Budget 2022 Expectations: Clarity on crypto taxation, 80C limit hiked, duty rationalization on EVs
As Finance Minister Nirmala Sitharaman presents her fourth Union Budget on February 1, all eyes will be on how the government balances populist measures while taking the test of fiscal consolidation. While Indian corporates are expecting some major announcements that will enable them to reset their growth agenda, individual taxpayers are expecting some more disposable income in their hands so that they can invest and consume more.
As India works towards a US$ 5 trillion economy by 2025, and with only 2 days left for the 2022-23 budget, here are the top five market expectations on direct and indirect taxes.
Direct Taxes:
1. The 80C deduction available up to Rs 1.5 lakh per annum should be substantially revised upwards;
2. Raise the income limit of Rs 15 lakh to have a maximum tax rate of 30%, to make the alternative concessional tax regime, which came into effect from April 2021, more acceptable;
3. As soon as Web 3.0 comes out, crypto-assets which include a wide range of digital assets like non-registered tokens, wrapped asset tokens etc. will gain tremendous traction. It is expected that a special regime for taxation of cryptocurrencies will be introduced in the budget.
4. The burden of Long Term Capital Gains Tax (LTCG) introduced through the Finance Act 2018 has affected investor confidence to some extent. There is no LTCG tax in major economies. In India too, it is expected that LTCG will be exempted on sale of Indian-listed equity shares as this will encourage investment through stock exchanges.
5. Corporates are hoping that the entire amount, or a reasonable proportion of the expenditure incurred to help the society and employee welfare during COVID-19, will be allowed as deductible expenditure. Also, the government is expected to reduce tax rates to 15 per cent or less for companies engaged in R&D activities and allow a weighted deduction on in-house R&D expenditure.
Indirect Taxes:
1. There is scope for rationalization of customs duty structure for EV and ancillary components, renewable energy generation equipment and related components.
2. Sector-specific concessions are required for semiconductor manufacturers with a focus on exports.
3. Budget allocation for expansion of PLI scheme to sectors like leather and laminates; The additional incentive schemes will also attract companies to set up additional manufacturing in areas that were not the focus in the previous budget and help reverse the impact of the pandemic.
4. The government is already reviewing 400 customs duty exemptions (as announced in the last budget). The final list is expected to be proposed as part of the 2022 budget and the industry is waiting so that there is no adverse impact on business as a result of this exercise.
5. Extension of customs duty exemption on goods imported for testing, and setting up of a customs dispute resolution platform, easing of compliance under Customs, and the existing ICEGATE, DGFT and SEZ online portals into a common digital platform to integrate.
Experts take:
Rakesh Nangia, Chairman, Nangia Anderson India said, the top end of businesses in particular, as well as the upper-middle class, are doing reasonably well despite the indelible impact left by the COVID crisis. “India is facing the problem of real consumption as the less affluent classes are still not out of their distressing situations.
The main focus of the budget should be on enabling the ecosystem around jobs, income and demand creation. There is also a need to address various challenges including the most important consideration. Data security is faced in relatively new areas like telemedicine, tele-lawying and ed-tech,” Nangia said.
Gokul Choudhary, Partner, Deloitte India, said the budget is expected to provide relief to low and middle-income people whose disposable income has been impacted by inflation. Also, India has agreed to abolish the Equalization Levy (EL) and follow the multilateral solution as agreed in Pillars 1 and 2 among the 137 member countries working on the OECD Inclusive Framework.
“Hopefully, the budget will introduce a necessary legislative framework to facilitate their implementation and also prepare a road map for stakeholder consultations,” Choudhary said.
AMRG & Associates Senior Partner Rajat Mohan said that while the middle class expects higher settlement income to combat sharp inflation, large corporates expect stability in the tax structure, MSMEs need additional liquidity for business growth. Desire for availability, and foreign investors expect a favorable business environment over a long period of time. -Term strategic investment budget from 2022-23.
Nangia Andersen LLP Partner – Indirect Tax Sameer Kapadia said that if the government sincerely wants to promote India as a manufacturing hub and pursue the policy of self-reliant India, then the government needs to take some practical measures.
Kapadia said, “These measures include, inter alia, rationalization of the rate of primary inputs/intermediaries on the one hand and, on the other hand, an increase in the rate of finished products to provide tariff protection to boost domestic manufacturing in India. may be required.”
Dhruv Advisors LLP partner Sandeep Bhalla said that the media and entertainment sector requires huge investments in digitisation, technology set up and distribution network.
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