Neeraj Bhatia, based in Silicon Valley is an accomplished accounting professional with 30 plus years of expertise in international and domestic tax planning, startups, and multinational entities. He is the co-president of Indo American Chamber of Commerce, SF Chapter.
India’s budget comes right before elections in 5 key states in India. Yet, the government has not come up with any kind of populist announcements in it as is normally expected in such situations. Rather, the focus of the budget initiatives is on growth and reforms in India and promoting technology-enabled development.
The budget makes provision for the formulation of GatiShakti-Master Plan for creating world-class modern infrastructure covering Roads, Railways, Airports, Ports, Mass Transport, Waterways and Logistics Infrastructure. The Master Plan for expressways provides for completing 25,000 kilometers of national highways in 2022-23, which lays down a strong foundation for India’s economic growth. As Finance Minister Nirmala Sitharaman put it, this budget seeks to lay the foundation and give a blueprint to steer the economy over the Amrit Kaal of the next 25 years – from India at 75 to India at 100.
As we have seen in recent years, modern technology has been playing a big role in India’s development and this gets a further boost in budget provisions aimed at providing Unified Logistics Interface Platform allowing data exchange among operators of all modes of transport, Multimodal connectivity between mass urban transport and railway stations.
The Indian Finance Minister also announced the introduction of ‘Digital Rupee’, using blockchain and other technologies in 2022-23 to give a big boost to the digital economy, thereby leading to more efficient and cheaper currency management.
The budget proposes to launch a Digital Ecosystem for Skilling and Livelihood through a DESH-Stack portal to empower citizens to skill, reskill or upskill through online learning, whereby individuals could earn API-based and trusted skill credentials. To support children, particularly from the government schools in rural areas, who have lost almost 2 years of formal education due to Covid-19, the budget announced schemes to provide supplementary teaching. To develop vocational skills, 750 virtual labs in science and mathematics and 75 e-labs for simulated learning environment are proposed in the next year. A Digital University is also proposed to be established to provide access to students across the country for world-class quality universal education in different Indian languages.
On the direct tax front, though only limited changes are there in the budget, that also signals to the investors that the government wants to provide transparency and stability in tax laws with no surprise and kneejerk announcements.
One of the important changes in direct tax laws would permit taxpayers to file updated tax returns within 2 years of end of the assessment year to correct errors later discovered. NRIs and Foreign passport holders living in India who are required to report Income earned outside India will have an opportunity to rectify the lapse by filing an updated return to include such income, whereby they could also claim credit for tax paid outside India on such income. The updated return, however, cannot be used to file a return of a loss, or to decrease the total tax liability, or to generate or increase a tax refund.
The budget proposes to extend the period of incorporation of the eligible start-up by one more year, that is, up to 31.03.2023 whereby such startups are for a provided tax incentive for three consecutive years out of ten years from incorporation.
The Indian government has so far shown its reluctance in accepting the legality of the cryptocurrency regime in India. However, as a reflection of accepting the modern and future reality now, this budget proposes to tax any income from the transfer of any virtual digital asset at the rate of 30 percent. To capture transaction details, the buyer of such assets will be obligated to deduct TDS (Tax deducted at Source at 1% of the consideration above a certain threshold.
The budget provides for better litigation management to avoid repetitive appeals by the government department when such issue is pending in appeal before the High Court or Supreme Court.
Towards the government’s objective of ‘Make in India’ and ‘Atmanirbhar Bharat’, the budget stresses upon continued endeavor towards the removal of custom duty exemption on items which are or can be manufactured in India and providing concessional duties on the raw material that go into the manufacturing of intermediate products. Re-calibration of customs duty on certain chemicals provides an example of this aim.
Though no separate announcement has been made for overseas investors, however, there is a proposal to cover Transfer Pricing assessment also as ‘faceless’ assessment and also reduce the length of time for such assessments.