Budget 2022: No new tax is itself a relief

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Budget 2022 has laid to rest two big fears of investors. One, there will be no new taxes or hike in the surcharge rates. In fact, long-term investors in property, unlisted shares and other capital assets have got some relief. The surcharge on LTCG from these capital assets has been proposed to be capped at 15 percent. For taxpayers with income above Rs 2 crore, this is currently as high as 25 percent while those earning over Rs 5 crore pay 37 percent.

The bigger fear that the Budget set to rest was that cryptos will not be banned in India. By levying a 30 percent tax on crypto gains and announcing plans to introduce a digital currency, the government has recognised this emerging asset class. A 30 percent tax may appear high, but it removes the shroud of uncertainty over cryptos and legitimizes the instrument.

The Budget has also given taxpayers another chance to come clean. The new form AIS has details of all financial transactions carried out by a taxpayer during a financial year. If a taxpayer filed his returns but forgot to include any income, he can file a revised return. However, he will have to shell out an additional 25-50 percent on the tax along with interest. The Budget gives taxpayers two years to come clean. This is likely to reduce tax litigation and improve compliance.

No tax reliefInvestors who were expecting some relief in tax on LTCG from equities must be dissapointed. There was also no relief by way of new deductions or any rejigging of the tax slabs. The basic exemption limit, which is Rs 2.5 lakh for regular taxpayers and Rs 3 lakh for senior citizens, remains unchanged. The Section 80C investment limit, last reviewed eight years ago in 2014, also remains unchanged at Rs 1.5 lakh.

Even so, the push for capital expenditure by the government has delighted the market. The Sensex zoomed 850 points, led by infrastructure shares and capital goods. Fears of a hike in excise duty on tobacco products had pushed down cigarette company shares just a few days before the budget. They bounced back smartly on Tuesday, with FMCG major ITC leading the pack with a 3.4 percent rise.

Finance Minister Nirmala Sitharaman’s third budget also focused on Ease of Doing Business in India. According to the Budget, more than 25,000 compliances were reduced and 1,486 Union laws repealed. The minister has promised digitisation of manual processes and interventions, integration of the central and state-level systems through IT bridges, a single point access for all citizen-centric services, and standardisation and removal of overlapping compliances.