What You Missed in the Budget – See Highlights and Summary

Every year, with the budget, come high expectations and big announcements. However, in all the noise, some finer details escape from our notice. WIth a budget riding high on growth and impressive fiscal performance, there are some subtle messages that this year’s Budget has conveyed.

These easy-to-miss details are bound to have a considerable impact on the common working class and small businessmen of India. How does the Budget affect the common people? Were there any tax-related changes? Did cryptocurrency become legal in India?

Find the answers to these questions by reading between the lines in the Union Budget 2022:

Things you missed in the Budget 2022

1. What was said – 30% tax on transfer of virtual assets; Digital Currency to be launched by RBI in 2023

What you missed – 

• The Government is conservative about Cryptocurrency
• Cryptocurrency recognized as a legitimate asset class
• Non-fungible tokens (NFTs) also included under virtual digital assets

Cryptos dominated the discussion and overshadowed what was said in the Finance Minister’s speech. While “cryptocurrency” was not expressly mentioned anywhere in the Budgetary speech, it was implied when FM Sitharaman levied a 30% tax on the income from digital virtual assets. Is cryptocurrency illegal in India? No, it is not. However, there is no regulation or any ban on the use of cryptocurrencies in the country. A clear understanding of the legality of cryptocurrency will only be possible when the Cryptocurrency and Regulation of Official Digital Currency Bill is passed in India.

This does not mean that cryptocurrency is illegal in India, it only means that there is no framework or law regulating the trade of cryptocurrencies in India.

Key points –

• No set-off allowed in case of losses from digital assets
• Gifts of these assets would be taxed at receiver’s end
• 1% TDS on transfer of crypto assets
• Changes will take place from April 1, 2023 (AY 2023-24)
• RBI will introduce blockchain-based Central Bank Digital Currency (CBDC)

2. What was said – A bigger budget of 39.45 lakh crore allocated for FY2 with Capex increased by 35% to 7.50 lakh crore

What you missed – 

• Ministry of Defence, Road, Transport & Highways, Food and PDS and Railways got the maximum allocation
• Spending will boost the economy but inflation still remains a cause for worry

A big push was given to capital expenditure which essentially means the government is spending a lot of money – on infrastructures such as roads, national highways, affordable housing and 400 Vande Bharat trains. Why is an increase in expenditure a good thing? Because it increases jobs, gives businesses a big push and gets the economy going (called the multiplier effect).

Now, the fiscal deficit for this year is 6.9% (fiscal deficit means how much money the government is spending in excess of income) which is a bit too much but it is expected to reduce next year to 6.4%. How does the government earn money? It borrows money from the market, earns from corporation tax, income tax, customs, GST, excise duties and other non-debt receipts and non-tax revenue. Where does the government spend the money? It provides assistance to States, gives them their share of taxes and duties, spends on Central Schemes, pensions, defence, subsidies, interest payments and other transfers.

Key points –

• The share of states in the budget allocation has been increasing from 9.86 lakh crore in 2016-17 to 16.12 lakh crore in 2022-23.
• India remains the fastest growing economy among the major economies of the world – expected to grow by 9.2% in the current fiscal year.
• Major push given to sustainable development, infrastructure, Gatishakti project and digitalization.
• The Budget Estimates for 2022-2023 are expenditure at 39.45 lakh crores and revenue at 22.84 lakh crores.

3. What was said – All post offices to come under banking system; Battery swapping policy announced for EV, Special Mobility Zones, Digital University and 75 rural digital banking units to come up soon

What you missed – 

• Technology in banking will reach the farthest corners of the country (financial inclusion)
• Digitalization will boost efficiency, promote new jobs, long-term investments and innovations in fintech
• The economy will grow, with greater national income, more sophisticated public services and higher living standards

Digital Boost and new-age tech are on the mind of the government as announcements related to digital currency, domestic manufacturing, innovations in fintech, EV batteries and electronics dominated the news. Sustainability and green energy remained the underlying focus behind all major announcements. In a country still reeling from the effects of the pandemic, a push to digital innovation is very welcome.

The future is digital. However, core infrastructure still needs to be strengthened while focusing on inclusive development so that the benefits of a digital economy reach everyone.

Key points –

• Budget allocation for Digital India increased by 67%
• PLI introduced for solar units, large scale electronics and IT hardware
• Big win for students with E-vidya program and Desh-stack e-portal for skill enhancement
• Digitization of land records, health records, green bonds, E-passport and procurement through online E-bill system announced
• AVGC (Animation, Visual Effects, Gaming and Comics) promotion task force will be set up
• The rollout of 5G mobile services, spectrum auction to be conducted in 2022.

4. What was said – No changes in Income tax slabs and standard deduction; Cannot claim cess & surcharge as expenses in deductions under professional and business income

What you missed-

• Tax deduction for donation can be rejected, higher TDS will be levied for non-filing of ITR
• No tax sops for the salaried, middle class who are the main payers of Direct Income Tax

True, the 2022 Budget had little in store for the common man. No change in tax slabs or limit for standard deduction was announced for the salaried class. This was not on the expected lines as the middle class has suffered under the impact of COVID the most.

While GST collection remained at an all-time high, there was a change in customs duties on several items. Tariffs on imports were increased on many items of daily use such as umbrellas, headphones, earphones, imitation jewelry, etc. While this may hike the price of imported items, it will give a boost to ‘Make in India’. Meanwhile, custom duties were reduced on cut and polished diamonds, asafoetida, cocoa beans, methyl alcohol and acetic acid. Excise duty will also be increased on Petrol and Diesel from October 2022 to promote blended fuels.

Key points –

• Surcharge on long-term capital gains from transfer of asset capped at 15%
• Tax deduction limit for govt employees on employee’s contribution to NPS increased to 14%
• Taxpayers can file updated ITRs within 2 years from the assessment year to correct any omissions.
• Income tax relief would be given to persons with disability and on COVID treatment expenses and compensation
• Higher TDS will be levied on non-filing of tax returns in the past 1 year

5. What was said – Tax incentives for startups extended till March 2023, ECLGS Scheme extended with 5 lakh crore cover; Increase in allocation for MSMEs, Credit Guarantee revamped and 6,000 crore RAMP program announced

What you missed –

• Indian investors still pay more surcharge (24%) on non-listed assets as compared to foreign investors (10%)

• Very few startups can take advantage of tax incentives due to various restrictions

The Budget was a silver lining for the MSME (Micro, Small and Medium Enterprises) sector struggling under the impact of the pandemic. The Budget aimed to make funding easier for MSMEs with reduced import duties, push on infrastructure, interlinking of MSME portal and extension of Emergency Credit Line Guarantee Scheme till March 2023.

However, many experts are disappointed with the Budget as it had failed to address the concerns of the startup industry. Indian investors are still at a disadvantage vis-a-vis foreign counterparts paying more surcharge on long-term capital gains (LTCG was capped at 15% as opposed to 37% before). Out of the US$42 billion that is invested in startups, only 10% was invested by Indians. 

Another concern of the startup ecosystem is that the extension of tax holiday till 2023 is used by a minimal percentage of startups (600 out of 62000) due to stringent conditions.

Key points –

• Tax incentives for startups increased from three years to four years of incorporation, in view of the pandemic
• Special tax of 15% for manufacturing industries extended till March 2024.
• Relief on capital gains tax arising from startup investment extended till March 31, 2022.
• NABARD will lend funds to Startups serving agricultural and rural sectors.
• Surety bonds to act as a substitute for bank guarantee, to be made acceptable in government procurements

With India celebrating 100 years of independence in 25 more years, the Budget gave a roadmap to propel the nation on the path to prosperity with all-inclusive welfare principles, a vision for sustainable development and a bright digital future in the making.

What remains to be seen is how well the government is able to spend the money allocated on different schemes and sectors in the country.

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