Union Budget 2023- Key Highlights – All You Need to Know

The Union Budget 2023, the first budget of the Amrit Kaal and the last full-fledged budget of the current government, was greeted with certain expectations, especially with respect to relaxation in personal taxation, and a boost in the capex by the government, for an economy which has now reeled out of the covid impacts, the recovery posed a major expectation altogether. Here are the key highlights of the budget and how the market reacted to it-

  1. Railways, Transportation and Tourism

    > A capital outlay of INR 2.40 lakh crores for the railways.
    > 100 critical transport infrastructure for last and first-mile connectivity of identified sectors with an investment of INR 75,000 crores, including INR 15,000 crores from private sources.
    > App-based tourism portal by selecting at least 50 destinations, with each destination being a complete package.

  2. Agriculture and other primary activities

    > Setting up an Agriculture Accelerator Fund to encourage agriculture startups.
    > Atmanirbhar Clean Plant Program for boosting planting material availability for high-value horticulture crops with an outlay of INR 2,200 crores.
    > Agriculture credit target increased to INR 20 lakh crores, with a focus on animal husbandries, fisheries and dairy.
    > Computerisation of 63,000 Primary Agriculture Societies with an investment of INR 2,516 crores, promoting the economic-development model of economic development model.
    > Setting up of 10,000 bio input resources over 3 years to facilitate 1 crore farmers to adopt natural farming.
  3. MSME and Business

    > Vivad se Vishwaas I – for MSMEs which failed to execute government contracts during Covid-19, 95% of the amount forfeited by the government and government entities will be returned.
    > Vivad se Vishwaas II – Introduction of a voluntary settlement scheme with standardised terms to settle contractual disputes.
    > Revamped Credit Guarantee Scheme for MSMEs from 1st April 2023 with an infusion of INR 9,000cr in the corpus
  4. Education and Youth

    > Setting up a National Digital Library to improve the accessibility of books across geographies and devices.
    > Launch of Pradhan Mantri Kaushal Vikas Yojana 4.0 to upskill over one lakh youth within the next three years, with a focus on upcoming technologies. 30 Skill India International Centres will be set up across different States with a focus on international opportunities.

  5. Health

    > 157 new nursing colleges to be established in co-location with medical colleges.
    > To encourage collaborative research, facilities in select ICMR labs are to be made available to medical college faculties and private sector R&D teams.

  6. Technology

    > National Data Governance Policy to promote innovation and research by startups and academia. This will provide access to anonymised data.
    > Integrated database for identity and addresses of individuals, established through Digi locker services and Aadhaar as a foundational identity. For business entities, PAN will serve the foundational identity purpose.
    > A national financial information registry will be set up to serve as the central repository of financial and ancillary information.
  7. Sustainable growth

    > Launch of National Green Hydrogen Mission with an outlay of INR 19,700 cr to transition to clean energy sources. The current target is the production of 5MMT by 2030.
    > Allocation of INR 35,000 crores for priority capital investments towards net zero objectives.
  8. Banking and Capital

    > The capital expenditure outlay has been increased by 33% to INR 10 lakh crores, which is 3.3% of the GDP
    > Launch of a one-time new small savings scheme, Mahila Samman Savings Certificate, to be made available for a two-year period up to March 2025. This is a deposit facility up to INR 2 lakh in the name of women or girls for a tenor of 2 years at an interest of 7.5 per cent.
    > Maximum deposit for Senior Citizen Savings Scheme enhanced from INR 15 lakh to INR 30 lakh
  9. Others

    > PM VIshwakarma KAushal Samman (PM VIKAS) – Assistance Package for traditional artisans and craftspeople to provide them with financial support and advanced skill training.
    > Pradhan Mantri PVTG (particularly vulnerable tribal group) Development Mission with an outlay of INR 15,000 crores for the next 3 years for rehabilitation of PVTG families with basic facilities.
    > Outlay for PM Awas Yojana to be enhanced to INR 79,000 crores
    > To encourage the production of Lab-grown Diamonds seeds and machines and to reduce dependence on imports, an R&D grant will be provided to an IIT for 5 years.

Key numbers for the budget are as follows-

Source: PIB India


Indirect Taxation

> For blended compressed natural gas, the exemption is provided with respect to GST-paid compressed biogas contained in it.
> Reduction of basic customs duty on parts of open cells of TV panels to 2.5 per cent.
> The basic customs duty rate on compounded rubber increased from 10 per cent to ‘25 per cent or INR 30/kg whichever is lower
> National Calamity Contingent Duty (NCCD) on specified cigarettes increased by 16%
> Increase in the minimum threshold of tax amount for launching prosecution under GST from one crore to two crores.
> To capitalize on the opportunity presented by Lab Grown Diamonds, the basic customs duty on LDG seeds has been reduced.

Direct Taxation

> Increase in turnover limit for presumptive taxation for businesses/professions from INR 2cr/50 lahks to INR 3cr/75 lakhs where cash receipts are no more than 5% of total receipts.
> Cooperatives that commence manufacturing activities till 31/03/2024, will benefit of lower tax rate of 15%.
> Extension of date of incorporation of start-up for income tax benefit to 31/03/2024.
> Introduction of a cap of INR 10 crores for deductions from capital gains on investment in residential houses under sections 54 and 54F
> Extension of period of tax benefits to funds relocating to IFSC, GIFT City till 31.03.2025
> Increase in rebate limit to INR 7 lakh in the new regime. Individuals having taxable income up to INR 7 lakh effectively don’t have to pay any tax under the new regime.
> New tax slabs under the new regime-

Upto INR 3,00,000Exempt
INR 3,00,000 – 6,00,0005%
INR 6,00,000 – 9,00,00010%
INR 9,00,000 – 12,00,00015%
INR 12,00,000 – 15,00,00020%
Above INR 15,00,00030%

> Extension of benefit of the standard deduction or the salaried class and the pensioners including family pensioners in the new tax regime.
> Reduction of the highest surcharge from 37% to 25% in the new tax regime.

Overall, the market had a mixed reaction to the budget. During the day the BSE Sensex jumped over 1100 points, touching an intraday high of 60,773.44 and NSE Nifty 50 surpassed the 17,970 mark but then immediately after the FM’s speech finished, indices started falling. The BSE Sensex rose 158.18 pts or 0.27% to close at 59,708.08 and the Nifty 50 fell 45.85 pts or 0.26% to 17,616.30.

The top gainer for Sensex 30 was ITC which was up by 2.61% on the announcement of an increase in taxation on cigarettes.

Overall, the salaried individuals finally had something to cheer for in the budget as much anticipated tax relaxation for individuals was finally provided for. However, since the benefits were mainly restricted to the new regime, it creates a disparity between the two regimes and would now completely change the dynamics of decision-making for opting for the regime. The new regime has been made as the default one, while the old one has to be specifically opted for. Further, the tax revenue loss which has been estimated at INR 35,000 crores, will need to be compensated for to achieve the deficit target of 5.9% of GDP.

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