Budget expectations 2022

Current Environment

• In the recent past, the Government of India has rolled out several policy measures on the direct tax front to encourage private investments and provide tax certainty to investors and businesses. To recall a few, these policy decisions entailed reduction in corporate tax rates to 15 percent for manufacturing, abolishment of dividend distribution tax, withdrawal of “retrospective” capital gains tax on indirect transfer, dispensation from tax return filing in select cases, etc.
• Certain other measures viz., reduction of withholding tax rates, exemption of ex-gratia payments to families of employees on death, etc., were also introduced to alleviate economic hardship and provide respite to taxpayers affected by the pandemic.
• Above said, there are a number of aspects—some historic and others on account of evolving new business models—that warrant further calibration/clarifications on existing provisions of tax law, such as lack of clarity on deductibility of expenses incurred towards COVID-19 relief measures, absence of the taxation framework of cryptocurrency, etc. Besides, select tax policy changes introduced by the government recently (such as denial of depreciation on goodwill) may be impacting M&A / deal flows.
• Therefore, the government should consider introducing necessary steps to address concerns of the investors/taxpayers in the forthcoming budget.