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12 Tax Changes in Budget 2022 that May Impact Your Personal Financial Planning

In accordance with Budget 2022, this requirement may change in some unique circumstances. Understanding the changes that may affect annual financial planning is crucial. According to Budget 2022, an individual will only have to pay tax when the taxable in

  • 4,676 Views | Updated on: Mar 12, 2024

Twelve tax and other key changes to remember for this financial year

Remember these important changes in the financial year for effective financial planning.

1. No tax on taxable earnings till ₹5 lakh

No individual will be required to pay tax if the annual income for the financial year 2022-23 does not surpass ₹5 lakh, and individuals will get a complete tax rebate. The rebate under Section 87A has been hiked to ₹12,500 with effect from the financial year 2022-23. It is important to note that individuals will still be required to file their income tax return as per the laws if the total annual earnings cross the minimum tax-exempted amount.

2. Standard deduction increased to ₹50,000

The Budget has raised the standard deduction from salary from ₹40,000 to ₹50,000. It is available to pensioners and salaried individuals.

3. No income tax on notional rent from the second self-occupied property

Individuals who own a vacant second home will not have to pay any income tax on the notional rent from the house. Earlier, individuals with an empty second house had to pay notional rent and a tax for that property.

4. Tax Deducted at Source (TDS) threshold increased to ₹40,000

Earlier, individuals with earnings lower than the taxable limit needed to provide Form 15G to avoid paying the TDS on interest from the bank. With this Budget, the TDS limit has increased from ₹10,000 to ₹40,000.

5. External benchmark to decide the interest rate on loans

This is one of the most important tax changes in Budget 2022. The Reserve Bank of India (RBI) announced that a new floating rate for personal and retail loans would be linked to an external benchmark. Until now, they were linked to an internal benchmark.

6. No transfer of physical shares from April 1, 2019

This tax change will have a budget impact analysis on individuals who invest in shares. From April 1, 2019, no individual can transfer shares physically.

7. New Goods and Services Tax (GST) rates and rules for the housing sector

There will be new GST rates for builders and developers. They can choose to charge GST at the rate of 12% with credit and 5% without an input tax credit for under-construction projects. The rates would be 8% along with input tax credit and 1% without input tax credit in case of affordable housing.

8. Investment of capital in two residential houses

Individuals who have sold a property now have the option to invest the capital gain in two houses rather than one to avoid paying capital gain tax. This facility can only be availed once in a lifetime if the capital profits do not surpass ₹2 crores.

9. Change in equity long-term capital gain

The long-term capital gain would attract a tax of 10% without any indexation benefit if the returns exceeded ₹1 lakh.

10. Digital assets are to be taxed at 30%

A 30% tax on the income, sale or purchase of digital assets like cryptocurrencies and NFTs was announced in the budget. On certain transactions, there is also an additional 1% TDS. Many young individuals who invest in rapidly expanding cryptocurrencies have called these tax rates exorbitant and see them as a detrimental effect of Budget 2022 on personal finance budget.

However, a lot of experts think that this is a good step. Despite originally wanting to outlaw cryptocurrencies, the Indian government is now allowing for the use of digital assets.

11. Income-tax return filing extended

This year’s Union Budget’s provision of some tax filing freedom was among its most well-liked features. Within two years following the conclusion of the assessment year, you may now file your updated tax returns. Additionally, you may file any unfiled income now if you haven’t already.

12. Surcharge on LTCG slashed

Long-term capital gains (LTCG) surcharges are currently only allowed to be applied to 15% of all assets, per the Union Budget. Investors should breathe easier because this ceiling was previously 37% for assets other than stocks.

Conclusion

The government intends to implement fresh reforms and programmes for the benefit of the taxpayers with the Union Budget 2022. The effects of these actions in the long run, however, remain to be seen.

Meanwhile, you can take out a loan with low personal loan interest rates if you need money for urgent expenses but don’t want to spend all of your cash. When making personal financial plans, keep these changes in mind and submit your income tax return on time.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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