Backlash and Extrapolation of the Union Budget for 2022

M.Nandhini, Asst.Professor, SIMS

            A fiscal year runs from April 1 to March 31 of the following year, and the Union Budget lays out the government’s revenue and expenditure plans for that time period. So that it may be implemented before the next financial year begins, Hence it is presented in February.

            Article 112 of the Indian Constitution states that it is a thorough financial statement that gives the Government’s estimate of income sources and expected spending for the year. The budget is broken down into two sections: income and capital. In contrast to the government’s income budget, the capital budget is comprised of the government’s expenditures and investments in capital assets.

            The first Indian Union Budget was given on April 7th, 1860, by India’s Finance Minister James Wilson, while the nation was still ruled by the British. On November 26, 1947, the first Finance Minister of Independent India, Sir R.K. Shanmugham Chetty, delivered the first Union Budget India of the Independent Nation.

Budget 2022: Salient Points to Grasp

            It is the goal of the Union Budget for 2022-23 to enhance macroeconomic growth with an emphasis on microeconomic fellow human tone for the entire demography. Indian economic rapid expansion will be facilitated toward Amrit Kaal by this year’s budget for the following 25 years, from India’s 75^th years to India’s 100th.

            An optimistic outlook for India’s economy despite the epidemic is provided by Union Budget 2022-23’s priority on long-term driven by growing consumerism. It has made a respectable and audacious move by substantially boosting capital spending by 35.4%.

            Furthermore, despite the fact that “second wave” caused significant harm to human health, a smaller economic impact was predicted in the poll. It predicted a 9.2 percent GDP growth rate for FY22 based on the return of activity to pre-pandemic levels in most industries. In November 2021, the annual growth rate of home mortgages, the biggest segment of personal loans, was 8 percent. Lending to commercial real estate by banks grew by 0.4% as well during this time period. Overall, the study predicted that India’s GDP would rise between 8.0 and 8.5 percent in FY23. The Hon. Finance Minister’s budget declaration, one of the shortest of her four dimensions, was presumably sustainable over the long strategies rather than short-term remedies.

• PM GatiShakti
• Advancement for All People
• Productivity Enhancement & Investment, Sunrise Opportunities, Energy Transition, and Climate Action
• Investing Capital Funding

Union Budget 2022 Frameworks:

• As Finance Minister Nirmala Sitharaman intends to deliver the Union Budget on February 1, 2022, the country’s capital expenditure (CAPEX) and fiscal deficit reduction plans would be spelled forth.
• According to the Union Budget, India’s inclusion into the global supply chain will be bolstered by massive investments in healthcare and infrastructure.
• She made significant tax reforms in her first year as finance minister, including reducing corporate income tax to 25% and creating a 15% tax rate for new manufacturing companies.
• As India’s economy tries to recover with the phenomenon, the Finance Minister has the option of tax concessions. As a corollary, the salaried class, on which the epidemic has had the greatest impact, would see a surge in demand for their products and services.
• Union Budget 2022 would focus on speeding up India’s recovery from the disease epidemic. Additionally, there is a good chance that the focus would be on enhancing India’s educational system.
• Tax benefits are available to employees. The amount that can be deducted from the work from home allowance should not be constrained by the current standard deduction.

Some of the budget’s proposals will be welcomed by Indian investors, businesses, and the general public, while others will be viewed as potential sources of frustration by these constituencies. Here’s a quick look at a few of our favourites.

Investors’ group – Despite the lack of notable good news for individuals in the budget, the introduction of the impending central bank digital currency (CBDC) attracted considerable attention.

At a press conference, FM Sitharaman said that the RBI will create an Indian national digital currency in FY2022-23.

Long-term capital gains (LTCG) will be subject to a surcharge of 15% this fiscal year, with the cap being applied to all assets. For the most part, it was only applicable to publicly traded equity shares and units of equity-oriented funds. To put it another way, this means that unlisted shares will be taxed like public shares.

The bad news for cryptocurrency investors is that they will be taxed at a rate of 30 percent on any income they get from the transfer of virtual digital assets. Gifting will also be a part of this. Except for the cost of acquisition, no deductions can be made when calculating income. Investors are also unable to deduct losses from any other source of income, such as dividends.

One more annoyance is the 1% TDS on virtual digital asset purchases, subject to specified criteria.

Incorporated Entities – By March 31, 2023, entrepreneurs will be able to recoup 100% of their profits. Companies incorporated before March 31, 2024 will be legally liable for the 15% tax rate. Inherently, this is an augmentation of an even more institution.Trade agreements on wrist wearables, smart watches, hearing devices, smart electric metres, and their components will rise over the next four years as part of a special legislation. It’s worthy to note that a 10% TDS will be imposed to any benefits or perquisites received over Rs 20,000 as part of a business or profession. Consequently, over 350 customs duty exemptions have been abolished. Another 40 or so permits will be tapered aside whilst also.

Consumers – The import duty on cut and streamlined precious stones and gems was reduced from 7.5 percent to 5 percent in the 2022 budget, according to the AFP. In addition, the tax on sawn gemstones was waived. A wonderful thing for the buyers of these commodities. The customs tariff on imitation jewellery was moved to a higher proportion of 20% or Rs 400/kg, which will causes an increase in their premium.

Tax Payers – There will be a fresh 3-year grace period for taxpayers to revise their tax returns and pay additional taxes, if necessary. Also, if they miss the deadline for lodging belated or amended returns, an extension will be offered to them. Another piece of good news is that Covid treatment reimbursements received from an employer or other source are no longer taxed. Payments made to the heirs of Covid the dead are also exempt from taxation. However, the total amount collected from sources other than the employer will be limited to Rs 10 lakh. Employer contributions to the National Pension System (NPS) can now be deducted up to 14 percent of a state government employee’s pay. As a result of this new rule, they will be on par with their central government equivalents. Updated returns will now require an extra premium of up to 50% of one’s capital gain, which may be a dilemma for some.

Real estate announcements featured data centres being nominated as infrastructure and housing receiving a grant of INR 48,000 crores for the renovation of 80,001 new dwellings. SEZ law has been embraced participation from states, land records have indeed been digitised, and expert groups have been formed to boost urban capacity. These are all important announcements. Tier-2 and Tier-3 villages, as well as the largest cities, were emphasised as important targets for this effort, therefore this final phase is crucial. Investors are likely to gravitate to cloud servers that have been granted ‘infrastructure status’ as a result of the ongoing revolution in digital consumption and attention on data localization legislation. Large tech companies that have been considering India as a location for data centres are anticipated to take notice of this development. As we see it, India’s ability to produce at the global level would be further enhanced with the creation of an exclusive task force focused on the AVGC industry.

The IT industry will closely monitor any legislation that changes the Special Economic Zones Act. A high-level panel of urban planners and economists has been organised to give recommendations on urban capacity building, planning implementation, and governance because many people have been working from home during the pandemic.

ECLGGS (Emergency Credit Linked Guarantee Scheme) has been prolonged till March 2023, and a further INR 50,000 Cr has been disbursed to the MSME sector, which would be anticipated to aid the beleaguered service industry.

The optimised allocation underneath the Production Linked Incentive (PLI) Scheme for solar PV modules would promote domestic production and warehousing. As part of the PLI Scheme, a design-led manufacturing intervention will also be launched to help develop a unique ecosystem for 5G.

On the whole, the Union Budget for 2022-23 has retained righteous to the long-term goal of reinforcing macro-growth with an insistence on infrastructure, the digital economy, and fintech.