• Notification Date: 03.02.2022
• Notification No: N/A

Massive Changes in Income-Tax Law

After the presentation of the Budget 2022, some major amendments have been made to the Income Tax Act. The Budget of 2005-06 has been changed and according to the new Budget, the surcharges are not allowed to be claimed as deductions. These are not entitled to be claimed as expenditure deductions. This was being practised by several companies due to the absence of legal clarity in the system.  

The Budget has started allowing an exemption for medical treatment amounts as well as for the deaths that happened due to the Covid-19 pandemic from April 1, 2020. Changes have been brought to the IT law. According to the new law, the tax department is provided with the space to ask for clarification regarding the source of funds received by the creditors.

The tax department has pointed out some of the court rulings made over the years that have provided enough benefits to the taxpayers concerning the claim of cess in the form of expenditure but not as tax. The new ruling has separated the income tax and educational cess related to income tax. The court has taken several beneficial views for the taxpayers in case there is an absence of a specific disallowance for ‘education cess’. A clarificatory amendment has been established in the law to rectify the impacts of such court rulings and consider them against the law. The amendment has made it clear that the surcharges or education cess on income tax are not eligible for considering as business expenditure.

The Budget allows exemptions from April 1, 2020, for medical treatment and for the families of the deceased people due to the Covid-19 pandemic. The employer of the dead person will provide a sum of Rs.10 lakh to the family of the person. The cause of death has to be due to the Covid-19 virus. The sum is donated within twelve months from the date of the person’s death.

According to the new Income-tax law, gifts and freebies offered to the doctors will not fall under business expenditure as per Section 37. The expenses that are incurred for providing benefits for violating the provisions mentioned under Indian Medical Council Regulations, 2002 are also not considered a business expenditure. This amendment in the law will refrain pharmaceutical companies from offering freebies to medical professionals.