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What Taxpayers May Expect From The Union Budget 2022?

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Ahead of the Budget 2022 which will be presented by the finance minister Nirmala Sitharaman on 1st February 2022, the Ministry of Finance has recently made big clarification for the investors of the Unit Linked Insurance Plan (ULIP). Investors who wish to save tax through ULIP can claim double tax benefits such as ULIP premiums can be claimed as a deduction under Section 80C of the Income Tax Act and also amount earned from the ULIP is exempted under Section 10(10D) of the Income Tax Act.

 
What Taxpayers May Expect From The Union Budget 2022?

According to a circular dated January 19, 2022, CBDT has clarified that the total amount received under a Unit Linked Insurance Policy (ULIP) authorised on or after January 19, 2022, will not be exempt under the said clause if the amount of premium payable for any of the previous years during the term of such policy surpasses Rs 2,50,000. Whereas if a premium is payable for more than one ULIP granted on or after 01.02.2021, the deduction under the said clause applicable is limited to such policies where the aggregate premium does not surpass Rs 2,50,000 for any of the preceding years throughout the period of any of those policies. Apart from these clarifications, taxpayers may expect significant alleviation on the income tax sector from the Union Budget 2022.

Taxpayers anticipate adjustment of income slabs and tax rates under both regular and concessional tax regime that allows lower tax slabs as compared to the old tax regime. According to a recent survey made by KPMG, it has been found ahead of the Budget announcement day that "On the taxpayer front, measures to encourage more foreign investments, relief for real estate and infrastructure sectors, etc. could be in the spotlight. Steps to boost investor confidence and attract foreign investment and to rationalise compliance through increased adoption of technology tools could also be considered."

According to pre-budget research conducted by KPMG, the basic income tax exemption threshold, which is now set at Rs 2.5 lakh, is expected to be raised in the Union Budget 2022-23, allowing most of the taxpayers to lower their tax obligation. Section 80C and Section 80D limitations, and a reduction in the term of tax-saving deposits to three years from five years, as interest rates are at a historic low, are all expected by taxpayers this year. In comparison to the old tax regime, income tax is now payable at lower slab rates on income up to Rs. 15 lakh and above under the new regime.

 

Tax slab rates of 5%, 10%, 15%, 20%, 25% and 30% are applied on each subsequent annual income starting from 2.5 lakhs to Rs. 15 lakh and above under the new tax regime. If you are a salaried individual and opt for the new tax regime, you must sacrifice various tax benefits because salaried individuals cannot make use of important advantages such as standard deduction, House Rent Allowance (HRA), Leave Travel Assistance (LTA), and others under the new tax regime. Various deductions, such as those allowed under Sections 80C and 80D of the Income Tax Act, would also be unavailable under the new tax regime. As a result, salaried folks anticipate the highest tax slab to be raised, or that certain deductions would be allowed to make the new system more appealing to them.

The Union Budget 2022 will be live-streamed on Lok Sabha TV on February 1st, at 11 a.m., which will be introduced by Finance Minister Nirmala Sitharaman.

Read more about: budget 2022
Story first published: Monday, January 24, 2022, 15:43 [IST]
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