AUDIT LOG/TRAIL

According to The Ministry of Company Affairs (MCA) notification dated March 24, 2021 (Companies (Accounts) Amendment Rules, 2021), every company that uses accounting software to maintain its books of account shall use only Accounting Software that has a feature of recording an –

Audit Trail of each and every transaction,

Creating an edit log of each change made in books of account along with the date when such changes were made.

Ensuring that the audit trail cannot be disabled.

The MCA has later announced that the above amendments will take effect on April 1, 2023, which suggests that accounting software used by businesses will have to comply with the Accounts Rules beginning in the financial year 2023-24.

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Highlights of Union Budget 2022-23 under Direct Taxes:

Rebate limit of Personal Income Tax to be increased to RS. 7lakh from the current RS. 5lakh in the new tax regime. Thus, persons in the new tax regime, with income up to RS. 7lakh to not pay any tax.
Tax structure in new personal income tax regime, introduced in 2020 with six income slabs, to change by reducing the number of slabs to five and increasing the tax exemption limit to RS. 3lakh. Change to provide major relief to all tax payers in the new regime.
New Tax Rates :

Total Income (RS)	Rate(percent)
Up to 3,00,000	Nil
From 3,00,001 to 6,00,000	5
From 6,00,001 to 9,00,000	10
From 9,00,001 to 12,00,000	15
From 12,00,001 to 15,00,000	20
Above 15,00,000	30

Proposal to extend the benefit of standard deduction of RS. 50,000 to salaried individual, and deduction from family pension up to RS. 15,000, in the new tax regime.
Highest surcharge rate to reduce from 37 per cent to 25 per cent in the new tax regime. This to further result in reduction of the maximum personal income tax rate to 39 per cent.
The limit for tax exemption on leave encashment on retirement of non-government salaried employees to increase to RS. 25lakh.
The new income tax regime to be made the default tax regime. However, citizens will continue to have the option to avail the benefit of the old tax regime.
Enhanced limits for micro enterprises and certain professionals for availing the benefit of presumptive taxation proposed. Increased limit to apply only in case the amount or aggregate of the amounts received during the year, in cash, does not exceed five per cent of the total gross receipts/turnover.
Provision of a higher limit of RS. 2lakh per member for cash deposits to and loans in cash by Primary Agricultural Co-operative Societies(PACS) and Primary Co-operative Agriculture and Rural Development Banks (PCARDBs).
A higher limit of RS. 3crore for TDS on cash withdrawal to be provided to co-operative societies.
Date of incorporation for income tax benefits to start-ups to be extended from 31.03.23 to 31.3.24.
Deduction from capital gains on investment in residential house under sections 54 and 54F to be capped at RS. 10crore for better targeting of tax concessions and exemptions.
Proposal to limit income tax exemption from proceeds of insurance policies with very high value. Where aggregate of premium for life
insurance policies (other than ULIP) issued on or after 1st April, 2023 is above RS. 5lakh, income from only those policies with aggregate premium up to RS. 5lakh shall be exempt.
Minimum threshold of RS. 10,000/- for TDS to be removed and taxability relating to online gaming to be clarified. Proposal to provide for TDS and taxability on net winnings at the time of withdrawal or at the end of the financial year.
TDS rate to be reduced from 30 per cent to 20 per cent on taxable portion of EPF withdrawal in non-PAN cases.

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NFRA to introduce annual transparency report requirement for Audit Firms

In a first of its kind move aimed at improving audit quality, the National Financial Reporting Authority (NFRA) proposed introducing annual transparency reports requirement for audit firms. The watchdog has come out with draft requirements to be followed by auditors and audit firms for preparing Annual Transparency Reports (ATRs).

According to NFRA, the effort is aimed at enhancing the transparency about management and governance of audit firms and their internal policy framework to ensure high quality audits and preventing conflict of interest by maintaining independence.

“The ATR requirements are proposed to be implemented in a gradual manner for PIEs (Public Interest Entities) starting with statutory auditors of top 1,000 listed companies (by market capitalization) with effect from the financial year ending on 31 March 2023,” the regulator said in a release.

An audit firm will have to publish the ATR within three months from the end of each financial year.

“Transparency report containing certain critical information about the auditor’s operational activities, management, governance and ownership structures, and policies and procedures necessary to deliver high-quality audits etc. The information contained in the ATR will be useful to the investors, audit committees, independent directors and public at large,” the release said.

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Due Date Extension for filing of TDS statement in Form 26Q for the 2nd quarter of FY 2022-23

Considering the difficulties in filing of TDS statement in the revised and updated Form 26Q, the Central Board of Direct Taxes (CBDT)has extended the due date of filing of Form 26Q for the second quarter of Financial Year 2022-23 from 31st October,2022 to 30^th November,2022.

CBDT Circular No. 21/2022 in F.No.275/25/2022-IT(B) dated 27.10.2022 issued.

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Businesses will be able to claim pre-GST tax credits from October 1

The businesses that could not claim tax credits for taxes paid during the pre-goods and services tax (GST) era may soon get an opportunity to do so. The government, from October 1, is likely open a special window for businesses to file their claims, according to a report by Mint.

According to the report, the credits are expected to be worth Rs 400 crore. “Based on the information that we have, the amount that is estimated is around Rs 400 crore. We are waiting for the window to open so that people can start filing claims,” a person aware of the matter told Mint.

When the new tax regime under GST was introduced in 2017, several businesses could not file their tax claims due to a lack of clarity on the rules. The businesses also reportedly faced technical glitches. These have now been resolved, Mint stated.

The window for claiming the credits open on October 1 and close on December 1. The Supreme Court (SC) had earlier asked the government to open the window on September 1 but it granted an extra four weeks to prepare the IT systems to avoid technical glitches.

It had also directed the government to keep in mind the high court judgements around transitional GST credit. Experts have said that the GSTN will accept the claims of tax credits, and the eligibility of the credit will be checked in the courts.

The taxpayers can either file fresh claims or revise their earlier forms on the GST portal. Also, they will be required to submit self-certified copies of the forms within seven days of filing the claim online.

On September 9, the Central Board of Indirect Taxes and Customs (CBIC) issued guidelines to clarify the procedure and timeline of the credit claims, to the officials.

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Companies Act, 2013 Amendment

In exercise of the powers conferred under sub-sections (1) and (3) of section 128, sub-section (3) of section 129, section 133, section 134, sub-section (4) of section 135, sub-section (1) of section 136, section 137 and section 138 read with section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Accounts) Rules, 2014, namely :-

1. Short title and commencement –

(1) These rules may be called the Companies (Accounts) Fourth Amendment Rules, 2022.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Companies (Accounts) Rules, 2014, in rule 3 –

(i) in sub-rule (1), for the words “accessible in India”, the words “accessible in India, at all times,” shall be substituted;

(ii) in sub-rule (5), in the proviso, for the words “periodic basis”, the words “daily basis” shall be substituted;

(iii) in sub-rule (6), after clause (d), the following clause shall be inserted, namely :-

“(e) where the service provider is located outside India, the name and address of the person in control of the books of account and other books and papers in India.”.

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GST: E-invoice mandatory for turnover above 10 crore from October 1

The centre has made E-invoicing mandatory for businesses with aggregate turnover exceeding Rs 10 crore from October 1, a move which will further plug in revenue leakage and will ensure better tax compliance from businesses.

Presently, e-invoice is compulsory for businesses with an annual turnover of over Rs 20 crore.

Initially e-invoicing was made mandatory for businesses having an annual turnover of Rs 500 crore, then it was brought down to ₹100 crore and then to Rs 20 crore and finally to Rs 10 crore.

The move to reduce turnover threshold and increase the ambit of e-invoicing is mainly aimed at resolving mis-match errors and to check tax evasion.

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The Top 50 Transactions getting reflected in New Annual Information Statement (AIS)

The Income Tax Department has rolled-out of a new statement namely Annual Information Statement (AIS) as against erstwhile Form No. 26AS.

The AIS which would provide almost all details about your financial transactions during the year. So far, the Income Tax Department has been issuing Form 26AS to provide information related to taxable income and tax deducted at source (TDS), which will now be replaced with the Annual Information Statement (AIS). The new AIS statement will provide comprehensive information of the taxpayer and will be significantly useful while preparing the tax return. The information will be provided in AIS after removing duplicate information and taxpayers can download such information in PDF, JSON, CSV formats.

A taxpayer can submit online feedback if the information is erroneous or refers to another person/year, or is duplicate Here’s the list of Top 50 Transactions to be reported in the New Annual Information Statement.

1.Salary

Employer submits detailed breakup of salary, perquisites, profits in lieu of salary etc paid to the employee in Annexure II of the TDS statement (24Q) of the last quarter. This information is also provided by the employer to the employee (taxpayer) in Part B (Annexure) of Form 16. AIS displays all the financial transactions such as, salary income, dividend income, interest income from saving/fixed deposits, sale and purchase of securities, etc. With the help of all such financial information, it would be easy for a taxpayer to report the correct information in the income tax return

2. Rent Received

Tenants responsible for paying rent are liable to deduct tax at source on payment of rent. Deductor reports details of amount paid/credited, date of payment, details of Tax deduction made etc. in Form 26Q. This information is provided by the deductor to the deductee (taxpayer) in Form 16A. Tenant (Individual/HUF) paying a rent of more than 50,000 is liable to deduct tax while making payment to the landlord. Tenant reports details of rent paid amount paid/credited, property details, date of payment and tax deduction details etc. pertaining to rent paid in Form26QC.

3. Dividends

Dividend paid/declared by all companies (reporting entity) is reported under Statement of Financial Transactions (SFT). Company paying/distributing dividend is liable to deduct TDS from the amount paid subject to the threshold applicable in the act and report through form 26Q (quarterly statement). This information is provided by the deductor to the deductee (taxpayer) in Form 16A.

4. Interest from savings bank

Interest paid/credited/accrued on saving account is reported under Statement of Financial Transactions (SFT).

5. Interest from deposit

Bank/deductor at the time paying/crediting interest on deposits is liable to deduct tax from deposit holder paid subject to the threshold applicable in the act. This information is reported by the Bank/deductor in form 26Q (quarterly statement). This information is provided by the deductor to the deductee (taxpayer) in Form 16A.

6. Interest from others

Interest paid/credited/accrued on others (other than savings account, term deposit, recurring deposit) is reported under Statement of Financial Transactions (SFT). Bank/deductor at the time paying/crediting other interest (interest on securities) is liable to deduct tax from deposit holder paid subject to the threshold applicable in the act. This information is reported by the Bank/deductor in form 26Q (quarterly statement). This information is provided by the deductor to the deductee (taxpayer) in Form 16A

7. Interest from income tax refund

Interest received on Income Tax Refund in the financial year is liable to be taxed as Income from other sources.

8. Rent on plant & machinery

Tenant paying rent is liable to deduct tax at applicable rate as per the Act from rent paid. Details of rent on Plant & Machinery is reported by the deductor in TDS form 26Q. Tenant furnishes the details of rent paid on quarterly basis. This information is provided by the deductor to the deductee (taxpayer) in Form 16A.

9. Winnings from lottery or crossword puzzle

Payer is liable to deduct tax at applicable rate as per act from winnings from lottery or crossword puzzle etc. Information about winnings is reported by payer in TDS form 26Q. Information is reported on quarterly basis. Income is taxable at special rate. This information is provided by the deductor to the deductee (taxpayer) in Form 16A.

10. Winnings from horse race

Payer is liable to deduct tax at applicable rate as per act from winnings from Horse race. Information about winnings is reported by payer in TDS form 26Q. Information is reported on quarterly basis and is chargeable to tax at special rate. This information is provided by the deductor to the deductee (taxpayer) in Form 16A.

11. Receipt of accumulated balance of PF from employer u/s 111

Employer/recognised provided fund reports information about accumulated balance due to an employee in form 26Q. Information is reported on quarterly basis and is chargeable to tax at special rate. This information is provided by the deductor to the deductee (taxpayer) in Form 16A.

12. Interest from infrastructure debt fund

Information relating to interest paid is reported by payer in form 27Q. Information is reported on quarterly basis and is chargeable to tax at special rate. This information is provided by the deductor to the deductee (taxpayer) in Form 16A.

13. Interest from specified company by a non-resident u/s 115A(1)(a)(iiaa)

14. Interest on bonds and government securities

15. Income in respect of units of non-resident u/s 115A(1)(a)(iiab)

Information about income in respect of units of Non Resident is reported by payer in form 27Q. Information is reported on quarterly basis and is chargeable to tax at special rate. This information is provided by the deductor to the deductee (taxpayer) in Form 16A.

16. Income and long-term capital gain from units by an offshore fund u/s 115AB(1)(b)

Information about income and long-term capital gain from units payable to an off shore fund is reported by payer in form 27Q. Information is reported on quarterly basis and is chargeable to tax at special rate. This information is provided by the deductor to the deductee (taxpayer) in Form 16A.

17. Income and long-term capital gain from foreign currency bonds or shares of Indian companies u/s 115AC

Information about income and long-term capital gain from foreign currency bonds or shares of Indian companies is reported by payer in form 27Q. Information is reported on quarterly basis and is chargeable to tax at special rate. This information is provided by the deductor to the deductee (taxpayer) in Form 16A.

18. Income of foreign institutional investors from securities u/s 115AD(1)(i)

Information about income of foreign institutional investors from securities is reported by payer in form 27Q. Information is reported on quarterly basis and is chargeable to tax at special rate. This information is provided by the deductor to the deductee (taxpayer) in Form 16A.

19. Insurance commission

Information about insurance commission received is reported by the payer in Form 26Q on a quarterly basis. This information is provided by the deductor to the deductee (taxpayer) in Form 16A.

20. Receipts from life insurance policy

Receipts from life insurance policy are exempt under section 10(10D) subject to conditions specified therein. If such conditions are not met, the receipts become taxable and tax is also deducted u/s 194DA. The information is reported by the payer in Form 26Q on a quarterly basis. This information is provided by the deductor to the deductee (taxpayer) in Form 16A.

21. Withdrawal of deposits under national savings scheme

Withdrawals from NSS are taxable. Tax is also deducted on such withdrawals and reported in Form 26Q by the payer on a quarterly basis. This information is provided by the deductor to the deductee (taxpayer) in Form 16A.

22. Receipt of commission etc. on sale of lottery tickets

Commission on lottery business is subject to tax deduction under section 194G. The payer reports such information in Form 26Q on a quarterly basis. This information is provided by the deductor to the deductee (taxpayer) in Form 16A

23. Income from investment in securitization trust

Income from investment made in securitization trust is subject to tax deduction. The payer reports such information in Form 27Q on a quarterly basis. This information is provided by the deductor to the deductee (taxpayer) in Form 16A.

24. Income on account of repurchase of units by MF/UTI

Receipt of income on account of repurchase of units by MF/UTI is subject to tax deduction under section 194F. The payer reports such information in Form 26Q on a quarterly basis. This information is provided by the deductor to the deductee (taxpayer) in Form 16A.

25. Interest or dividend or other sums payable to government

Income from interest or dividend or other sums payable is not subject to tax deduction. The payer reports such information in Form 26Q on a quarterly basis. This information is provided by the deductor to the deductee (taxpayer) in Form 16A

26. Payment to non-resident sportsmen or sports association u/s 115BBA

Information pertaining to amount paid to non-resident sportsmen or sports association is reported by deductor in form 27Q. This information is provided by the deductor to the deductee (taxpayer) in Form 16A.

27. Sale of land or building

Sales consideration of immovable property transferred is reported under Statement of Financial Transactions (SFT). The information will be shown in AIS of all sellers to enable submission of feedback. Sale of immovable property is also reported in Form 61 where PAN is not furnished by the transacting party. PAN is populated based on aadhaar and other attributes of the person. Information related to receipts under specified agreement is reported by person making payment for specified agreement entered into. This information is provided by the deductor to the deductee (taxpayer) in Form 16A.

28. Receipts from transfer of immovable property

Information related to receipts from transfer of immovable property is reported by buyer of property in Form 26QB. This information is provided by the deductor to the deductee (taxpayer) in Form 16B.

29. Sale of vehicle

Sale of motor vehicle is reported in Form 61 where PAN is not furnished by the transacting party. PAN is populated based on aadhaar and other attributes of the person.

30. Sale of securities and units of mutual fund

In the SFT reporting of depository transactions, the estimated sale consideration for the debit transaction is determined on the best possible available price of the asset with the depository (e.g. end of day price). The taxpayer will be able to modify the sales consideration and other related information before filing the return. In the SFT reporting of depository transactions, the estimated sale consideration for the debit transaction is determined on the best possible available price of the asset with the depository (e.g. end of day price). The taxpayer will be able to modify the sales consideration and other related information before filing the return.

31. Off market debit transactions

In the SFT reporting of depository transactions, the depository reports details of off market debit transactions. The value of transaction is computed on the basis of end of day price of the security. In case, the consideration is available, the same is also shown.

32. Off market credit transactions

In the SFT reporting of depository transactions, the depository reports details of off market credit transactions. The value of transaction is computed on the basis of end of day price

33. Business receipts

Information pertaining to amount paid to contractor is reported by contractee in form 26Q. This information is provided by the deductor to the deductee (taxpayer) in Form 16A. Information pertaining to amount paid to the service provider is reported by recipient of services in form 26Q. This information is provided by the deductor to the deductee (taxpayer) in Form 16A

34. Business expenses

Information pertaining to purchase of alcoholic liquor is reported by tax collector in TCS form 27EQ (quarterly statement). This information is provided by the collector to the taxpayer in Form 27D.

35. Rent payments

Information is reported by person making payment in form 26QC. This information is provided by the deductor to the taxpayer in Form 16C

36. Miscellaneous payments

Information is reported by person making payment in form 26QD. This information is provided by the deductor to the taxpayer in Form 16D. Purchase of bank drafts or pay orders may be reported in Form 61 if PAN is not furnished by the transacting party. PAN is populated based on aadhaar and other attributes of the person

37. Cash deposits

Information pertaining to cash deposits in an account other than current account is reported by reporting entity in form 61A. The information will be shown in AIS of all account holders to enable submission of feedback. Information pertaining to cash deposits in current account is reported by reporting entity in form 61A. The information will be shown in AIS of all account holders to enable submission of feedback.

38. Cash withdrawals

Information pertaining to Cash withdrawals from current account is reported by reporting entity in form 61A. The information will be shown in AIS of all account holders to enable submission of feedback. Sometimes, cash withdrawals from accounts other than current account are reported by the Reporting Entity in SFT-004. The information will be shown in AIS of all account holders to enable submission of feedback. Information pertaining to Cash withdrawals is reported by reporting entity through TDS statement 26Q. This information is provided by the deductor to the taxpayer in Form 16A.

39. Cash payments

Information pertaining to Cash payments for goods and services is reported by reporting entity in form 61A. Information pertaining to Purchase of bank drafts or pay orders or banker’s cheque in cash is reported by reporting entity in form 61A. Information pertaining to Purchase of prepaid instruments in cash is reported by reporting entity in form 61A.

40. Outward foreign remittance/purchase of foreign currency

Information of outward foreign remittance is reported by authorised dealer in form 15CC. Information about Remittance under LRS for educational loan taken from financial institutions mentioned in section 80E (Third proviso to Section 206C(1G)) is reported by authorised dealer through TCS form 27EQ for specified foreign remittances made by remitter PAN.Information about Remittance under LRS for purpose other than for purchase of overseas tour package or for educational loan taken from financial institution (Section 206C(1G(a))) is reported by authorised dealer through TCS form 27EQ for specified foreign remittances made by remitter PAN.

41. Receipt of foreign remittance

Information relating to payment of royalty or fees for technical services etc., paid to non- residents is reported by deductor in form 27Q. This information is provided by the deductor to the deductee (taxpayer) in Form 16A. Information is reported by authorised dealer in form 15CC for foreign remittances made by remitter PAN. Information of receipt of foreign remittance by a remittee is reported by authorised dealer in form 15CC.

42. Foreign travel

Information is reported by deductor in TCS form 27EQ (quarterly statement). This information is provided by the collector to the taxpayer in Form 16D. Payment in connection with travel to any foreign country may be reported in Form 61 if the PAN is not furnished by the transacting party. PAN is populated based on aadhaar and other attributes of the person.

43. Purchase of immovable property

Information relating to immovable property is reported by the Property Registrar through SFT. The information will be shown in AIS of all buyers to enable submission of feedback. Buyer at the time of making payment towards purchase of property is liable to deduct tax from the amount paid to the seller subject to the threshold applicable. This information is reported in form 26QB. Seller of property reports the details of property buyer in schedule CG of ITR. Payment for purchase of immovable property may be reported in Form 61 if the PAN is not furnished by the transacting party. PAN is populated based on aadhaar and other attributes of the person.

44. Purchase of vehicle

Information is reported by deductor in TCS form 27EQ (quarterly statement). This information is provided by the collector to the taxpayer in Form 16D. Payment for purchase of motor vehicle may be reported in Form 61 if the PAN is not furnished by the transacting party. PAN is populated based on aadhaar and other attributes of the person.

45. Purchase of time deposits

Information relating to Purchase of Time deposits is reported by reporting entity (such as the bank) in the Statement of Financial Transaction (SFT). Information pertaining to investment in Time deposit is reported in Form 61 where PAN is not furnished by the transacting party. PAN is populated based on aadhaar and other attributes of the person.

46. Purchase of securities and units of mutual funds

Information is reported by reporting entity in the Statement of Financial Transaction (SFT). Purchase of shares (including share application money). Information is reported by reporting entity in the Statement of Financial Transaction (SFT). Information is reported by reporting entity (such as mutual fund companies) in the Statement of Financial Transaction (SFT).

47. Credit/Debit card

Information pertaining to application for issuance of credit/debit card is reported in Form 61 where PAN is not furnished by the transacting party. PAN is populated based on aadhaar and other attributes of the person.

48. Balance in account

Details of bank account other than saving and time deposits opened during the year , as reported in Form 61. Bank account with balance exceeding 50,000 at the closing of Financial year, as reported in Form 61.

49. Income distributed by business trust

Information relating to income from units of a business trust is reported by payer in form 27Q. Information is reported on quarterly basis and is chargeable to tax at special rate.

50. Income distributed by investment fund

This information is reported by the deductor in Form 26Q on a quarterly basis

So now incometax department knows more about you & you have to be very careful in next ITR filing plus proper records to be maintained by all for above list of items as anytime department will ask about it.

Vipul Sheladiya

Sheladiya & Jyani

Chartered Accountants

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Seeks to implement e-invoicing for the taxpayers having aggregate turnover exceeding Rs. 20 Cr from 01st April 2022.

Government of India
Ministry of Finance
(Department of Revenue)
Central Board of Indirect Taxes and Customs
Notification No. 01/2022 – Central Tax
New Delhi, the 24th February, 2022

New Delhi, the 24th February, 2022

G.S.R…..(E).- In exercise of the powers conferred by sub-rule (4) of rule 48 of the Central Goods and Services Tax Rules, 2017, the Government, on the recommendations of the Council, hereby makes the following further amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 13/2020 – Central Tax, dated the 21st March,2020, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) videnumber G.S.R. 196(E), dated 21st March, 2020, namely:-

In the said notification, in the first paragraph, with effect from the 1st day of April, 2022, for thewords “fifty crore rupees”, the words “twenty crore rupees” shall be substituted.

[F. No. CBIC- 20021/1/2022-GST]

(Rajeev Ranjan)
Under Secretary to the Government of India

Note: The principal notification No. 13/2020 – Central Tax, dated the 21st March, 2020 was published in the Gazette of India, Extraordinary, vide number G.S.R. 196(E), dated 21st March, 2020 and was last amended vide notification No. 23/2021-Central Tax, dated the 1st June, 2021, published vide number G.S.R. 367(E), dated the 1st June, 2021.

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Union Budget 2022: 10 Key Budget Expectations

Background
The Union Budget 2022 is around the corner. Finance Minister Nirmala Sitharaman and her team is all set to announce the Union Budget 2022 as on 01 February 2022. At the same time, the Indian economic recovery may take another setback with rising COVID-19 cases due to the new Omicron variant. As lockdowns and restrictions are being imposed by several states to control the COVID-19 cases, it has given an indication that the pandemic is going to last longer.
Thus, taxpayers are expecting certain relief from Union Budget 2022.
In this backdrop, this article attempts to highlight “10 Key Budget expectations” from different categories of taxpayers’ perspective i.e. Individual, Corporates and Non corporate-non individual.

Budget expectations from Individual perspective:

1. Increase in standard deduction limit to INR 1 lakh: The Finance Act, 2018 introduced standard deduction of INR 40,000 to salaried employee with effect from 01 April 2019. This limit was increased to INR 50,000 by the Finance Act, 2019 with effect from 01 April 2020. However, considering the impact of inflation particularly the inflated cost of medical expenses on account of COVID-19, it is expected that the Government increases this threshold to INR 1 lakh.

2. Increase the threshold of taxability of income on Provident Fund (PF): The Finance Act 2021 amended the provisions of section 10(11) and 10(12) of the Income Tax Act, 1961 (The Act) to tax income on PF contributions above INR 2.5 lakh in a year. This limit was further increased to INR 5 lakh for PF accounts having no contribution from employers. However, these limits are harsh for PF accountholders planning their own retirement and contributing to PF to maximise their savings. Further, the memorandum to Finance Bill 2021 explained the rationale of this amendment as the amendment is to avoid misuse of this provision by rich individual who are investing huge amount in PF and claiming the entire interest as exempt.
Given the threshold of INR 2.5 lakh and INR 5 lakh, it appears that even an average earning individual may be covered and will have to pay tax. Thus, it is expected from Union Budget 2022that the Government would raise these thresholds to INR 7.5 lakh

3. Increase the limit of deduction of interest on housing loan: Under the existing the provision1 of the Act, a taxpayer may claim deduction of interest on housing loan while computing income from house property up to a limit of INR 2 lakh. This threshold was fixed by the Finance (No.2) Act, 2014 by substituting the erstwhile threshold of INR 1.5 lakh. Considering the adverse impact of COVID-19 pandemic which has caused liquidity crisis amongst taxpayers, this limit may be enhanced to INR 5 lakh. This will not only motivate the middle class individual taxpayers to invest in residential house but also help the real estate developers to mitigate the adverse impact of COVID-19 to some extent.

4. Clarification on tax treatment of COVID assistance loan: In view of persistent COVID-19 pandemic, employers are providing financial assistance to their employees for meeting the medical expenses. Some employers are providing financial assistance in the form of interest free loan to combat this deadly virus.
Under the Income Tax Law2, interest free loan provided by employer to employee is generally taxed as perquisite. However, the Act also provides certain exception which inter alia include3 loans made available for medical treatment in respect of specified diseases. The specified diseases are prescribed under the Income Tax Rule4, 1962. However, COVID-19 is not specifically covered therein. Therefore, it is expected that COVID-19 may be covered within the ambit of prescribed disease so that employee does not have to pay tax on such financial assistance.
Also, the Central Board of Direct Tax (CBDT) has released a Press Release5 which provides tax exemption on receipt of financial assistance from employer and well wisher. However, legislative amendment in this regard is still awaited which leads to lack of clarity about the meaning and scope of “financial assistance” referred in the said Press Release.
Thus, it is expected that the Government would consider making necessary amendment to give effect to the Press Release.

5. Increase in deduction limit and stamp duty value limit under section 80EEA: The Finance (No.2) Act, 2019 introduced section 80EEA to provide deduction up to INR 1.5 lakh of interest on residential housing loan subject to certain conditions which inter alia include following:
(i)The stamp duty value of residential house shall not exceed INR 45 lakh;

(ii) The loan should be sanctioned between 01 April 2019 and 31 March 2021 and

(iii)The assessee shall not claim deduction of such interest under any other provisions of the Act.

The limit of stamp duty value of INR 45 lakh is less for house property in urban area. Also, the deduction limit of INR 1.5 lakh is not justified as the taxpayer will not be able to claim deduction under any other provisions of the law.
Further, the provision requires that the loan should be sanctioned between 01 April 2019 and 31 March 2021. In view of the COVID-19 pandemic, many taxpayers have not been able to avail the benefit of this section. Therefore, it is expected that the Government would consider extending this date further by a (more…)

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