Budget 2023 Highlights: Taxation Policy
01 February, 2023
The Union Finance Minister Nirmala Sitharaman presented the Union Budget on the 1st of February 2023 - the fifth budget in the Modi 2.0 era. This budget strives to further build upon the previous budget, as the Indian economy transitioned from being the 10th largest to the 5th largest in the world. Here are some key updates from the session:
The overall macroeconomic health of the country is in good shape as monthly GST collection continues to hover around ₹1.5 lakh crore and the asset quality of banks continues to improve, according to the Finance Minister. She also stated that the country has enough forex reserves to cover 9 months’ worth of imports. The projected growth for the current fiscal year is 7%, the highest of all major economies.
The most awaited part of the budget was taxation policy. The new tax regime is set to become the default tax regime in the country. The tax slabs have been revised with a full tax rebate on an annual income of upto ₹7 Lakh per annum. However, should the amount earned by an individual exceed this amount by even ₹1, then they would be taxed as per the following slabs:
₹3-6 lakh – 5%
₹6-9 lakh – 10%
₹9-12 lakh – 15%
₹12-15 lakh – 20%
>₹15 lakh – 30%
The Finance Minister maintained a target fiscal deficit of 6.4% of the GDP for FY23 and reiterated her target of bringing it down to 4.5% by 2025-26.
The centre has planned a total capital outlay of ₹10 lakh crore, which is a 33.4% jump over the previous budget. The budget announced massive fund infusion in the railway sector in the upcoming fiscal year. A record ₹2.4 lakh crore has been set aside for capital outlay in the railways segment. The announced capital expenditure will also fund the construction of 50 new airports, ports, helipads, etc. to boost regional connectivity.
The outstanding bank loans to agricultural and ancillary businesses stood at ₹16.3 lakh crore on 30th December 2022, which is ₹1.69 crore higher than the previous year. ₹20 lakh crore in agricultural credit has thus been set as the target for 2023-24. The Collateral-free agri-loan limit has also been elevated from ₹1 lakh to ₹1.6 lakh.
Under the PM Matsya Sampada Yojana, schemes with an outlay of ₹6,000 crore will also be laid out to support the fisheries segment.
The transition to green energy is also in the budget’s crosshairs. ₹35,000 crore as ‘priority capital’ will facilitate the transition to green energy. The government will push this initiative further through viability gap funding and help set up 4,000 MwH of energy storage. A 13 GW renewable energy project worth ₹27,000 crore has also been announced for Ladakh, of which ₹8,300 crore will be funded by the centre.
Further, the budget has earmarked ₹9,000 crore for infusion in the MSME segment, which will unlock ₹2 lakh crore to facilitate collateral-free credit. This will also result in a 1% drop in cost of credit.
Mobile phone manufacturing in India witnessed a jump from 5.8 crore units in 2014-15 to 31 crore units in the last fiscal year. Duty cuts on import of mobile camera lenses and batteries was announced for another year as a value-adding move for the economy.
Moreover, cigarettes are getting a 16% hike in calamity contingent duty, which will eventually make them more expensive. The import duty on silver bars has been raised to level it with platinum and gold as well.
The budget makes a pronounced push in the areas of infrastructure as evidenced in the revised capital outlay. At the same time the Finance Minister also managed to walk the path of fiscal consolidation. The New Tax regime aims to incentivise people to adopt it, and may be especially beneficial for people with growing incomes and the government.
Read more about the highlights of the Union Budget 2023-24 here.
*The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.
