4 Major Changes in Income Tax after 1st April 2022: FY 2022-2023

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4 Major Changes in Income Tax after 1st April 2022 FY 2022-2023

With the beginning of the new financial year FY 2022-2023, numerous rules and regulations have changed in respect of Income Tax. Some of the changes are in the areas of EPF (Employee’s Provident Fund), tax on crypto assets, tax relief on the treatment of Covid-19, etc. In this blog, we will discuss the, ‘4 Major Changes in Income Tax after 1st April 2022’.

Table of Content

Financial Year

A financial year is twelve months, used by the government, businesses, and any other organizations for calculating their profits, budgets, and losses.

In India, the financial year is from 1 April to 31 March the following year and further, the financial year is from 1 April 2022 to 31 March 2023, in short FY 2022-23. It is also commonly knowns as FY 2022.  

Income Tax

Income tax is a type of tax on the income received during a financial year by individuals and businesses. The collection of this tax is by the central government as taxes are the source of revenue for the government. Taxes are sources of revenue for the government.

Taxes are of two types, direct taxes and indirect taxes. The tax generated on the earned income of a person is knowns as income tax. The Income-tax is an example of a direct tax. Further, these tax calculation is based on income slab rates relevant during that financial year.

4 Major Changes in Income Tax after 1st April 2022: FY 2022-2023

Following are 4 Major Changes in Income Tax after 1st April 2022: FY 2022-2023

New tax rules on EPF (Employee’s Provident Fund) Interest:

The term EPF means Employee Provident Fund. It is a scheme for providing a monetary benefit to all individuals who receive a salary, after their retirement. The Employee Provident Fund Organization of India calculates the EPF.

From 1st April 2022, there is a change that if the employee’s contribution to the Provident Fund account exceeds more than Rs 2.5 lakh during the financial year, then the interest earned on the excess contribution is taxable in the hands of the employee year after year. The new rule comes under section 9D of the Income-Tax Act, 1961.

It is very important to remember that only the interest amount generated on the excess contribution will be considered for tax calculation, and the contribution amount will not be included.

Illustration, if an employee contributes Rs. 6 lakhs to EPF in a year, out of that Rs. 2.5 lakhs will be taxable and interest on that part shall be taxable in the hand of the employee year after year.

Crypto Taxation

The ‘Decentralized digital asset and a medium of exchange based on blockchain technology is an undefined definition of cryptocurrency. In simple language, cryptocurrencies are digital currencies used for buying goods and services. 

However, from the start crypto has largely been controversial because of its, decentralized nature, meaning, and operation without any intermediary like banks, financial institutions, or central authorities. The government of India has not up till now approved any status of legal tender to cryptocurrencies.

The crypto asset tax in India has regularly rolled out from April 1, 2022. The provisions on the 30% tax have been effective while those related to the 1% TDS (Tax Deducted at source) will come into effect from July 1, 2022. The FY 2022-23 Budget has brought in clarity concerning the levy of income tax on crypto assets.

The budget for 2022-23 has a threshold limit for TDS of ₹50,000 a year for specified persons, which includes individuals/HUFs who are required to get their accounts audited under the I-T Act, 2000. Also, if anyone receives a gift in form of cryptocurrency or; any other virtual digital asset, that will be liable for taxation as a gift.

How the TDS will work – Example

If ‘A’ buys a bitcoin of Rs. 1 lakh. Later in the year, the value drops to Rs. 50,000 and she decides to sell his holdings at a loss of Rs. 50,000. So, when she will withdraw Rs. 50,000 to her account then she will receive only Rs. 49,500 after deduction of TDS at 1%.  

Let’s assume, that she has not made other transactions in crypto for the rest of the financial year. So, during filing the tax returns, it will be seen that she got a loss of Rs. 50,000 then TDS of 500 will be refunded to her. Since she made an overall loss in her crypto investments, she will not pay the tax. 

However, in the next year, if she makes a profit in her crypto investments, she will be estimated to pay tax on the net income after setting off the loss from the previous year. But, the government doesn’t approve of this because according to the provision the losses from virtual digital asset transactions cannot be carried forward.

Filing of updated IT Return

An Income tax return (ITR) is a form used to file information regarding one income and tax to the Income Tax Department. From April 1, 2022, a new provision is introduced that allows the taxpayers to file an updated return to overcome errors or mistakes done in income tax returns.

According to the new change, the taxpayers can now file an updated return within two years from the end of the relevant assessment year. However, earlier one has only a window of 5 months for filing returns and revising the tax returns. 

Further, the new change is to provide an opportunity to include the missing or; undisclosed income or; any other error leading to less filing of tax in the original tax return.


While reporting such extra income, the taxpayer will also pay additional tax at the rate of 25%. It will be done if the updated return is filed between 1 to 12 months (1st year) or; 50% on the additional tax if the updated return is filed between 13 to 24 months (2nd year) from the end of the applicable assessment year.

Tax relief on Covid-19 treatment expenses

According to the Press Release on June 2021, those who bought money for the treatment of covid-19 have got an exemption from tax. 

Further, the money received by the family members of the dead person due to Covid-19 will get an exemption up to Rs. 10 lakhs. If such payment is within 12 months from the date of death. The amendment has come into effect on April 1, 2020.

 ITR Filing for Company Starting from ₹ 4000/

Conclusion

Therefore, the above-mentioned points are four major changes in the income tax from 1st April 2022. Apart from other changes are in the NPS deduction to State government employees, Tax relief to persons with disability. Contact us for more details.

CA Pulkit Goyal, is a fellow member of the Institute of Chartered Accountants of India (ICAI) having 10 years of experience in the profession of Chartered Accountancy and thorough understanding of the corporate as well as non-corporate entities taxation system. His core area of practice is foreign company taxation which has given him an edge in analytical thinking & executing assignments with a unique perspective. He has worked as a consultant with professionally managed corporates. He has experience of writing in different areas and keep at pace with the latest changes and analyze the different implications of various provisions of the act.

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