Finance Minister Nirmala Sitharaman presented the Union Budget 2022 on February 1, making it her fourth consecutive Budget since 2019. She concluded her Budget speech in 92 minutes- her shortest Budget speech so far.
The Budget 2022, as argued by experts, panels and investors, is the most visionary Budget in the last few years. In fact, Sitharaman stated that Budget 2022 would lay the foundation for the country’s economic development for the next 25 years. However, Sensex went in a swing, rising nearly 1000 points first, declining 1200 points midday after the Budget speech, and swelling by 1.46% at the end of the intraday trading session. Nifty, Bank Nifty, and IT stocks were on a rally with Sitharaman announcing a sharp spike in the capex for FY22-23.
From Digital currency launch to direct MSP and e-passports, the Budget placed a massive bet on various sectors of India and their capacity in the economy.
While the budget stepped up on capex spending, the common man felt a pinch with no specific income tax cuts or any other reforms.
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Here is how Budget 2022 affects your personal finance and planning. Read on!
Hit hard by the pandemic, health woes, and a dull economy, the common man kept all eyes on the Finance Minister’s announcement on income tax rates. But in what comes as a disappointment for the common man is that the Union Budget 2022 neither made any changes to tax slabs nor offered tax concessions. The hopes of the standard deduction limit being raised were shattered with no word on deductions in the Budget 2022. This implies, for FY 22-23, the prevailing tax rates on income would continue.
In Budget 2022, the central Government threw in a major surprise for blockchain and digital currency enthusiasts. FM Sitharaman announced that the RBI (Reserve Bank of India) will soon issue its own digital currency, backed by blockchain technology. This currency is likely to hit the market by 2020-23.
The proposal is in line with the thought of making currency management cheaper and more efficient.
What became the major talking point of the Budget was the Government’s decision to tax digital assets (read as cryptos, NFTs, and others). The Budget declared a 30% tax on income, sale, or acquisition of digital assets, with an additional 1% TDS. Also, no offset of losses would be permitted for tax on assets withheld. While the crypto industry is finally recognized by the Indian Government, the excess tax rates have been viewed negatively as cryptocurrencies are one of the fastest-growing industries globally and domestically.
For a Government that planned on banning cryptocurrencies, introducing a digital currency, and throwing light on the tax treatment of the same, is a positive step in establishing cryptocurrencies in India.
An interesting development from the Budget presented was the timelines on tax filings. Updated tax returns can now be filed within two years from the end of the assessment year. And those who missed filing certain incomes can now declare them so.
In some relief to the investing community, the Budget capped surcharges on LTCG at 15%, down from 37%. Currently, this is applicable to the sale of stocks, post this budget, this surcharge is now capped at 15% on any assets.
Taking India’s climate goals forward, the Budget announced the issuance of ‘Sovereign Green Bonds’ to fund ‘Green infrastructure.’ The project intends to reduce carbon intensity in the economy and shall be a part of the Government borrowing program in FY 22-23.
Small scale entrepreneurs can now tap on insurance companies for the surety of their payments. The use of surety bonds as a substitute for bank guarantees shall be made acceptable in Government procurements. The industry has welcomed it as many small contractors and workers do not enjoy the luxury of collateral.
The Budget also proposed an exception on payment of annuity and a lump sum to differently-abled’s dependents.
The ‘aam aadmi’ has termed the Budget boring while the Government has ushered a way of reforms and schemes. But what these reforms bring to the table remains to be seen.