BAB extended by a year, that is, from the 31st of March, 2023 to the 31st of March, 2024

• IFSC
• Tax incentives are subject to specifies conditions, the following are to be exempted from tax:

1. Income from over the counter derivatives issued by an offshore banking limit
2. Income received from portfolio management services in IFSC
3. Income of a non-resident from offshore derivative instruments
4. Income from royalty and interest on account of lease of a ship

• Surcharge rationalisation

• Surcharge on AOPs that is a consortium formed in order to carry out a contract, capped at 15%
• It is done to decrease the disparity in surcharge between AOPs and individual companies.
• Surcharge on long term capital gains arising on transfer of any different type of assets capped at 15%
• This will give a dramatic boost to the start-up communities in India

• Tax-evasion
• No set-off, of any loss, is to be allowed against undisclosed income that is detected during survey operations and searches

• Education and health cess
• Any surcharge or cess on income and profit is not to be allowed as business expenditure

• TDS Provision Rationalisation

• The tax deduction is provided to a person giving benefits if the average value of such benefits exceeds Rs 20,000 during the financial year
• The benefits passed on to agents as a business promotion strategy is applicable for taxation in the hands of the agent

Indirect Tax:

• GST progress
• Taxpayers deserve appreciation for the significant growth of GST revenues despite the ongoing pandemic

• Duty rate charges and customs reforms
• Faceless customs are now fully established. During the pandemic, the customs formations have done a buoyant frontline work against all odds, displaying agility and purpose

• Special Economic Zones
• The customs administration of Special Economic Zones is to be fully IT-driven and function on the Customs National Portal- shall be implemented by the 30th of September, 2022.

• Capital goods and project imports

• Phasing out gradually the concessional rates in capital goods and project imports and applying a moderate tariff of 7.5%- conducive to the growth of the domestic sector and ‘Make in India’
• Certain exemptions for types of machinery that are advanced and are not manufactured within the country are to be continued
• Some exemptions were introduced on inputs, like specialised castings, ball screws and linear motion guides, in order to encourage domestic manufacturing of capital goods.

• Review of tariff simplification and customs exemptions

• 350+ exemption entries are to be phased out gradually, like exemption on some agricultural products, chemicals, medical devices, fabrics, drugs and medicines for which sufficient domestic capacity already exists
• Simplifying the customs rate and tariff structure particularly for sectors like chemical and textiles and metals and minimising disputes. The removal of exemption on items that are or can be manufactured in India and providing concessional duties on the raw materials that are used in the manufacturing of intermediate products- this goes in line with the objectives of ‘Make in India’ and ‘Atmanirbhar Bharat’

• Electronics

• The custom duty rates to be calibrated to provide a graded rate structure- in order to facilitate domestic manufacturing of devices that are wearable, hearable and electronic smart meters
• The duty concessions to parts of a transformer of mobile phone chargers and camera lens of camera phones module and some other items- this is to enable domestic manufacturing of high growth electronic items

• Chemical
• The customs duties on some critical chemicals like methanol, acetic acid and heavy feedstocks for petroleum refining is to be reduced. The duty is being raised on sodium cyanide for which enough domestic capacity exists. This will help in enhancing domestic value addition

• Jewellery and Gems

• The customs duty on polished and cut diamonds and other precious gemstones are to be reduced to 5%. No customs duty to be imposed on sawn diamonds. This will give a boost to the Gems and Jewellery sector in India
• A simplified regulatory framework is to be implemented by June this year in order to facilitate the export of jewellery through e-commerce
• The customs duty of at least Rs 400 per kg is to be paid on imitation jewellery import in order to disincentive the import of undervalued imitation jewellery.

• Exports

• Customs  duty to be reduced on certain inputs required for shrimp aquaculture in order to promote its export
• To incentivise imports, some exemptions are to be provided on items like embellishment, trimming, fastening, zipper, lining materials, specified leather, furniture fittings and boxes for packaging.

• MSME

• The customs duty on umbrellas is to be raised to 20% and exemptions on parts of umbrellas being withdrawn
• Exemption being rationalised on the implemented and tools for agri-sector which are manufactured within India
• Customs duty exemptions given to steel scrap last year extended for another year in order to provide relief to MSME secondary steel producers
• Some anti-dumping, as well as CVD on stainless steel and coated steel  flat products, bars of alloy steel and high-speed steel, is being revoked in order to tackle prevailing high prices of metal in the larger public interest

• Encouraging blending of fuel
• Unblended fuel to attract an additional differential excise duty of Rs 2 per litre from the 1st of October 2022 in order to incentivise the blending of fuel.

PM GatiShakti:

• PM GatiShakti

• The seven components of the PM GatiShakti are railways, roads, airports, ports, mass transport, waterways and logistic infrastructure
• This will encompass the seven engines for economic transformation, seamless multimodal connectivity and logistics efficiency
• The projects pertaining to these seven components in the National Infrastructure Pipeline will be aligned with PM GatiShakti Framework.

• Road Transport

• The National Highways Network to be expanded by 25000 km in 2022-23
• A total sum of Rs 20000 crore to be mobilised for National Highways Network expansion

• Multimodal Logistics Parks
• Contracts to be awarded through the PPP model in 2022-23 for implementation of Multimodal Logistics Parks at four locations.

• Parvatmala

• The National Ropeways Development Program, Parvatmala to all be taken up on PPP mode.
• This contract is to be awarded in 2022-23 for 8 ropeway projects of 60 km in length

• Railways

• It is a one-station, one product concept to help local businesses as well as supply chains
• 2000 km of the railway network to be brought under the indigenous world-class technology and capacity augmentation, Kavach, in 2022-23
• 400 new generation Vande Bharat Trains to be manufactured during the next three years
• 100 PM GatiShakti Cargo terminals for multimodal logistics are to be developed during the next three years

Inclusive Development

• Ken Betwa project

• 1400 crore outlay for implementation of the Ken-Betwa link project
• 9.08 lakh hectares of farmers’ lands to receive irrigation advantages by Ken-Betwa link projects

• MSME

• Udyam, e-shram, NCS and ASEEM portals are to be interlinked
• A total of 130 lakh MSMEs are provided additional credit under Emergency Credit Linked Guarantee Scheme (ECLGS)
• The ECLGS can be extended up to March 2023
• The guarantee cover under the ECLGS is to be expanded by Rs 50000 crore to a total cover of Rs 5 lakh crore
• Rs 2 lakh crore additional credit for Micro and Small Enterprises to be facilitated under CGTMSE or Credit Guarantee Trust for Micro and Small Enterprises.
• Raising and Accelerating MSME performance (RAMP) programme with an outlay of Rs 6000 crore to be rolled out

• Agriculture

• Rs 2.37 lakh crore of direct payment to 1.63 crore farmers for the procurement of paddy and wheat
• Promotion of Chemical-free Natural farming throughout the country.  The initial focus, however, is on farmer’s lands in 5 km wide corridors along river Ganga
• NABARD to facilitate fund with blended capital to finance startups for agriculture and rural enterprise
• ‘Kisan drones’ for crop assessment, digitisation of land records, spraying of insecticides and nutrients.

• Education

• The ‘One class- One TV channel’ programme of PM eVIDYA is to be expanded to 200 TV channels
• Virtual labs and skilling e-labs to be set up in order to promote critical thinking skills and simulated learning environments
• High-quality e-content will be developed for the delivery through Digital Teachers

• Health

• An open platform for National Digital Health Ecosystem to be rolled out
• ‘National Tele Mental Health Programme’ for quality mental health counselling and care services are to be launched
• A network of 23 tele-mental health centres of excellence to be set up

• Banking

• 100% of 1.5 lakh post offices to come on the core banking systems
• Scheduled Commercial Banks to set up 75 digital banking units or DBUs in 75 districts. 

• Digital Rupee
• The Digital Rupee by The Reserve Bank of India was introduced which will be starting from 2022-23

Fiscal Management

• Budget estimates 2021-22: Rs 34.83 lakh crore
• Revised estimates 2021-22: Rs 37.70 lakh crore
• Total expenditure in 2022-23 estimated at Rs 39.45 lakh crore
• Total receipts other than borrowings in 2022-23 estimated at Rs 22.84 lakh crore
• Fiscal deficit in the current year: 6.9% of GDP (against 6.8% in Budget Estimates)
• Fiscal deficit in 2022-23 estimated at 6.4% of GDP