The Finance Minister presented the Budget 2023 on 1 February 2023. Here’s a look into how it will impact taxation in India.
Here is a snapshot of the essential announcements in Budget 2023 to give you a handle on how much you save under the new income tax slabs.
The announcements made in the Budget 2023 are expected to provide a new impetus for the development of MSMEs, start-ups and self-employed professionals. Find out more.
Budget 2023 gives several reasons for major investors to place funds in the Indian market, while also urging the middle class towards wealth creation. Here’s how it can give fresh impetus to investors.
The Union Budget 2023 introduced a handful of reforms pertaining to income tax. Under the new regime, the highest tax rate is about 4% less. What does this revision in the surcharge rate mean for taxpayers?
The Finance Minister proposed a holistic Union Budget 2023 addressing the needs of various segments of society. It sought to empower and provide financial assistance to senior citizens and women in particular.
The Budget involved several announcements that pave the way for a tech-driven nation and enable financial inclusion. The focus was on deeper penetration of digital services into business processes and customer interactions.
The Union Budget pointed out that India ranks 2nd in innovation quality amongst middle-income countries. In such a scenario, providing impetus to entrepreneurship is not just vital, but opportune.
Read the latest Budget 2023 highlights to understand how the Nirmala Sitharaman Budget has proposed certain measures to boost previous efforts in the lending sector.
The Union Budget 2023, which was declared on 1st February 2023, envisions an India wherein all sectors, especially women, youth, OBCs, SCSTs and farmers, equally benefit from the provisions and changes announced by the Finance Minister.
Despite the pandemic and the subsequent global slowdown, India has managed to steer through the major roadblocks and plunge into the world economy as a significant superpower.
The said budget, although broad and all-inclusive, mainly focuses on three major aspects
To provide ample opportunities to citizens, specifically the youth
To create job prospects to promote growth
To build a stronghold to foster stable macroeconomic goals
Here’s a rundown of all the key highlights of the Union Budget 2023 to give you a clear perspective:
The provisions made under direct taxes aim to simplify and rationalise existing provisions to minimise the burden of compliance, promote the spirit of entrepreneurship, and give tax relief to the taxpayer.
Given below is an overview of the provisions under each sector:
The budget provides presumptive taxation benefits to MSMEs
The taxation limit will be enhanced to ₹3 Crores for micro-enterprises and ₹75 Lakhs for professionals from the existing ₹2 Crores and ₹50 Lakhs limit.
New manufacturing co-operatives that will be formed until the 31st March 2024, will be able to benefit from the 15% low tax rate.
Relief of about ₹10,000 Crores as expenditure to sugar cooperatives that made payments prior to 2016-17 to farmers that grow sugarcanes.
Cash deposits given to and loan deposits taken from Primary Agricultural Co-operative Societies (PACS) and Primary Co-operative Agriculture and Rural Development Banks(PCARDBs) will have a higher limit of ₹2 Lakhs.
TDS on cash withdrawal will also have a higher limit of ₹3 Crores
The term for the carry forward of losses is updated to 10 years from the existing 7 year period
100 Joint Commissioners to be deployed to settle small appeals
Deductions on capital earnings from investment on housing will be capped at ₹10 Crores
High-value insurance policy proceeds will have limited income tax exemptions
Boards, commissions and authorities established by union or state statutes will be exempted from income tax with regard to the development of housing, villages, cities and towns and their regulatory activities.
Removal of the minimal TDS of ₹10,000
Clarity on online gaming taxability
Abolishment of considering gold to electronic gold conversions as capital gains
TDS rate reduced to 20% on taxable EPF withdrawals in the absence of a PAN
Income derived from debentures that are market-linked will be liable to taxation.
Funds that are relocated to GIFT City, IFSC will get an extension on the tax benefit period till 31st March 2025
Section 276A under the Income Tax Act will be decriminalised
Strategic withdrawal of investments from banks will be allowed to carry their losses forward
EEE status will be provided to Agniveer Fund
As per the New Tax Regime, the rebate limit on income tax will be increased to ₹7 Lakhs
The income tax slab will begin at ₹3 Lakhs.
The revised income tax rates under the New Tax Regime are as follows:
Income Tax Rate
Over ₹15 Lakhs
Citizens that have an annual income of ₹9 Lakhs will be liable to pay only 5% tax
Citizens with an annual income of ₹15 Lakhs will have to pay 10% tax
Pensioners and salaried-class individuals will be able to benefit from the extended standard deduction
The highest tax rate will be brought down to 39% from 42.74%
The highest surcharge rate will be reduced to 25% from the existing 37%
The limit for leave encashment tax exemption for non-government employees will be increased to ₹25 Lakhs
The latest tax regime will become the default tax regime.
The provisions made under indirect tax intend to promote exports, augment domestic manufacturing, improve the addition of domestic value, and vitalise mobility and green energy.
Here’s a rundown of the provisions under each category:
Exemption on excise duty on compressed biogas that is GST-paid
Exemption on custom duty will be extended to the import of battery-manufacturing machinery and capital equipment.
Relief on custom duties on the import of certain mobile parts
Concessional duty on battery cells will be continued for a year
Basic custom duties on television parts will be reduced to 2.5%
Tariff on electrical kitchen chimneys will be increased to 15%
Duties on heat coils will be reduced to15% from the existing 20%
Exemption of custom duties on denatured ethyl alcohol
Custom duties on acid grade fluorspar and crude glycerin will be reduced to 2.5% each
Duties on the manufacture of shrimp bait on a domestic level to be reduced
Reduction in the custom duties of the seeds that are used in the manufacture of diamonds developed in labs.
Duties on the articles that are made of platinum, silver and gold will be increased
Custom duties on raw materials used in the manufacture of ferrous scrap, nickel cathode, and CRGO steel will remain the same.
Concessional duty on copper scrap will remain at 2.5% for copper producers in the MSME sector
Duties on compounded rubber will be raised to 25%
The National Calamity Contingent Duty on certain cigarette brands will be revised to 16%
In addition to the provisions made under taxation, Budget 2023 adopts seven cardinal priorities. They are listed below:
Reaching the Last Mile
Infrastructure and Investment
Unleashing the Potential
Each of these priorities is specifically set in a manner that will lead to the growth and development of various sectors.
Here’s an outline of all the provisions made under each class:
To encourage young entrepreneurs venturing into agri-startups, an accelerator fund will be set up
Sectors like fisheries, animal husbandry and dairy will be allocated an agricultural credit of ₹20 Lakh Crores
About 10,000 centres of bio input resource will be established
The Indian Institute of Millet Research in Hyderabad will be reinforced as the Centre of Excellence, in order to mould India as a global centre for ‘Shree Anna’
All organisations that market natural gas as well as biogas, will have a mandatory 5% tax on compressed biogas
To provide viable micro-irrigation in regions of Karnataka that are prone to droughts, a ₹5,300 Crores central assistance will be provided
Under the PM Mastya Sampada Yojna, a sub-scheme with a ₹6,000 Crores outlay will be launched to enable fisherman activities
Agriculture sector will be given a digital public infrastructure
Around ₹1 Crores farmers will be provided assistance to opt for natural farming over the span of the next three years
About 63,000 credit societies will receive computerisation worth ₹2,516 Crores
An investment of ₹10,000 Crores will be allocated for 500 new plants under the GOBARdhan scheme for the promotion of a circular economy
For the development of urban infrastructure, ₹10,000 Crores will be allocated
To improve creditworthiness for the acquisition of municipal bonds, cities will be given incentives
Septic tanks and sewers in all towns and cities will be qualified for a 100% transition
PM Awaas Yojana outlay enhanced by 66% to a sum of over ₹79,000 Crores
Railways to receive a massive boost through a ₹2.4 Lakh Crores outlay in financial year 2024 which stands to be the highest allocation ever
About 75 Vande Bharat trains to roll out by August,2023
The renewal of tracks will be allocated a sum of ₹17,296.84 Crores
The NHAI allocation is increased by 13.90% equivalent to a sum of 1.62 Lakh Crores
Revival of an additional 50 helipads, airports, aero water drones and state-of-the-art landing grounds for the improvement of air connectivity regionally
Highway sectors to receive an enhanced ₹2.70 Lakh Crores outlay
Allocation of ₹89.155 Crores for the healthcare sector
Sickle Cell Anaemia to be eliminated by 2047
Formulation of a new program for pharmaceutical research
Pradhan Mantri Swasthya Suraksha Yojana to get a budget allocation of ₹3,365 Crores
AYUSH Ministry to receive a budget boost
National Digital Health Mission gets a hiked budget of ₹341.02 Crores from the existing ₹140 Crores
National Health Mission to receive an increased budget
ICMR budget allocation increased to ₹2,359.58 Crores from ₹2,116.73 Crores
Autonomous bodies allocated a budget of ₹17,322.55 Crores for the year 2023-24
A budget of ₹133.73 Crores allocated for the National Tele Mental Health Programme
The National Digital Health Mission budget increased to ₹341.02 Crores from ₹121 Crores
The Health and Family Welfare Department has been allocated ₹86,175 Crores
The Health Research Department will receive an allocation of ₹2,980 Crores
Artificial intelligence to have three centres of excellence set up in renowned educational institutions
Centre to set up Eklavya Model Residential Schools in the upcoming three years. About 38,000 educators and support staff to be recruited for 740 schools to serve over 3.5 Lakh students from various tribes
Deemed-to-be-Universities to be increased by 27%
Central Universities to be expanded by 17.66%
IITs and NITs to be hiked by 14% and 10.5% respectively
In order to unleash prospects of research and innovation for academia and startups, National Data Governance Policy to be implemented
An additional 157 nursing colleges to be set up
An increase of ₹459 Crores in the grant provided to the University Grants Commission
National Digital Library to be established for adolescents and children
States will be encouraged to establish libraries at ward and panchayat levels
Infrastructure to be provided for the access of the resources of the National Digital Library
Groups such as Children’s Book Trust and National Book Trust to restock books in regional and english language to digital libraries
The budget for defence increased to ₹5.94 Lakh Crores from the existing ₹5.25 Lakh Crores
Capital outlay allocation for 2022-2023 set at ₹1.52 Lakh Crores
Indian Navy to receive a capital outlay of ₹52,804 Crores
Army to receive a capital outlay of ₹37,241 Crores
The Defence Research Development Organisation has been allocated ₹23,264 Crores
Border Roads Organisation capital budget hiked to ₹5,000 Crores
Indian Air Force to receive the highest allocation of ₹57,137.09 Crores
Capital expenditures inclusive of new weapons, warships, military hardware, and aircrafts to receive ₹1.62 Lakh Crores budget allocation
MSMEs to get an updated credit guarantee through the infusion of ₹9,000 Crores in the existing corpus
An additional credit guarantee of ₹2 Lakh Crores that is free of any collateral will be enabled
The credit cost will be reduced by a percent
Amendments applied on the Banking Application Act will be open to debate as an attempt to improve the governance in banking activities
The limit on the maximum deposit for the Senior Citizen Savings Scheme to be hiked to ₹30 Lakhs from the existing ₹15 Lakhs
The limit for the Monthly Income Scheme will be doubled to ₹9 Lakhs if it is a single account and ₹15 Lakhs if it is a joint account
As a one-time savings scheme, the Mahila Samman Savings Certificate will be available for a period of 2 years until March 2025
A deposit facility of up to ₹2 Lakhs with a 7.5% rate of interest can be opened by women with the option to partially withdraw whenever required
For the enhancement of growth potential and the creation of jobs, a capital investment of ₹10 Lakh Crores will be provided
The centre’s capital expenditure to be ₹13.7 Lakh Crores
The outlay of capital investment to be 3.3% of the Gross Domestic Product in the financial year 2024
Centre to attempt to achieve a lower fiscal deficit of 4.5% by the year 2025-2026
Fiscal deficit to be retained at 6.4% for the financial year 2023
Fiscal deficit to be reduced in the financial year 2024 to 5.9%
Net tax receipts of the year 2024 to be set at ₹23.3 Lakh Crores
Gross market borrowing for the year 2024 to be set at ₹15.43 Lakh Crores
The revised estimate of the net tax receipts for the year 2023 is set at ₹20.9 Lakh Crores
The estimate of the total number of receipts except for borrowings is estimated at ₹24.3 Lakh Crores for the year 2023
Net market borrowings for the year 2024 to be set at ₹11.8 Lakh Crores
The revised estimate of the total expenditure for the year 2023 is set at ₹41.9 Lakh Crores
The interest-free 50-year loan to the state government to be continued for another year
To prioritise energy transition a capital of ₹35,000 Crores is provided
Feasibility gap funding to be provided to battery storage
To transition the economy to a lower carbon intensity and minimise dependence on the import of fossil fuels, an outlay of ₹19,700 Crores will be provided to the National Green Hydrogen Mission
Storage units of battery energy of 4,000 MwH to be set up by the government
The notification of the Green credit programme will be set under the Environment Protection Act
Pradhan Mantri Kaushal Vikas Yojana 4.0 to be launched by the government
About 30 Skill India International Centres to be established to train youth for international prospects
A pan-India apprenticeship scheme to provide assistance to over 47 Lakh youth in the upcoming 3 years under a Direct Benefit Transfer will be rolled out.
As an attempt to bring about an improvement in socio-economic conditions, Pradhan Mantri Primitive Vulnerable Tribal Group has been launched
A sum of ₹15,000 Crores to be allocated as a welfare fund to provide sanitation, safe housing, electricity and clean drinking water to tribal individuals in the upcoming 3 years
For the settlement of commercial disputes, Vivas Se Vishwas-2 to be introduced
PAN to become the common mode of identification for government agency digital systems
Measures for the enhancement of business activities in the GIFT city to be implemented
In an attempt to better business practices, reduction in over 39,000 compliances and decriminalisation of more than 3,400 legal provisions will be adopted
Aadhar and digi locker to be used as elements of foundational identity to establish a comprehensive solution for the updation of identity that is maintained by numerous agencies
To facilitate a rapid response for forms filed by companies under the Companies act, a Central Processing Centre will be established
The amendment of 42 Central Acts that are introduced to foster a governance that is based on trust will be implemented through the Jan Vishwas Bill
DigiLocker services to expand its scope
For the development of 5G services, 100 labs will be set up in established engineering institutes
Amenities such as smart classrooms, healthcare and precision farming will be covered by the labs
E-court projects to launch Phase 3 with a ₹7,000 Crore outlay
Top industrial companies to partner for the development and provision of scalable health, agri and other options
The expectations are high as India gears up to hear the Union Budget 2023 on February 1. From revisions to tax slabs and IT deductions to encouraging sectors such as logistics and exports, both the common man and industry are hopeful about the latest Budget.
The Finance Minister, Nirmala Sitharaman, had already promised a reduction in the fiscal deficit and to work for the welfare of the middle class in the past. Smart cities and infrastructural development are particularly important here to boost employment and healthcare access.
However, with lower expenditure in the Budget 2023, it remains to be seen how indirect tax relief measures and higher capital expenditure could benefit economic growth.
Budget 2023 day: February 1, 2023
Budget 2023 time: 11 am
Budget 2023 highlights: Expected to focus on tax relief, electric mobility, MSME growth, health and improving exports for the textile and auto sectors
Read on for a quick summary of the Union Budget in 2022 and see how the landscape differs for FY 2023-24.
Here is a summary of what the Union Budget brought to the fore in the last financial year.
Announcement of Amrit Kaal, a roadmap for growth in the next 25 years, which focuses on technology, financial inclusion, development of underserved communities and more
30% tax on gains from selling digital assets like cryptocurrency with TDS of 1% on every transaction was also declared
Clean energy got a boost along with a new battery-swapping policy to boost the EV sector
Education received support in terms of starting 750 brand new virtual labs for both maths and science alongside 75 e-skilling labs for digital education
Healthcare didn’t receive any thrust in spending, but announcements were made on creating a National Digital Health ID for all and building a unified health ecosystem; creating regulations for a better National Tele Mental Health program was also announced
Infrastructural development was highlighted with a plan for 400 modern Vande Bharat trains and 100 PM Gati Shakti cargo terminals over time
Conspicuously missing were any reliefs on personal taxes or subsidies for petroleum, food and fertiliser sectors, as well as any considerable boost for agriculture and allied activities
The Union Budget this financial year could provide relief to taxpayers and various industry sectors with reductions in tax and greater allocation in infrastructure. Take a look at some of the common expectations.
1. Revision of Tax Slabs
In terms of the Budget 2023, income tax revisions are some of the most anticipated announcements. While the basic exemption is capped at ₹2.5 Lakhs, taxpayers are hoping that it is moved to ₹5 Lakhs.
This increase is expected to apply to both the new and traditional regimes. Moreover, the tax slab of 30% is also expected to be moved to ₹20 Lakhs from its current value of ₹10 Lakhs.
2. Deduction Under Section 80D and 80C
The budget is also expected to deliver good news for those hoping to receive bigger deductions via Section 80C of the Income Tax Act. While it has a cap of ₹1.5 Lakhs right now, this is anticipated to increase to ₹2.50 Lakhs.
Alongside Section 80C, Section 80D is also projected to offer a higher tax exemption for medical insurance premiums. Currently, at ₹50,000 for seniors and ₹25,000 for non-senior citizens, experts predict a revision to ₹1 Lakh and ₹50,000, respectively.
Both these modifications will help increase India’s purchasing power and boost GDP.
3. Increase in Standard Deduction
Budget 2023 is also being looked upon to provide impetus to salaried professionals when it comes to increasing the standard deduction. While this benefit was removed in 2005, it was reintroduced in 2018. It has replaced both the medical reimbursement and the transport allowance.
This financial year 2023-24, employees are waiting for the cap on the standard deduction to be raised from ₹50,000 to ₹1 Lakh. This will help compensate for the inflation that adversely impacts disposable incomes.
4. Exemption for Home Loan Interest Rates
Similarly, home loan borrowers are awaiting some relief when it comes to higher EMIs that have resulted from increased home loan interest rates. These hikes are subsequent to the RBI’s rising repo rate.
The most probable solution from the Union Budget is an increase in the exemption for home loan interest, which is currently limited to ₹2 Lakhs a year under Section 80EEA of the income tax act.
5. Revision of Higher Tax Slab Rates
Taxpayers are also hoping for a revision in the effective tax rate for those in the bracket of ₹5 Crores and more. Purchasing power will increase by reducing the highest slab rate from 42.744% to 35.62%.
This way, India will also match the highest tax rate among neighbouring nations, the closest of which is 30% in Malaysia.
6. Reconsideration of Other Income Tax Deductions
One of the other Budget 2023 expectations is around increasing income tax deductions such as:
1. Stock Market
The Union Budget is also predicted to bring transparency to stock market investments. This relates specifically to the capital gain tax structure, which is currently divided by holding duration and asset class.
A simpler system with one rate and consolidating all asset classes into predefined tenures can boost investment in this sector and prevent disagreements.
Manufacturing and service industries are also looking for a more uniform corporate tax structure. Currently, different tax rates apply to different sectors, and a standardised rate of 15% is likely to boost this sector.
The banking industry is expecting a surge in capital funding and looking for a well-defined privatisation strategy for public sector banks. A modification to the Insolvency and Bankruptcy Code is also awaited to aid in the recovery of bad loans to aid lenders.
4. Real Estate
In addition to increasing the home loan interest deduction, the real estate sector is also looking forward to positive changes to usher in growth. This applies to:
Lowering the 20% taxation rate for gains on property that is held for 2 years before the date of sale.
Capital gains on property sales that cross ₹2 Crores are exempt if invested in one property, and under ₹2 Crores are exempt if invested in two properties. Both the property limit and the cap of this amount are expected to be relaxed to incentivise the resale market.
The Credit-Linked Subsidy Scheme is also expected to be extended from 2024 to 2027 to encourage potential homebuyers from the economically weak, low-income and mid-income groups.
The affordable housing sector is also looking for an adjustment in the price cap of ₹45 Lakhs and a limit of 645.6 sq ft. The anticipated modification is to have a higher ceiling for metros.
Housing developers are also looking forward to a GST break to participate more fully in the Affordable Rental Housing Complex scheme.
The healthcare sector also expects an increase in budgetary allocation in FY 2023-24. Some of the most anticipated announcements in the Union Budget 2023 include:
Increase in public-private partnerships to bolster rural healthcare and get experienced teachers from the private sector to medical schools
Increase in tax reforms to support R&D in med-tech
Reducing GST for medical providers and import duty on medical equipment that brings state-of-the-art facilities to national shores
More allocation towards telemedicine and mental healthcare
Improving quality and bringing transparency to diagnostic centres in India’s tier 2 and 3 cities with national accreditation
6. Electric Vehicle
The Electric Vehicle sector is also looking forward to policies that support its growth. Some of the expectations include the following:
Lowering the import fee and customs duty to 5% on different components that go into building lithium-ion batteries. This is the chief resource that the EV industry relies on and is currently taxed at 20%.
Improving the last-mile delivery by reducing GST to 5% on EVaaS functions.
Helping EV adoption by increasing spending on electric charging infrastructure across the country.
The MSME sector is also pinning its hopes on the Budget 2023. It is anticipating positive changes to the Credit Guarantee Scheme for Micro and Small Enterprises. This move is expected to help with a more convenient way to get a line of credit for working capital requirements.
With all this on the anvil, it is time to wait and watch to see which sectors will receive the needed impetus from the government. Watch this space as we bring you the latest news on the Union Budget 2023.