Union Budget 2023

What is the Union Budget?

At the beginning of every financial year, the Government of India comes up with a blueprint of how the expenditures and revenues of the country will be taken care of that year. The Finance Minister presents the budget in February so that it can be finalized before the start of the new fiscal year, that is, April. Under Article 112 of the Constitution of India, Union Budget is a detailed statement of the country's estimated upcoming expenses and revenue sources.

In general, Union Budget is classified into 2 parts:

Capital Budget

The Capital budget comprises 2 major sub-heads: Capital receipts and Capital expenditures. While on the one hand, capital receipts include loans from RBI (Reserve Bank of India), foreign government, or citizens, and capital expenditures, on the other hand, include the cost incurred for the maintenance and development of health facilities, buildings, machinery, etc.

Revenue Budget

The Revenue budget comprises 2 major sub-heads: Revenue receipts and Revenue expenditures. On the one hand, revenue receipts include:

• Tax revenues: Excise duty tax, income tax, corporate tax, etc.

• Non-tax revenues: Government fees, fines, profits, etc.

On the other hand, revenue expenditures include the day-to-day expenditure incurred by the government for their regular functioning.

Union Budget Highlights 2023

Presented by honorable Finance Minister Nirmala Sitharaman in the year 2023, 1st February, the following are the key highlights put across in the year 2023's Union Budget:

DIRECT TAX PROPOSALS 

• Next-gen Common IT Return Form for taxpayer convenience, stronger grievance mechanism.

• The personal Income Tax rebate limit increased to Rs. 7 lakh, no tax for income up to Rs. 7 lakh.

• Standard deduction of Rs. 50,000 for salaried individuals, a deduction for family pensions up to Rs. 15,000.

• The highest surcharge rate was reduced from 37% to 25%, max personal income tax rate at 39%

• Tax exemption limit on leave encashment increased to Rs. 25 lakh for non-govt salaried employees.

• Presumptive taxation limits increased for micro-enterprises and certain professionals.

• Expenditure deduction for MSMEs is allowed only when payment is made.

• Lower tax rate of 15% for new co-ops manufacturing till 31.3.2024.

• Relief of Rs. 10,000 crores for sugar co-ops to claim payments made to sugarcane farmers prior to 2016-17.

• The higher limit of Rs. 2 lakh for cash deposits and loans in cash by PACS and PCARDBs.

• The higher limit of Rs. 3 crores for TDS on cash withdrawal for co-op societies.

• Extension of date of incorporation for income tax benefits for startups to 31.3.24.

• Carry forward of losses on change of shareholding of startups increased from 7 to 10 years.

• Capping of capital gains deduction on investment in a residential house at Rs. 10 crores.

• Exemption of income tax for authorities and boards set up for housing and development.

• Removal of a minimum threshold of Rs. 10,000 for TDS and clarification of taxability on online gaming.

• Conversion of gold into electronic gold receipts is not treated as a capital gain.

• Reduction of TDS rate from 30% to 20% on the taxable portion of EPF withdrawal in non-PAN cases.

• Tax on income from Market Linked Debentures.

• Deployment of 100 Joint Commissioners for small appeals reduction.

• Increased selectivity in appeal cases scrutiny.

• Extension of tax benefits for funds relocating to IFSC till 2025.

• Decriminalization of liquidators under section 276A from 2023.

• Allowance of losses carries forward on strategic disinvestment, including IDBI Bank.

• Exemption from taxes for payment from Agniveer Corpus Fund.

• Deduction in total income allowed for contribution to Seva Nidhi account.

• New 2020 personal income tax regime with 6 slabs reduced to 5 and the exemption limit raised to Rs. 3 lakh for major relief to taxpayers.

INDIRECT TAX PROPOSALS: 

• Number of basic customs duty rates was reduced from 21 to 13 (excluding textiles and agriculture)

• Minor changes in basic customs duties, cesses, and surcharges on items such as toys, bicycles, automobiles, and naphtha

• Excise duty exemptions on GST-paid compressed biogas

• Customs duty extended on specified capital goods/machinery for the manufacture of lithium-ion cells for EVs until 31.03.2024

• Customs duty exemptions on vehicles and parts imported by notified testing agencies for testing and certification purposes

• Customs duty reduced to zero on the camera lens and inputs for use in the manufacture of camera modules in mobile phones

• Basic customs duty reduced on parts of open cells of TV panels, electric kitchen chimneys, heat coil for electric kitchen chimneys, acid grade fluorspar, crude glycerin for use in epichlorohydrin, seeds for lab-grown diamonds, key inputs for domestic shrimp feed

• Denatured ethyl alcohol for the chemical industry exempt from basic customs duty

• Increased duties on articles made from dore and bars of gold and platinum

• Import duty on silver dore, bars, and articles increased

• Basic Customs Duty exemptions continued on raw materials for CRGO Steel, ferrous scrap, and nickel cathode

• Concessional BCD of 2.5% on copper scrap continued

• Basic customs duty rate on compounded rubber increased to 25%

• National Calamity Contingent Duty (NCCD) on specified cigarettes was revised upwards by 16%.

Budget Allocation: 

• Expenditure: Rs 45,03,097 crore proposed in 2023-24, up 7.5% from 2022-23 revised estimate

• Receipts:  Rs 27,16,281 crore expected in 2023-24, up 11.7% from 2022-23 revised estimate

• GDP: Nominal GDP growth rate estimated at 10.5% in 2023-24

• Revenue deficit targeted at 2.9% of GDP in 2023-24 (lower than 4.1% in 2022-23)

•  Fiscal deficit targeted at 5.9% of GDP in 2023-24 (lower than 6.4% in 2022-23)

Union Budget Highlights 2022

Presented by the honorable Finance Minister Nirmala Sitharaman in the year 2022, 1st February, the following are the key highlights put across in this year 2022's Union Budget:

Direct Tax Proposals

• The new provision allows taxpayers to update their past returns as well as include the omitted income by additional tax payment. Updated returns are to be filed in the time span of 2 years (ending from the relevant AY).

• For startups, tax incentives are extended for a year. Also, startups are now eligible for tax benefits till 31st March 2023 under Section 80IAC of the Income Tax Act.

• Reduction in Corporate surcharge from 12% to 7%.

• 30% tax levied on the transfer of Virtual Digital Assets, like Cryptocurrency. Gifting is also taxable under the hands of the receiver.

• The tax deduction limit for state government employees to NPS was raised to 14% from 10%.

• Surcharge and cess on income shall not be considered as business expenditure.

• Insurance tax benefits for the special able parents

Indirect Tax Proposals

• Some amendments in Sections 16, 34, 37, 39, and 52 of the Central Goods and Services Act are made. The last date to make any kind of changes and amendments has shifted to 30th November from 30th September of the following year.

• The initial rate of 7.5% for custom duty on the import of capital goods is to be imposed.

• Imitation jewelry's custom duty was raised to discourage imports.

• Duty on packaging boxes and specified leather reduced.

• Custom duty reduced to 5% on cut and polished gems and diamonds.

• Rs. 2 per liter additional excise duty on unblended fuels.

Budget Allocation

• For the financial year 2023, a 6.4% fiscal deficit has been estimated.

• 6.9% of the GPD is the estimation of the revised fiscal deficit.

• To help fund the Prime Minister's "Gati Shakti" related investments, the government has provided the states Rs. 1 lakh crore as 50-year interest-free loans.

Other Proposals

• To improve child health, 2 lakh Anganwadis will be upgraded.

• All post offices are to be linked with core banking solutions to push financial inclusion.

• No Tax slab change

• Startups will be facilitated to promote drone usage under the "Drone Shakti" program.

• Kisan drone usage is also to be promoted for assessing the crops, spraying nutrients and insecticides, etc.

• For the North East Council, PM development initiatives are to be implemented.

• Digital rupee using blockchain technology to be introduced by RBI in the financial year 2022 – 2023.

• Rs. 19,500 crores announced for allocation in PLI for solar modules.

• Online billing system to be launched for the reduction in payment delays.

• 5G spectrum to be auctioned in the financial year 2022 – 2023.

• e-passports to be issued and insured in 2022 – 2023.

• 400 Vande Bharat trains to be developed in the next 3 years with better efficiency.

• PLI (Production Linked Incentive) scheme to be spread across 14 sectors and create 60 lakh job opportunities.

Union Budget Highlights 2021

Presented by honorable Finance Minister Nirmala Sitharaman in the year 2021, 1st February, the following are the key highlights put across in the year 2021's Union Budget:

Direct Tax Proposals

• Income tax relaxation for Senior Citizens above 75 years of age if pension income is the only source annual source of income for them.

• A dispute Resolution Committee has been formed for assesses whose taxable income is up to Rs. 50 lakhs or the assessee has any disputed income of up to Rs. 10 lakhs under Section 245MA.

• Tax incentives for startups have been extended till 31st March 2022.

• Removal of double taxation and other hardships for NRIs (Non-Resident Indians).

• Advanced tax will be applicable only after the declaration of the dividend income.

• If the employer has not deposited the PF contribution, but it is deducted from the employee's PF account, it will not be considered a deduction for employers.

• Section 44ADA, which was earlier applied to all the assesses that are Indian residents, now applies only to HUF (Hindu Undivided Family), resident individuals, or partnership firms other than LLP.

• Deductions under Section 80EEA for affordable housing are extended till 31st March 2022.

Indirect Tax Proposals
Custom duty is revised on:

• Copper scrap: Duty reduced from 5% to 2.5%

• Excise duty on petrol and diesel reduced

• Solar inverters: Duty increased from 5% to 20%

• Solar lanterns: Duty increased from 5% to 15%

• Gold and silver custom duty reduced

• Imposed (AIDC) Agriculture Infrastructure and Development Cess on diesel and petrol at Rs. 4 and Rs. 2.5 (per liter), respectively.
  CGST amended for provisions like:

• Amendments in Section 35 and Section 44 related to furnishing the GST reconciliation.

• Taxpayers can claim an input tax credit under Section 16 based on GSTR – 2A and GSTR – 2B.

To Conclude

The 2023-2024 Union Budget holds great promise and prioritizes the technological and digital advancement of India and its citizens. 

While various groups have their own interests, the government must consider the country's overall growth in its decision-making process. Balancing the needs of all citizens is challenging, but if the majority is satisfied, we can expect to see a thriving India in the near future.