Union Budget 2023: Key Highlights and Impact on Taxpayers

By Webcab Last updated Feb 1, 2023

Finance Minister Nirmala Sitharaman presenting Union Budget 2023

Table of Contents

Introduction The Union Budget 2023 was presented by Finance Minister Nirmala Sitharaman on Wednesday. The budget highlights the progress of the Indian economy and outlines the government’s plans to take it toward a brighter future. The budget is the fifth budget of Modi 2.0 and is the last full-fledged budget before the general elections next year.

Income Tax Reforms In a boost to taxpayers and the economy, the Finance Minister announced major changes in tax slabs under the new tax regime. The key changes include:

No changes in the old tax regime
The new tax regime will become the default tax regime
No tax on income up to Rs 7.5 lakh per year in the new tax regime

New Tax Slabs under the New Regime

Rs 0-3 lakh: Nil
Rs 3-6 lakhs: 5%
Rs 6-9 lakhs: 10%
Rs 9-12 lakhs: 15%
Rs 12-15 lakhs: 20%
Rs Over 15 lakhs: 30%

Other Key Highlights

The government proposes to cap deductions from capital gains on investments in residential houses to Rs 10 crore.
An individual with an annual income of Rs 9 lakh will pay only Rs 45,000 in taxes.
A Rs 50,000 standard deduction for taxpayers has been introduced under the new regime.
For online games, the government proposes to provide for TDS and taxability on net winnings at the time of withdrawal or at the end of the fiscal year.
Fully imported luxury cars and EVs will cost more as the government raises custom duty from 60% to 70%.
Tax exemption on leave encashment on retirement for non-government salaried employees has been hiked to Rs 25 lakh from Rs 3 lakh.

Savings Schemes

The maximum deposit limit for the Senior Citizen Savings Scheme has been enhanced to Rs 30 lakh from Rs 15 lakh.
The monthly income scheme limit has been doubled to Rs 9 lakh and Rs 15 lakh for joint accounts.
A new saving scheme “Mahila Samman Saving Certificate” for women will be made available for 2 years up to 2025.

Indirect Taxes

16% tax hike on certain cigarettes
New cooperatives that commence manufacturing till March 2024 will get a lower tax rate of 15%
Basic customs duty on crude and glycerine reduced to 2.5%
Import duty on silver bars has been hiked to align it with gold and platinum
Customs duty cut on imports of parts of mobile phones has been extended by 1 year
To promote TV manufacturing, customs duty on open cells of TV panels has been reduced to 2.5%
Relief has been provided on customs duty on the import of certain parts and inputs like camera lenses
Concessional duty on lithium-ion cells for batteries has been extended for another year
The number of basic custom duty rates on goods other than textiles and agriculture has been reduced from 21 to 13.

What’s Cheaper and What’s Costlier

Cheaper: Mobile phones, TV, lab-grown diamonds, shrimp feed, machinery for lithium-ion batteries, raw materials for the EV industry
Costlier: Cigarettes, silver, compounded rubber, imitation jewelry, articles made from gold bars, imported bicycles, and toys, imported kitchen electric chimney, imported luxury cars and EVs

Boost for Railways

The railways sector has received a massive boost in the Union Budget 2023 with an outlay of Rs 2.4 lakh crore provided for the financial year 24. This allocation is the highest ever for the railways sector, nearly nine times more than the allocation in FY14.

Increased Capital Expenditure

In a move to boost the economy, the Capital Expenditure has been increased by 33% to Rs 10 lakh crore, which is 3.3% of the GDP. The effective capital expenditure of the Centre will be Rs 13.7 lakh crore, with a capital investment outlay of 3.3% of the GDP in FY24.

Fiscal Position

The government has set a target to bring down the fiscal deficit below 4.5% of GDP by 2025-26. The revised estimate for the fiscal deficit in FY23 is retained at 6.4% and reduced to 5.9% for FY24. The gross market borrowing for FY24 is estimated at Rs 15.43 lakh crore and the net market borrowing at Rs 11.8 lakh crore.

MSMEs

The Union Budget 2023 has also brought good news for MSMEs with the introduction of a revamped credit guarantee scheme from April 1, 2023. The scheme, infused with Rs 9,000 crore in the corpus, is aimed at reducing the cost of credit by 1 percentage point.

Banking and Skill Training

The government has also announced amendments to the Banking Regulation Act to improve governance in banks and the launch of Pradhan Mantri Kaushal Vikas Yojana 4.0 for skill training of the youth. To provide international opportunities, 30 Skill India International Centres will be set up across different States.

Clean Energy and Gems and Jewellery

The Union Budget 2023 has placed a significant emphasis on clean energy, with an allocation of Rs 35,000 crore for priority capital and a national green hydrogen mission with an outlay of Rs 19,700 crore. The gems and jewellery sector will also receive a boost with a research and development grant for lab-grown diamonds to be provided to one of the IITs.

Aviation and Ease of Doing Business

The aviation sector will see the revival of 50 additional airports, helipods, water aero drones, and advanced landing grounds. The government has also announced several measures to improve ease of doing business, including the Vivad Se Vishwas-2 scheme for dispute resolution, a central processing centre for companies filing forms under the Companies Act, and more than 39,000 compliances reduced and over 3,400 legal provisions decriminalized.

Digital Services and Urban Development

The Union Budget 2023 has also announced the expansion of the scope of services in DigiLocker and the setting up of 100 labs for 5G services. The government will also spend Rs 10,000 crore per year for urban infrastructure development and incentivize cities to improve their creditworthiness for municipal bonds.

Agriculture Sector Gets a Boost with Agriculture Accelerator Fund

The Union Budget 2023 has set up an Agriculture Accelerator Fund to encourage agri-startups by young entrepreneurs. The budget also allocates funds for the development of digital public infrastructure for the agriculture sector, increasing the agricultural credit target to Rs 20 lakh crores, and providing assistance to one crore farmers for natural farming adoption. The budget also supports the Indian Institute of Millet Research as a centre of excellence, and initiates computerization for 63,000 primary agricultural credit societies with an investment of Rs 2,516 crore. In the drought-prone central regions of Karnataka, the central government will provide Rs 5,300 crore to the upper Badra project for sustainable micro-irrigation.

Empowerment of Women through Self-Help Groups

The budget aims to empower women through self-help groups by enabling them to reach the next stage of economic empowerment and providing them with raw material supply, branding, and marketing of products. The budget 2023’s aim is to help women self-help groups reach their full economic potential.

Fisheries Sector to Benefit from PM Mastya Sampada Yojna

The Union Budget 2023 has launched a sub-scheme under PM Mastya Sampada Yojna with an outlay of Rs 6,000 crore to further enable activities of fishermen. The budget’s allocation for the fisheries sector will help to boost the industry and provide opportunities for growth.

Conclusion

The Union Budget 2023 has proposed several measures to support the growth of various sectors and to drive the country’s economic growth. The government has proposed a major boost to infrastructure development, MSMEs, agriculture, and the railway sector. Additionally, the government has proposed several tax reforms, which are expected to benefit taxpayers and support the growth of the economy. The government’s focus on job creation and driving the country’s economic growth is expected to improve the standard of living for the citizens and take the country on the path of sustainable development.