Union Budget 2022 | ‘Unchanged tax slab disappointing’

The restriction on set-off of realised losses against gains is unusual

The Finance Minister’s Budget Speech was a short one, and she made only a handful of references to the direct tax changes envisaged. Nonetheless, the Finance Bill is a detailed one, and contains several important, albeit low-key amendments on the direct tax front.

On the all-important topic of personal tax rates, the Budget contains no major changes. This will come as a disappointment to many who were expecting relief from changes to slabs, a lowering of rates, or at least through an increase in key tax deductions. Some benefit by way of COVID relief is, however, provided both in respect of treatment costs as well as in respect of sums paid to family members of those who passed away in the pandemic. In a sense, with strong domestic demand and the looming threat of inflation, perhaps the government chose to adopt a wait-and-watch approach towards tax relief, despite the imminent elections in key States. However, this is something that the government may have to consider in the coming years, especially if tax collections continue to remain buoyant.

On the procedural side, there is an important change that will enable taxpayers to update their returns beyond the short existing time limits for filing belated returns. This will now be possible up to 2 years from the end of the assessment year, but comes with a cost — the taxpayer has to pay an additional tax of between 25% and 50% of the tax on the additional income declared in the updated return. This is a far reaching change, and will enable taxpayers to address inadvertent errors and obtain certainty without going through a complex and time consuming litigation process.