The new financial year starting from April 1, 2022, will bring new opportunities, possibilities, and experiences. So even if your financial situation did not pan out the way you wanted last year, it is a good idea to have a positive outlook.
Considering that financial stability is something that you cannot achieve overnight, you will want to stay up-to-date with important economic changes this year. Next, you will want to know how to do proper financial planning for 2022 to get closer to your financial goals.
The following section will cover the most significant updates for FY22-23.
Significant Changes for the New Financial Year
From April 1, 2022, all changes announced in the Union Budget 2022 will be applicable. The following are some of the most significant changes that will affect the everyday life of Indians.
- Updated filing of ITR
The Union Budget added a new sub-section 139(8A) to the Income Tax Act to allow taxpayers to file updated income tax returns (ITR). This provision will allow you to correct any errors or mistakes in ITR within two years from the end of the relevant assessment year.
- Increase in NPS deductions
The Union Budget 2022-23 has increased the tax deduction limit under Section 80CCD(2) for NPS contributions of state government employees. Now, they can get the same deductions available for central government employees, amounting to up to 14% of their basic salary and dearness allowance (DA).
- Taxes on an EPF account
The CBDT (Central Board of Direct Taxes) has decided to introduce a tax on EPF (Employee’s Provident Fund) accounts from April 1. Any employee’s contributions over and above tax-free contributions of up to Rs. 2,00,000, including the principal amount and interest, will be taxable.
- End of tax benefits u/s 80EEA
Introduced in FY2018-19, Section 80EEA allowed tax deductions of up to Rs. 1.5 lakh over and above the Rs. 2 lakh limit of Section 24(b). This facility was available only for first-time homebuyers for interest payment of affordable houses worth a maximum of Rs. 45 lakh. This facility was extended for the next two financial years but will end in FY22-23.
- Tax on cryptocurrencies
Another change in the new financial year is that crypto assets will be taxed at a flat 30% rate. This will apply to all virtual digital assets (VDA) like Bitcoin, Ethereum, and Non Fungible Tokens (NFTs). Besides this, a 1% TDS and a gift tax will be applicable on VDAs from July 1, 2022.
- Cannot offset VDA gains against losses
The Finance Minister has announced that you cannot adjust losses from one type of VDA against gains from another VDA-related transaction. Therefore, you cannot deduct losses from the final taxation amount gained from trading cryptocurrencies.
- Exemption from filing ITR
Senior citizens who are 75 years of age or above will no longer need to file ITR from the new financial year. However, they will have to give a declaration to the bank and fulfill certain conditions.
- Change in long term capital gains
Before FY22-23, a surcharge on listed securities had a maximum limit of 15%, while unlisted securities were subject to 25% and 37% surcharge. The Union Budget 2022-23 has declared that the surcharge on LTCG tax will be capped at 15% for all assets.
Ways to Plan Your Finances for FY22-23
Now that you have learned the important finance-related updates, you can get started on a plan to secure your finances. You can follow these money-saving tips for 2022-23 to work towards your financial goals:
- Start investing: It is never too early or too late to get started on your investment journey. Saving enough money for investments is difficult, but you will want to make small savings regularly. You can set an investment target to accumulate funds or use a SIP (Systematic Investment Plan) to ensure regular investments.
- Employ a financial plan: Setting up a budget for you and your family is a great way to deal with expenses and save money. You can use last year’s income, expenses, and future goals to set up a financial plan for 2022-23. A financial calendar is another useful tool for keeping track of major expenses, credit card bills, the due date for taxes, and EMI payments.
- Engage in tax planning: If you pay considerable income taxes, it may be time to create a tax plan to reduce your tax liability. The Income Tax Act allows a number of deductions and exemptions for loan repayments, insurance premiums, and certain investments that you can use to your benefit. You can take the help of a financial advisor to know every tax benefit that you can avail yourself of.
- Analyze your debt outflow: Last year, you may have taken loans or accumulated credit card bills. If you have high-interest debts, you will want to make sure to pay them off as soon as possible. You should analyze your debt outflow and avoid taking more loans if your debt burden is too high.
- Get adequate insurance cover: For proper financial planning for 2022-23, evaluate your life insurance and health insurance. Having sufficient coverage would ensure that your family can take care of major expenses in case of an unfortunate event. A health insurance policy is essential to deal with medical emergencies these days.
- Build an emergency fund: Besides making regular investments, you should make sure that you have a rainy day fund. Having this amount will help you deal with the unexpected financial crisis without having to liquidate your investments. For a sound financial plan, you can set aside funds worth at least 12-24 months’ living expenses.
To make a smart financial plan for 2022–23, you should check all the important updates announced in the Union Budget 2022. Furthermore, you can follow the above tips to get closer to your investment goals this year.