Page 25 - Union Budget, 2022

Union Budget, 2022

Clarification of Taxation in Certain Circumstances (for both regimes)
• On instances where exemption is denied (for non-filing of ROI, commercial receipts in excess of 20% of
annual receipts, failing to audit books of account), it is proposed to clarify that taxable income shall be

computed after allowing deduction for only revenue expenditure incurred in India, for its objects, subject
to the following conditions:
- Expenditure is not from corpus or loan or borrowing.
- Claim of depreciation is not in respect of an asset, of which capital expenditure was claimed as
application.
- Expenditure is not contribution or donation to any person.
- No deduction in respect of any expenditure or allowance or set-off of any loss shall be allowed under
any other provisions
• It shall be noted that compliance of TDS deduction u/s 40(a)(ia) and limits of cash payment u/s 40A(3)
and (3A) shall still be applicable.
• Newly proposed Sec 115BBI: When exemption is denied and income is brought to tax on account of
application of income for the benefit of specified person (as discussed earlier), or non-application of
income within stipulated period of accumulation, or deposit in unspecified modes, it is now proposed to
clarify that only so much of that income that is applied in violation shall be taxed at 30%. Tax shall be on
the aggregate of such deemed income and income accumulated or set apart in excess of 15% (when not
allowed under provisions of the Act).
• Further, new Sec 271AAE is proposed to be inserted to provide for penalty on trusts/institutions, equal
to an amount of income applied for the benefit of specified person (as discussed earlier) on first instance
of violation and twice the amount of such income on subsequent violation.
• It is proposed to be clarified that any voluntary contributions received by a wholly public religious or
wholly public religious and charitable trust/institution, whose property includes any temple, mosque,
gurdwara, church or other notified place, for the purpose of renovation or repair, may be treated as
“corpus” subject to the condition that the same is applied only for the stipulated purpose and is separately
identifiable, and is deposited in Sec 11(5) specified modes. On breach of any of the conditions, such sum
shall be deemed income in the year of violation.
• It is additionally proposed to specifically clarify that 85% application would be considered only on “actual
payment” and not on earmarking of funds.

AY 2022-23 and subsequent AYs.

The operationality of the taxation regime of trusts have been explicated and clarified in order to avoid frivolous
claims of exemption.

Economy recovers past Pre-pandemic

Studies

• The Indian economy has been staging a sustained recovery since the second half of 2020-
Inference
21. Despite the severity of the second wave, the economic impact was muted compared to
the national lockdown of the previous year.
• Advance estimates suggest that GDP will record an expansion of 9.2% in 2021-22. This
implies that the level of real economic output will surpass the pre-COVID level of 2019-20.

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