Indian Union Budget 2023: An Overview

February 1st, 2023 shall be remembered as a remarkable day in the Indian Budget history, when a woman President commenced the Indian Union Budget 2023 Session which was presented by another woman, our Finance Minister!?

The Finance Minister Smt. Nirmala Sitharaman commenced her Budget speech by calling it "the first budget of Amrit Kaal".

The Indian Union Budget 2023 aims to steer the Indian economy towards sustained and inclusive growth; with the purpose to provide stability and simplification, improving ease of doing business, rationalising various provisions to reduce the compliance burden, promoting the entrepreneurial spirit, and providing tax relief to citizens. The budget focuses on several key areas, including agriculture and rural development, infrastructure, education and health, and tax reforms. Let’s have a succinct overview of each segment.

Agriculture and Rural Development: The government has allocated INR 2.83 lakh crore for agriculture and rural development in 2023, an increase of nearly 24% from the previous year. The budget proposes several measures to support farmers, including the creation of a new centralized agriculture market, the expansion of micro-irrigation, and the introduction of a new crop insurance scheme.

Infrastructure: The government has allocated INR 5.54 lakh crore for infrastructure development in 2023, with a focus on roads, ports, airports, and power. The budget also proposes the creation of a new National Recruitment Agency to streamline the recruitment process for public sector jobs.

Education and Health: The budget allocates INR 93,224 crore for education and INR 2.23 lakh crore for health and well-being, a significant increase from the previous year. The government aims to improve the quality of education and healthcare services, with a focus on rural areas.

Tax Reforms: The budget proposes several tax reforms, including a simplification of the tax code, the introduction of a new tax dispute resolution scheme, and the reduction of corporate tax rates for new companies. The government also aims to reduce tax evasion and increase tax compliance through the implementation of a new tax information exchange system.

Union Budget 2023 has come up with a plethora of key initiatives having a significant impact on the overall development of the nation.?

Here are the key initiatives announced by the Government:

• The outlay for PM Awas Yojana was increased by 66% to over INR 79,000 crore in a bid to boost housing.
• Provision of INR 35,000 crore for capital investments towards energy transition and net zero objectives, and energy security.
• A capital outlay of 2.40 lakh crore has been provided for the Railways. This is the highest-ever outlay and is about 9 times the outlay made in 2013-14.
• To unleash innovation and research by start-ups and academia, a National Data Governance Policy will be brought out.
• The digital ecosystem for skilling will be further expanded with the launch of a unified Skill India Digital platform. To skill the youth for international opportunities, 30 Skill India International Centres will be set up across different States.
• Revamping of the credit guarantee scheme for MSMEs from 1st April 2023 with an infusion of INR 9,000 crore in the corpus
• New co-operatives that commence manufacturing activities till 31st March 2024, shall get the benefit of a lower tax rate of 15%.
• In a move towards diversifying revenue streams of the government, cities will be incentivized to improve their creditworthiness for municipal bonds.?

TAX HIGHLIGHTS Union Budget 2023

We understand it could be tiring to go through the changes and revised clauses of the tax regime, so we have summarised the highlights on Direct & Indirect Tax for your better understanding.?

Direct Taxes

? Personal taxation - Promotion to new tax regime wherein slab rate changed, standard deduction of INR 50K introduced, no tax on income upto INR 7 lakh by way of tax rebate under Section 87a. The Budget 2023-24 proposes to lower India's highest rate of income tax to 39%, from 42.74% at present, by reducing the surcharge applicable to high net-worth individuals.

? No change in headline tax rates for corporates.

? New tax regime of 15% was introduced for manufacturing co-operatives.

? Start-ups – The benefit of carrying forward losses on change in shareholding extended from 7 years to 10 years. Tax holiday benefit extended to start-ups incorporated up to March 31, 2024.

? Angel tax u/s 56(2)(viib) extended to issue of shares to non-residents.

? Cost of acquisition for intangibles and rights to be taken as nil if indeterminable for capital gains.

? Scope of Section 28(iv) and Section 194R extended to cover business monetary perquisites as well.

? Presumptive taxation – Turnover limits enhanced for MSMEs and Professionals to INR 3 Crore (from INR 2 Crore) and INR 75 lakh (from INR 50 lakh) respectively.

? Section 50AA introduced specifying Market Linked Debentures to be taxed as short-term capital gains (irrespective of the period of holding).

? REIT/INVITs - Debt repayment and redemption of units taxable under the head IFOS.

? Exemption limit for Leave Encashment has increased from INR 3 lakh to Rs. 25 lakh INR.

Indirect Taxes:

? Restriction on availability of GST input tax credit in respect of CSR expenses.

? New section 158A in CGST Act is being inserted to enable sharing of information across regulators

? Import tariffs suitably amended to foster more local value addition and promote green energy & mobility

? Validity period of 2 years shall not apply to specified exemption notifications such as those issued in relation to multilateral or bilateral trade agreements etc.

? Retro amendments to Customs Tariff Act concerning trade remedies, addresses pending (unwanted) litigation.

? Retrospective coverage of international merchant trading transactions, sale of warehoused goods as well as high seas sales under Schedule III of the CGST Act.

? Filing of returns/statements restricted to a maximum period of three years from its due date.

? Decriminalization of certain offences under Section 132 of CGST Act.

? Increase in the threshold limit in relation to certain offences for prosecution under Section 132.

? Penalty proposed on e-Commerce operators dealing with unregistered persons or composition taxpayers.

? Taxation regime for online gaming introduced levying 30% tax as well as withholding tax on net winnings.

Final Thoughts

Like the previous years, the prime aim of the government has remained on manufacturing, ease of doing business, a green economy and social development. The Indian Union Budget 2023 presents a visionary approach towards achieving the country's long-term economic and social goals. The focus on infrastructure development, digital technologies, and human capital, along with the emphasis on financial inclusion and sustainability, sets the stage for inclusive and sustainable growth in the coming years.?

The allocation of funds towards key sectors such as education, healthcare, and agriculture, will not only create new opportunities but also improve the quality of life for citizens across the country. The budget's commitment to reducing inequality, promoting entrepreneurship, and creating jobs are commendable and has the potential to spur economic growth and development. The budget aims to create an environment that is supportive of economic growth, while also promoting equity and inclusiveness.

Overall, the Indian Union Budget 2023 is a step in the right direction and provides a roadmap for the country's progress in the years to come.