Finance Minister Nirmala Sitharaman on Tuesday, February 1, gave a one-time window to taxpayers to correct any discrepancy or omissions in their ITRs within two years of filing, subject to payment of taxes. In her 2022-23 Budget speech, the Minister said this is an "affirmative step in the direction of voluntary tax compliance." Currently, if the IT department finds out that some income has been missed out by the assessee, it goes through a lengthy process of adjudication, and the new proposal would repose trust in the taxpayer.

"To provide an opportunity to correct such errors, I am proposing a new provision permitting taxpayers to file an Updated Return on payment of additional tax. This updated return can be filed within two years from the end of the relevant assessment year," Sitharaman said. The Minister said that the I-T Department has established a robust framework of reporting of taxpayers' transactions and some taxpayers may realize that they have committed omissions or mistakes in correctly estimating their income for tax payment.

"Instead, with this proposal now, there will be a trust reposed in the taxpayers that will enable the assessee herself to declare the income that she may have missed out earlier while filing her return," she said.

Besides, rationalising the surcharge regime, Sitharaman said, she proposes to cap the surcharge on long-term capital gains arising on transfer of any type of assets at 15 per cent. This step will give a boost to the startup community, she said.

Currently, the long-term capital gains on listed equity shares, units etc are liable to maximum surcharge of 15 per cent, while other long-term capital gains are subjected to a graded surcharge, which goes up to 37 per cent.

Finance Minister Nirmala Sitharaman did not tinker with the personal income tax rates in the Budget for 2022-23. The minister also did not raise standard deduction, which was widely anticipated in view of elevated inflation levels and impact of the pandemic on the middle class. The standard deduction currently stands at Rs 50,000.