Key Highlights of Union Budget 2022-23

Author – Sunil Jain[1]

Indian Government has announced proposals for federal budget for the financial year 2022-23 on February 01, 2022. The provisions of the budget will become an action program for next one year and carry out necessary changes in the fiscal legislations upon discussions and approval of the parliament. Any legal and tax proposals will become law in relation to financial year or say business year that runs from April 1, 2022 to March 31, 2023.

Higher vaccine coverage with close to 1.7 billion doses delivered and improved mobility support a positive growth outlook for FY 2022-23 for the Indian economy. This year’s budget focuses on ease of doing business , strengthening infrastructure, improvement of logistics facilities including expansion of railways, roadways, airways, ports, waterways and unified logistic interface. While Government is looking to introduce its own digital currency, tax on virtual digital assets has also been proposed. Renewed thrust on technology overall and deepening of IT driven governance will further facilitate a better overall investment climate.

The economy in numbers

  • India’s economic growth in the current year is estimated to be 9.2 percent, highest among all large economies
  • The fiscal deficit in FY 2022-23 is estimated at 6.4 per cent of GDP

Venture Capital and Private Equity funds

  • An expert committee to be set-up to examine and address regulatory and other challenges faced by VC and PE funds in order to scale up investments

Insolvency law and winding up

  • Indian insolvency and bankruptcy code (IBC) will be further amended to enhance efficacy of resolution process and facilitate cross-border insolvency resolution
  • Centre for Processing Accelerated Corporate Exit (C-PACE) to be set up to reduce voluntary winding-up timeline of companies from two years to six months

GIFT City (Gujarat International Finance Tec-City) – an IFSC

  • World class foreign universities and institutions to offer various courses free from domestic regulations
  • International arbitration centre will be set up for timely settlement of disputes under international jurisprudence
  • Services for global capital for sustainable & climate finance in the country


  • Startups to be promoted to facilitate ‘Drone Shakti’ (drone power) through varied applications and for drone-as-a-service (DrAAS)
  • Supportive policies and regulations for promotion of research and development in these sunrise opportunities will be laid out

Key tax proposals

Indian Rupee as digital currency and virtual digital assets (VDA)

  • India’s central bank Reserve Bank of India will issue a Central Bank Digital Currency (CBDC) in the form of digital Rupee using blockchain and other technologies in the FY 2022-23
  • Definition of VDA to include non-fungible tokens (NFTs) and tokens of similar nature under the Income Tax Act
  • Income from the transfer of any VDA to be taxable at 30% (plus surcharge and cess) with effect from FY 2022-23
  • No deduction will be allowed on any expenditure other than cost of acquisition in the computation of income from VDA
  • Set-off of losses incurred on transfer of virtual digital asset against any other income will not be permitted
  • Carry forward of losses to subsequent years will not be permitted
  • Income arising from gift of VDAs will be taxed in the hands of the recipient
  • Withholding tax will need to be deducted at 1% on consideration for payment to a resident on the transfer of VDAs from July 1, 2022

Tax incentives to International Financial Service Centres (IFSC)

  • Income of a non-resident from transfer of offshore derivative instruments (ODI) or over-the-counter (OTC) derivatives entered into with an offshore banking unit (OBU) in IFSC to be exempt from tax
  • Exemption of royalty/interest income of non-resident on account of lease of ship to an IFSC unit
  • Income accruing or arising outside India and received by a non-resident from a portfolio of securities or financial products or funds, managed or administered by any portfolio manager
  • Extension of the tax holiday for income arising from the transfer of a ship that is leased by a unit of IFSC
  • Exemption of income from transfer of ships leased by IFSC unit
  • Exclusion of specified funds from taxation of excess share premium over fair value to Category I or a Category II Alternative Investment Fund (AIF) regulated under the IFSC Act
  • All amendments to take effect from FY 2022-23

Start-ups and manufacturing units

  • Eligible start-ups that may incorporated by March 31 2023 will also be able to claim tax holiday regime applicable to those already incorporated
  • Manufacturing/production companies incorporated by March 31 2024 will also be able to claim concessional tax rate of 15% applicable to those already incorporated

Merger, acquisitions and business reorganisation

  • Successor entity to be treated as the entity being taxed in case of assessment or reassessment proceedings carried out on the predecessor entity in case of an amalgamation, merger or demerger
  • Successor entity in such business reorganisations to file a modified return/statement of income within 6 months from the month of order issued by jurisdictional authority
  • In case of a strategic divestment of a public sector company, carry forward of any losses will be permitted in case the strategic investor continues to hold at least 51% voting power directly or through its subsidiaries

Anti-Avoidance-bonus stripping & dividend stripping

  • Bonus stripping provisions will be applicable to a much wider ambit of securities
  • Bonus stripping and dividend stripping provisions will also apply to units issued by Infrastructure Investment Trust (InvIT), Real Estate Investment Trust (REIT) and Alternative Investment Funds (AIFs)

Dividend Taxation

  • Concessional tax rate of 15% on dividend income received by Indian companies from specified foreign companies has been withdrawn and ordinary rates will apply from FY 2022-23

Business expense- deduction- perquisite or benefit –

  • Expense deduction will not be allowed for providing any benefit or perquisite where acceptance by a recipient violates any law, rule, regulation or guideline governing the conduct of the recipient
  • Benefit or perquisite provided to a resident during the course of business or exercising of profession would now be subject to tax withholding at 10% from July 1, 2022

Exemption for Covid-19 benefits

  • Medical treatment
  • Any sum of money received from an employer or any other person for medical treatment for self and family will be exempt
  • Mortality related payments
  • Any sum of money received by a family member within 12 months of the death of an employee, from her employer
  • Received by a family member within 12 months of the death of an individual from any other person up to INR 1 million
  • Exemption will apply from FY 2019-20 and is subject to certain conditions to be notified

[1] Sunil Jain is a partner at AnantLaw and can be reached at

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