The beginning of the new financial year marks the changes in the tax rules and others money changes announced in the Union Budget. It is important to know these changes to plan your money moves for the financial year. Read on to know more about these 10 money changes for FY 2022-23.
April 1 is the start of the new financial year. As it happens every new year, there are certain income tax rules and other financial changes that come will into effect on April 1, 2022. Here is a look at the new changes that come will into effect from April 1, and how it will impact your money.
- Two EPF accounts if contribution exceeds Rs 2.5 lakh
If the employee’s contribution to the Employees’ Provident Fund (EPF) account exceeds Rs 2.5 lakh in the previous financial year 2021-22, then interest earned on the excess contribution will be taxable in his/her hands. To calculate the interest that will be taxable in the hands of an employee, a new EPF account will be created.
The Central Board of Direct Taxes (CBDT) issued a notification on August 31, 2021, to provide clarity on how the interest on excess contribution will be taxed. As per the notification, any contributions made by an employee till March 31, 2021 will be considered as tax-exempt. For contributions up to Rs 2.5 lakh in FY 2021-22, interest will be credited into the existing EPF account. The interest credited in this account will remain tax-exempt.
The new EPF account will be opened if the EPF contributions in FY 2021-22 exceeds Rs 2.5 lakh. The interest credited on the excess contribution (Rs X minus Rs 2.5 lakh) will be taxable for the employee.
For individuals not having employer’s contribution to their EPF accounts, such as government employees, the threshold is Rs 5 lakh.
- Tax on crypto and other virtual digital assets
One of the biggest announcements of Budget 2022 was taxation of crypto gains. Effective from FY 2022-23, gains from various virtual digital assets (VDA) such as bitcoin, dogecoin etc. will be taxed at a flat rate of 30%. Further, no deduction in respect of any expenditure (except cost of acquisition) will be allowed. No set-off of losses of buying /selling of virtual digital assets from other incomes will be allowed. Recently, the government clarified that gains from one virtual digital asset will not be allowed to be set off against losses from other virtual digital assets. A new section 115BBH has been inserted into the Income-tax Act, 1961 for taxation of virtual digital assets.
- Updated ITR filing after end of time limit to file ITR
From April 1, an individual will get additional opportunity to update his/her income tax return (ITR). This updated return will be filed if additional information was missing at the time of filing ITR. A new subsection 139 (8A) has been added to the Income-tax Act.
Updated return can be filed by an individual within three years from the end of the financial year. This tax return will be filed irrespective whether an individual has filed original/belated ITR or not. While filing updated ITR, an individual will be required to pay amount equal to 25% to 50% as additional tax on the tax and interest due.
Also Read: Who cannot file updated ITR?
- Relaxation in receiving annuity by disabled person
Budget 2022 relaxed certain provisions under section 80DD – a section offering tax break for the care of disabled persons. As per the relaxation provided, if an individual buys a life insurance policy for a disabled person, then an individual can claim a tax deduction even if policy benefits (such as annuity payments) starts while the individual is still alive.
Earlier, deduction under section 80DD was allowed when the annuity from the life insurance policy was received by the disabled person after the death of the individual (i.e., the person who has purchased the insurance cover).
The new law will be applicable for life insurance policies bought from FY 2022-23 onwards. Deduction on such policies will be claimed in the next year ITR filing (i.e., AY 2023-24).
Also Read: New tax relief for parents of disabled
- New TDS rules on sale of immovable property
New TDS rules on buying and selling of immovable property will come into effect from April 1, 2022. As per the new TDS rules, buyer of immovable property will deduct tax at the rate of 1 % on the sum paid to the seller or stamp duty value of the property, whichever is higher. TDS on sale of immovable property is applicable if the sale value of immovable property/ stamp duty of the property exceeds Rs 50 lakh.
Earlier, tax was deducted on the money paid by the buyer to the seller.
- No additional tax deduction for buying affordable house under section 80EEA
If you are planning to buy an affordable house in FY 2022-23, then do note that the additional deduction of up to Rs 1.5 lakh under section 80EEA will not be available anymore. This is because the government has not extended this tax break in Budget 2022. Till FY 2021-22, if an individual satisfies the criteria specified under section 80EEA and home loan is sanctioned on or before March 31, 2022, then he/she will be eligible to claim additional deduction of up to Rs 1.5 lakh in the future financial years on the home loan EMI paid. An individual can claim deduction of up to Rs 3.5 using section 80EEA and section 24 on the interest paid on home loan taken for buying an affordable house.
Do note that individuals can continue to claim deduction under section 24 for a maximum up to Rs 2 lakh.
Also Read: You must get this home loan before March 31
- Higher TDS from April 1 if ITR for FY 2020-21 not filed
The rule of higher TDS, TCS if ITR for two previous years has not been filed was announced in Budget 2021. However, the change was announced in Budget 2022. As per the announcement made in the latest Budget, if ITR for one year is not filed, then higher TDS, TCS will be applicable in the next financial year. As per the Memorandum to the Budget 2022, the decision was taken to widen the tax base and nudge taxpayers to furnish their tax returns. However, do note that higher TDS will not be applicable if the source of income is salary, provident fund. However, higher TDS will be deducted from interest income, dividend income etc. as specified under the Income-tax Act.
- Senior citizens aged 75 years & above exempted from filing ITR
Effective from April 1, 2022, senior citizens aged 75 years and above are exempted from filing income tax returns (ITR). However, this exemption from filing ITR is available provided certain conditions are fulfilled by the senior citizens. Further, a declaration has to be given by the senior citizen to the bank.
- Linking of savings account with different post office schemes
If you have invested in post office schemes such as monthly income schemes, Senior Citizen Savings Scheme, post office time deposits etc., then ensure that your post office savings account or savings bank account is linked to these schemes. Effective from April 1, interest earned on post office savings schemes will be credited to the investor’s post office savings account or bank account linked with the scheme. Interest payment in cash will not be allowed from April 1, 2022.
Further, if the savings account or post office is not linked, then the interest will be credited to the sundry office accounts. The outstanding interest in the future will be payable either via credit in post office savings account or cheque.
- Interest rate on PMVVY
As per the modified version of Pradhan Mantri Vaya Vandana Yojana, the interest rate on the scheme is reset annually. As per a press release issued on May 20, 2020, the interest rate on the scheme was announced at 7.4% per annum for FY 2020-21. There has been no change in the interest rate since then.
The press release further stated that annual reset of assured rate of returns with effect from April 1 of a financial year will be in line with revised rate of returns of Senior Citizens Saving Scheme (SCSS) up to a ceiling of 7.75% with fresh appraisal of the scheme on breach of this threshold at any point.
- Restrictions on your bank accounts
From April 1, 2022, if your bank account is not KYC compliant, then you will not be able to operate your bank account. The restrictions will be placed on cash deposits, cash withdrawals etc. due to the bank account being non-KYC compliant.
In May 2021, the Reserve Bank of India (RBI) extended the deadline for periodic KYC updation in one’s bank account till December 31, 2021 due to the novel coronavirus pandemic. This deadline was further extended to March 31, 2022 due to the omicron variant of the coronavirus.
However, no further extension has been given by the central bank for periodic KYC updation.