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From ETH Tax to Crypto, New Income Tax Rules Take Effect;  Here’s what changed


The new fiscal year 2022-23 (FY23) has brought key changes that may affect your budget. Changes ranging from income tax, PF account to crypto tax came into effect on Friday, April 1, 2022.

30% tax on virtual digital assets, including cryptocurrencies

The 2022-2023 Union budget proposed a 30% tax on virtual digital assets. From April 1, cryptocurrency winnings will be taxed at 30%, which is the highest tax bracket equivalent to the rate of lottery winnings. From cryptocurrency to NFTs, the tax rate will apply to all virtual digital assets (VDAs).

Crypto losses cannot be deducted from crypto gains and cryptocurrency received as a gift will be taxable

With the new rules, cryptocurrency losses cannot be used to offset cryptocurrency gains. For example, if you make a gain of Rs 2,000 on Bitcoin and a loss of Rs 1,000 on Ethereum, you have to pay tax on Rs 2,000 and not on the net profit of Rs 1,000.

Additionally, gifts received in the form of cryptocurrency or any other virtual digital asset would be subject to taxation.

Updated RTI drop window

A new provision allows income taxpayers to file updated returns within two years of the end of the relevant tax year. Previously, only a five-month window from the filing due date, to review tax returns, was available. However, this cannot be done to claim an additional loss or lower tax liability.

Tax on the EPF account

The Central Board of Direct Taxes (CBDT) will implement Income Tax Rule 2021 (25th Amendment) from 1 April 2022. Thus, a cap on tax-free contributions of up to Rs 2.5 lakh is now taxed on the Employees Provident Fund (EPF) Account. Interest income on contributions paid in excess of this amount will be taxed.

State employee NPS deduction

State government employees will now be able to claim a 14% National Pension System (NPS) tax benefit under Section 80CCD(2) granted by their employer up to 14% of their salary and allowance basic.

Mutual fund

Dividends from mutual funds will be placed in tax brackets. A higher tax burden will be imposed on investors in higher tax brackets, and a lower tax burden will be imposed on investors in lower tax brackets.

No additional tax incentives for buyers of affordable homes

An additional tax deduction under Section 80EEA was available for first-time home buyers where the value of the property does not exceed Rs 45 lakh. Thus, home buyers could claim a maximum deduction of Rs 3.5 lakh using Section 24(b) and Section 80EEA.

Now, the deduction under Section 80EEA will only be available for houses purchased before March 31, 2022. For houses purchased in the following financial year, the additional deduction of Rs. 1.5 lakh against payment of interest on the home loan will no longer be provided.

However, EMI on home loan (principal and interest) is still eligible for deduction under Section 80C and Section 24B. The maximum limit without 80EEA will now be Rs 2 lakhs for self-occupied properties.

Surcharge on LTCG

Currently, there is a cap of 15% Long-Term Capital Gain Surcharge (LTCG) on the sale of listed stocks or mutual funds. From 1 April 2022, this will be extended to long-term capital gains on all assets.

Tax relief on Covid-19 treatment costs

Tax exemption will be given to people who received money for COVID treatment. Money received by family members upon death of a person due to COVID will also be exempt up to Rs 10 lakh, if payment is received within 12 months from the date of death. This will be effective retrospectively from April 1, 2020.

80DD for children with disabilities

Previously, expenses incurred for the payment of insurance premiums for disabled children could be deducted, under Section 80DD of the Income Tax Act, only if the payment was made to a disabled child after the death of a parent or caregiver. Now, from April 1, there is a relaxation and the deduction is made available even if the sum is collected while the parent is still alive.

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