Focus on 3 Income Tax Amendments in Budget 2022

1. Loss return can also be updated

Updated return is a provision introduced in Budget 2022 that allows individuals who have missed to declare certain income, to file an updated return within 2 years of the end of an assessment year. For example, if you miss to declare some income for FY 2021-22, it gets translated into AY 2022-23. You can file updated returns till FY 2024-25. Amendments introduced today extend this feature 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 those returns that you can file within 2 years of the end of the assessment year. In an updated return, You can include the income that may have been unintentionally missed and pay tax and penalty thereon.The amended Finance Bill also allows individuals who have filed loss returns to be eligible to file an updated return. provided positive income is declared in the updated return,” said Prakash Hegde, a Bengaluru-based chartered accountant.

2. Deadline for Assessment Extended

The government is gradually reducing the time limit given to the Income Tax Department to complete the assessment. The assessment for the assessment year 2020-21 was to be completed within 1 year of the end of the assessment year, that would be 31 March 2022. From assessment year 2021-22, the time limit was further reduced to 9 months. However, in the amendments introduced today, the deadline for completion of assessment proceedings for the assessment year 2020-21 has been extended, according to Hegde. “The assessment for the election year 2020-21 (financial year 2019-20) was to be completed by March 31, 2022. The amended Finance Bill has extended the deadline to September 30, 2022,” he said.

3. Crypto Losses cannot be set off against Crypto Gains or other assets

The amendment to the Finance Bill reiterated the reply given by the government in the Lok Sabha on Monday. In response, the government clarified that losses in 1 cryptocurrency cannot be set off against gains in another. For example if you make a a profit of 100 on bitcoin and a 70 loss on ethereum, you will have to pay tax 100 and not on your net profit 30. On 30% slab, this will work 30 (not including surcharge and cess). Similarly, you cannot set off gains and losses on a cryptocurrency against gains and losses in other assets such as stocks, mutual funds or real estate. For example, if you have made a profit of Loss of 100 more on cryptocurrency 40 on bitcoin, this cannot be adjusted to reduce taxable income.