3 income tax amendments to Budget 2022 to take note of


The Government tabled certain amendments to Budget 2022 in the Lok Sabha today. The budget was originally presented on 1st February 2022. Following public and expert feedback, the Government generally introduces amendments in its budget proposals and these were introduced in the Lok Sabha today. According to tax experts, there are a few amendments that individuals should take note of, from an income tax point of view.

1. Loss return can also be updated

Updated return is a provision introduced in Budget 2022 which allows individuals who may have missed out on declaring some income, to file an updated return within 2 years of the end of an assessment year. For example, if you miss out on declaring some income for FY 2021-22, this translates to AY 2022-23. You can file an updated return till FY 2024-25. The amendments tabled today extended this facility to loss returns as well. “A loss return is one in which a net loss is declared and no tax is payable. Updated returns are returns that you can file within 2 years of the end of the assessment year in question. In an updated return, you can include income that may have gotten inadvertently missed out and pay tax and penalty on it. The amended Finance Bill allows individuals who have filed a loss return to also be eligible to fill an updated return provided positive income is declared in the updated return,” said Prakash Hegde, a Bengaluru based Chartered Accountant.

2. Time limit for assessments extended

The Government has been gradually reducing the time limit given to the income tax department to complete assessments. Assessments for AY 2020-21 had to be completed within 1 year of the end of the assessment year, which would be 31st March 2022. From AY 2021-22, the time limit had been shortened further  to 9 months. However, in the amendments tabled today, the time limit for completion of assessment proceedings for AY 2020-21 has been extended, according to Hegde. “Assessments for AY 2020-21 (FY 2019-20) had to be completed by 31st March 2022. The amended finance bill has increased the time limit to 30th September 2022,” he said. 

3. Crypto losses cannot be set off against crypto gains or other assets

The amendments to the Finance Bill reiterated a reply given by the Government in the Lok Sabha on Monday. In the reply, the government had clarified that losses incurred in 1 cryptocurrency cannot be set off against gains in another. For instance if you make a 100 gain on bitcoin and a 70 loss on Ethereum, you have to pay tax on 100 and not on your net profit of 30. At a 30% slab, this will work out to 30 (not including surcharge and cess). Similarly, you cannot set off gains and losses on cryptocurrency against gains and losses in other assets like stocks, mutual funds or real estate. For instance if you have made gains of 100 on cryptocurrency and a loss of 40 on bitcoin, the same cannot be adjusted to reduce taxable income.

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