Terms used in union budget 2022-23
CORPORATE SURCHARGE:
What is it:
- A surcharge is an extra fee, charge, or tax that is added on to the cost of a good or service, beyond the initially quoted price.
- Often, a surcharge is added to an existing tax and is not included in the stated price of the good or service.
- Plus surcharge is applicable in case a company gets taxed under section 115BA.
Why in the budget:
- Union Finance Minister Nirmala Sitharaman presented Budget 2022 and announced that the government will reduce the corporate surcharge from 12% to 7%.
- The decision has been made to provide an opportunity to correct an error, taxpayers can now file an updated return within 2 years from the relevant assessment year.
- The reduction in surcharge is for those having a total income of more than ₹1 crore to up to ₹10 crore.
TAX INCENTIVES:
What is it:
- A tax incentive is a government measure that is intended to encourage individuals and businesses to spend money or to save money by reducing the amount of tax that they have to pay.
- Tax incentives are ways of reducing taxes for businesses and individuals in exchange for specific desirable actions or investments on their parts.
Why in the budget:
In union budget 2022-23, The government has offered tax incentives to:
Incentives for Start-ups
- Period of incorporation extended by one year, up to 31.03.2023 for eligible start-ups to avail tax benefit.
- Previously the period of incorporation valid up to 31.03.2022.
Tax incentives to IFSC
Subject to specified conditions, the following to be exempt from tax
- Income of a non-resident from offshore derivative instruments.
- Income from over the counter derivatives issued by an offshore banking unit.
- Income from royalty and interest on account of lease of ship.
- Income received from portfolio management services in IFSC.
- GIFT IFSC has received a plethora of tax incentives, be it for traded securities, mutual funds, alternative investment funds, relocation of offshore funds, global in-house centres, offshore banking units or even aircrafts.
- Budget 2022 proposals continue to further incentivise business and investments in GIFT, taking it a step closer to becoming a destination that global investors can no longer afford to ignore.
ALTERNATE MINIMUM TAX (AMT)
What is it:
- AMT is a minimum tax that is leviable alternative to normal tax.
- AMT is a tax levied on ‘adjusted total income’ in a FY wherein tax on normal income is lower than AMT on Adjusted total income.
- So, irrespective of normal tax, AMT has to be paid by taxpayers to whom AMT provisions apply.
- AMT provisions are applicable only to those non-corporate taxpayers having income under the head ‘Profits or Gains of Business or Profession
- Alternative Minimum Tax (AMT), introduced for non-corporate taxpayers works on principals similar to MAT (minimum alternate tax)
Why in the budget:
- The government proposes to reduce the Alternate Minimum Tax (AMT) for cooperative societies from current 5 per cent to 15 per cent at par with private companies.
- Currently, the cooperative societies are required to pay AMT at the rate of 18.5 per cent, while the companies paid at the rate of 15 per cent
- The proposal’s main aim is to provide a level-playing field between cooperative societies and companies.
PRODUCTION LINKED INCENTIVE (PLI)
What is it:
- Production linked incentive (PLI) schemes were first introduced in India in March 2020, targeting various sectors.
- The PLI concept has since expanded with schemes rolled out for multiple sectors to make India self-sufficient in manufacturing products and to cater to both domestic and international markets.
- The scheme is an initiative started by the Government of India to not only encourage foreign companies to find workforce in the country and thereby generate employment, but also encourage domestic and local production to create micro jobs.
Why in the budget:
- According to budget 2022-23, 60 lakh new jobs to be created under the productivity linked incentive scheme in 14 sectors.
- PLI Schemes have the potential to create an additional production of Rs 30 lakh crore.
- Additional allocation of 19,500 crore for Production Linked Incentive for manufacture of highefficiency solar modules to meet the goal of 280 GW of installed solar power by 2030.
- Scheme for design-led manufacturing to be launched to build a strong ecosystem for 5G as part of theProduction Linked Incentive Scheme.
- The scheme was initially allocated Rs 4,500 crore
DRAFT DPR’s
What is it:
- It is the Detailed project reports for five river links which is finalized in budget 23.
- The Indian Rivers Inter-link is a proposed large-scale civil engineering project that aims to effectively manage water resources in India by linking Indian rivers by a network of reservoirs and canals to enhance irrigation and groundwater recharge, reduce persistent floods in some parts and water shortages in other parts of India.
Why in the budget:
- Finance Minister Nirmala Sitharaman during her Budget 2022 speech announced that the draft DPRs (Detailed project reports) for five river links have been finalised.
- These are: Daman Ganga-Pinjal; Par Tapi-Narmada; Godavari-Krishna; Krishna-Pennar and Pennar-Kaveri
- Once the consensus is reached among the beneficiary states, the Centre will provide support for their implementation
- An allocation of Rs 1,400 crore in Union Budget 2022-23 for the implementation of the Ken-Betwa river-linking project in Bundelkhand, a drought-prone region spreading across 13 districts of Uttar Pradesh and Madhya Pradesh.
- The implementation of the Ken-Betwa Link Project at an estimated cost of Rs 44,605 crore will be taken up. This is aimed at providing irrigation benefits to 9 lakh hectares of land, drinking water supply to 62 lakh people, 103 MW of hydro (power), 27 MW of solar power. Allocations of Rs 4,300 crore in the RE 2021-22 and Rs 1,400 crore in 2022-23 have been made for this project
BATTERY SWAPPING POLICY:
What is it:
- Battery Swapping is a service that allows EV drivers to replace depleted battery blocks for freshly charged ones at swap stations.
- This is faster than charging the vehicle and reduces range anxiety for drivers.
- The advantage of this method means that the owner of the vehicle is also the owner of the battery, and has access to other batteries when required to speed up his trips.
- However this system has several disadvantages.
- The first is that the owner has to go to the same location to pick up his original battery pack.
Why in the budget:
- In the union budget 2022-23 the finance minister stated, battery swapping policy to be brought out for setting up charging stations at scale in urban areas.
- Considering the constraint of space in urban areas for setting up charging stations at scale, a battery swapping policy will be brought out and inter-operability standards will be formulated.
Important point
- India’s proposed ‘battery swapping’ policy is interesting but is unlikely to work beyond limited situations without a heavy-handed government mandate and subsidy as major car companies do not share the technology around batteries.
VIRTUAL DIGITAL ASSET:
What is it:
A virtual digital asset is proposed to mean any information or code or number or token (not being Indian currency or any foreign currency):
- Generated through cryptographic means or otherwise
- Providing a digital representation of value which is exchanged with or without consideration with the promise or representation of having inherent value
- Functions as a store of value or a unit of account and includes its use in any financial transaction or investment, but not limited to, investment schemes
- Can be transferred, stored or traded electronically.
Why in the budget:
In the budget 2022-23, Specific tax regime for virtual digital assets introduced.
- Any income from transfer of any virtual digital asset to be taxed at the rate of 30%.
- No deduction in respect of any expenditure or allowance to be allowed while computing such incomeexcept cost of acquisition.
- Loss from transfer of virtual digital asset cannot be set off against any other income.
- To capture the transaction details, TDS to be provided on payment made in relation to transfer of virtualdigital asset at the rate of 1 per cent of such consideration above a monetary threshold.
- Gift of virtual digital asset also to be taxed in the hands of the recipient.
BLOCKCHAIN TECHNOLOGY IN BANKING:
What is it:
- Blockchain technology is an open, distributed ledger that records records transactions between two parties.
- A blockchain is made up of individual data blocks that include a sequence of connected transactions that are linked in a certain order.
- Blockchain technology is the tech behind Bitcoin and other cryptocurrencies
Why in the budget:
- Finance minister Nirmala Sitharaman announced that the Reserve Bank of India (RBI) will soon introduce digital currency based on blockchain technology.
- Digital currency will also lead to a more efficient and cheaper currency management system. It is therefore proposed to introduce a digital rupee using blockchain and other technologies, to be issued by the Reserve Bank of India, starting 2022-23
Proposed digital currency:
- Digital currencies, the best known use of blockchain, use it as a means of recording transactions.
- Starting with the next fiscal year on 1 April, 2023, India will have its own digital currency which would essentially mirror the physical currency in digital form.
- The currency, called ‘digital rupee’, will be issued by the Reserve Bank in digital form and will be fungible with physical currency.
- The exact regulation governing this Central Bank Digital Currency (CBDC) is yet to be finalised.