Budget 2023 Highlights: Key Takeaways

02 February 2023
20 min read

The Union Budget 2023–24 was unveiled on February 1 by Finance Minister, Smt. Nirmala Sitharaman amidst the impending global recession and declining economic development in India.

The Indian economy is on the right road and, despite difficulties, is moving toward a bright future, according to the Finance Minister. Accordingly, the Finance Minister presented a financially responsible budget to the Parliament, focusing more on the rural sector, social sector initiatives, infrastructure development, and the middle class.

In this blog, we will closely examine the most important announcements from the Budget for 2023 as well as other significant alterations and modifications made during the Budget.

Primary Goals of The Budget

The budget for 2023 is the inaugural one under "Amrit Kaal." According to our Finance Minister, the following seven priorities are included in the budget, and these goals work well together and serve as our "Saptarishi" as they lead us down the Amrit Kaal.

  1. Inclusive Development.
  2. Reaching the Last Mile.
  3. Infrastructure and Investment.
  4. Unleashing the Potential.
  5. Green Growth.
  6. Youth Power.
  7. Financial Sector.

Key Takeaways of The Budget 2023

Please take note that the information in this blog has been sourced from the Finance Minister's speech in the Indian government's budget document. Here are the Budget's main highlights for 2023:

  • Personal Income Tax

The New Income Tax system was established as the default tax system during the session, however, residents will still be able to make use of the previous tax system's advantages. Five significant announcements were made in this respect by the Finance Minister.

  • The Finance Minister suggested raising the rebate threshold under the New Tax System to ₹7 lakhs. People under the New Tax System would not be required to pay any tax on income up to ₹7 lakhs.

  • By decreasing the number of tax slabs to five and raising the threshold for tax exemption to ₹3 lakhs, the FM suggested altering the tax system under this regime.
    Here are the New Tax Rates-

₹0-3 Lakhs

NIL

₹3-6 Lakhs

5%

₹6-9 Lakhs

10%

₹9-12 Lakhs

15%

₹12-15 Lakhs

20%

Above ₹15 Lakhs

30%

 

  • The FM advocated extending the standard deduction's benefits to the New Tax Regime, which will result in a ₹52,500 advantage for each salaried individual with an income of at least ₹15.5 lakhs.

  • In the New Tax System, the FM suggested lowering the maximum surcharge rate from 37% to 25%. The maximum tax rate would be reduced as a result to 39%.

  • The ₹3 lakhs cap for tax exemption on leave encashment upon retirement for salaried non-government workers was set in 2002 when the maximum basic wage in the government was ₹30,000/-pm. The FM suggested raising this limit to ₹25 lakhs in order to keep up with increases in government pay.
  • Indirect Taxes

  • Green Transportation: The Finance Minister suggested exempting excise duty on GST-paid compressed biogas contained in blended compressed natural gas to prevent cascading taxes.

  • Electronics: The Finance Minister suggested reducing the customs charge on the import of some components and inputs, such as camera lenses, and extending the reduced duty on lithium-ion batteries for another year. Similarly, the FM recommended lowering the basic customs tax on components of open TV panel cells to 2.5% in order to encourage value addition in television manufacturing.

  • Electrical Sector: The basic customs tax on electric kitchen chimneys is raised from 7.5% to 15%, while that on heat coils for these is planned to be decreased from 20% to 15%, in order to correct the duty structure inversion and promote the production of electric kitchen chimneys.

  • Chemicals & Petrochemicals: The FM suggested exempting Denatured Ethyl Alcohol from the basic customs tariff. The basic customs tariff on Acid-Grade Fluorspar is decreased from 5% to 2.5%. Additionally, it is planned to lower the basic customs tax on Crude Glycerin used to make Epichlorohydrin from 7.5% to 2.5%.

  • Marine Commodities: Duty on essential inputs for domestic production of shrimp feed has been cut in order to further improve the international competitiveness of marine products, notably shrimps.

  • Laboratory-Grown Diamonds: The Finance Minister suggested lowering the basic customs charge on the seeds used to make LGD.

  • Precious Metals: To raise the duty disparity, the finance minister recommended raising the tariffs on products derived from these materials. She also suggested raising the import tax on silver bars, and other items to make them comparable to the import tax on gold and platinum.

  • Metals: Raw materials used to make CRGO steel, ferrous scrap, and nickel cathode continue to be free from basic customs duty. Similarly, the 2.5% concessional BCD on copper scrap is also being maintained.

  • Combination Rubber: To prevent duty avoidance, the basic customs tax rate on compounded rubber has been raised from 10% to 25% or ₹30/kg whichever is lesser, making it comparable to the rate on natural rubber other than latex.

  • Cigarettes: The latest revision to the National Calamity Contingent Duty (NCCD) on certain cigarettes was made three years ago, thus it is suggested that this be increased by around 16%.
  • Direct Taxes

  • Professionals & MSMEs: The Finance Minister recommended giving taxpayers with cash revenues of no more than 5% increased limits of ₹3 crores and ₹75 lakhs, respectively. Additionally, she suggested allowing deductions for expenses expended on payments made to MSMEs only when the payments are actually made in order to encourage MSMEs in the timely receipt of payments.

  • Cooperation: Until 31/03/2024, new cooperatives that start manufacturing operations will benefit from a lower tax rate of 15%, which is now offered to new manufacturing businesses. Secondly, it was suggested to provide sugar cooperatives the chance to write off payments made to sugarcane farmers prior to the assessment year 2016–17 as expenses, which is projected to save them up to ₹10,000 crores. Next, for cash deposits to and loans from Primary Agricultural Co-operative Societies and Primary Co-operative Agriculture and Rural Development Banks, a greater limit of ₹2 lakhs per member is stipulated. Additionally, Co-operative Societies are also given a greater maximum of ₹3 crores for TDS on cash withdrawal.

  • Start-Ups: The Finance Minister suggested moving forward the date of incorporation for start-ups in order to qualify for income tax incentives from 31/03/23 to 31/3/24. It was also suggested to extend the benefit of loss carryover for start-ups from seven to 10 years after incorporation when changing shareholdings.

  • Appeals: The Finance Minister recommended deploying roughly 100 Joint Commissioners to handle minor appeals in order to decrease the backlog of appeals at the Commissioner level.

  • Better Focusing on Tax Breaks: It was recommended to limit the deduction from capital gains on investment in residential homes under sections 54 and 54F to ₹10 crores in order to properly target tax breaks and exemptions.

  • Rationalization: The proposals in this area include lowering the TDS rate from 30% to 20% on the taxable portion of EPF withdrawal in non-PAN cases, eliminating the ₹10,000 minimum threshold for TDS, clarifying taxability in relation to online gaming, and taxing income from Market Linked Debentures. Further, gold conversion into electronic gold receipts and vice versa will not be treated as a capital gain.

  • Alterations to the Finance Bill: The proposals in this area include extending the tax benefits to funds moving to GIFT City's IFSC until 31/03/2025, decriminalizing certain activities under section 276A of the Income Tax Act, allowing carryover of losses from strategic disinvestments, including IDBI Bank's, and giving Agniveer Fund EEE status. 
  • Regarding Senior Citizens

The Senior Citizen Savings Scheme would increase its maximum deposit amount from ₹15 lakhs to ₹30 lakhs. The maximum deposit amount for the Monthly Income Account Scheme will also increase, going from ₹4.5 lakhs to ₹9 lakhs for single accounts and ₹9 lakhs to ₹15 lakhs for joint accounts.

  • Agriculture and Digital Public Infrastructure

Agriculture-related digital public infrastructure will be developed as a freely available, freely used, and interoperable public benefit. Through pertinent information services for crop planning and health, greater access to farm inputs, loans, and insurance, assistance for crop estimating, market intelligence, and support for the expansion of the agri-tech industry and start-ups, this would allow inclusive, farmer-centric solutions.

  • Fund for Agriculture Acceleration

To support young entrepreneurs in rural regions who are starting agribusinesses, an Agriculture Accelerator Fund is to be created. The Fund's goal is to provide farmers with creative, cost-effective solutions to their problems.

  • Boosting Cotton Crop Productivity

Through Public-Private Partnerships, the government will use a cluster-based and value-chain strategy to increase the production of extra-long staple cotton. 

  • Atma Nirbhar Horticulture Clean Plant Program

With an investment of ₹2,200 crores, the government will introduce the Atma Nirbhar Clean Plant Program to increase the availability of disease-free, high-quality planting material for high-value horticultural crops.

  • ‘Shree Anna’ the Global Hub for Millets

The Indian Institute of Millet Research in Hyderabad will get funding as the Center of Excellence for exchanging best practices, research, and technology on a global scale in order to make India a center for "Shree Anna" worldwide.

  • Credit for Agriculture

The goal for agricultural financing would rise to ₹20 lakh crore, with an emphasis on dairy, fishery, and animal husbandry.

  • Fisheries

With a projected expenditure of ₹6,000 crores, the government is set to introduce a new sub-scheme of the PM Matsya Sampada Yojana.

  • Cooperation

The government is urging farmers to build their economies through cooperatives. In addition to the existing framework, the government will put into action a plan to set up a significant amount of decentralized storage. As a result, farmers will be able to keep their goods and sell them during profitable periods to earn a profit.

  • Nursing Institutes

Alongside the 157 medical colleges that have already been operating since 2014, 157 new nursing colleges are also to be founded.

  • Mission to End Sickle Cell Anaemia

By 2047, a mission will be begun to tackle Sickle Cell Anaemia, which is said to involve raising awareness, universal screening of 7 crore persons in the age range of 0-40 years in the impacted tribal regions, and counseling.

  • Medical Study

Faculty from public and private medical colleges as well as R&D teams from the corporate sector are to have access to facilities in a few ICMR Labs to conduct research in an effort to promote joint research and innovation.

  • Pharmaceutical Advancement

Through centers of excellence, a new initiative to encourage pharmaceutical research and innovation is to be implemented.

  • Multidisciplinary Medical Device Courses

Medical device-specific transdisciplinary courses are to be sponsored in current institutions.

  • Training of Teachers

Through creative methodologies, curriculum change, ongoing professional development, and ICT deployment, the training of teachers are to be reimagined. 

  • National Digital Library for Children and Adolescents

For the purpose of easing accessibility to high-quality books across platforms and languages, genres, and reading levels, a national digital library for kids and teens is to be established.

  • Program for Aspirational Districts and Blocks

Based on the heels of the Aspirational Districts Program, the government recently introduced the Aspirational Blocks Program, which will cover 500 blocks and will ensure that all residents have access to basic infrastructure as well as health, nutrition, education, agriculture, and water resources.

  • The Mission for Pradhan Mantri PVTG Development

The Pradhan Mantri PVTG Development Mission will be implemented to ameliorate the socioeconomic circumstances of the especially vulnerable tribal groups. By doing this, essential amenities including secure housing, access to clean water and sanitation, better health and nutrition, road and telecommunication connectivity, and chances for sustainable livelihoods would be provided to PVTG families and habitations.

  • Eklavya Model Residential Schools

38,800 teachers and support personnel will be hired by the center over the next 3 years to work in the 740 Eklavya Model Residential Schools that serve 3.5 lakhs of indigenous youngsters.

  • Water for an Area Prone to Drought

The Upper Bhadra Project would get federal funding of ₹5,300 crores to fully sequence micro irrigation and fill surface tanks with potable water in the drought-prone central area of Karnataka.

  • PM Awas Yojana

The PM Awas Yojana budget has been increased by 66% to more than ₹79,000 crores.

  • Bharat Shared Repository of Inscriptions

One lakh old inscriptions will be digitally preserved as part of the "Bharat SHRI," which will be housed in a museum of digital epigraphy.

  • Aid to Impoverished Prisoners

Financial assistance will be given to inmates who are poor and unable to pay their fines or needed bond amount.

  • Capital Investment As A Source of Employment & Growth

For the third year in a row, the amount spent on capital investments is being sharply raised by 33% to ₹10 lakh crore or 3.3% of GDP.

  • Effective Capital Expenditure

Budgeted at ₹13.7 lakh crore, or 4.5% of GDP, is the Center's Effective Capital Expenditure.

  • Capital Investment Support for State Governments

In order to encourage infrastructure investment and provide incentives for complementing policy initiatives, the FM agreed to extend the 50-year interest-free loan to state governments for an additional year with a considerably increased expenditure of ₹1.3 lakh crore.

  • Increasing Prospects for Private Infrastructure Investment

The recently created Infrastructure Finance Secretariat will support all stakeholders in securing greater private investment in infrastructure, especially the heavily reliant public resources trains, roads, urban infrastructure, and power.

  • Railway

₹2.40 lakh crores have been allocated as a capital budget for the railways.

  • Logistics

With a total investment of ₹75,000 crores, including ₹15,000 crores from private sources, the one hundred crucial transportation infrastructure projects that have been selected will be completed in order of importance.

  • Regional Interconnection

To increase regional aviation connectivity, 50 more airports, heliports, water aerodromes, and advanced landing grounds are to be resurrected.

  • Future Sustainable Cities

States and localities will be pushed to make urban planning changes and take other initiatives to make their cities "sustainable cities of tomorrow."

  • Urban Infrastructure Development Fund

The Urban Infrastructure Development Fund (UIDF) will be created using the gap in financing to the prioritized sectors. It is anticipated that ₹10,000 crores would be made accessible annually for this objective.

  • Sanitation in Cities & Towns

All towns and cities will be able to switch from manhole to machine-hole mode for septic tanks and sewers by 100% mechanical desludging.

  • Mission Karmayogi

Plans for public servant capacity-building are being developed and put into action by the Center, States, and Union Territories as part of Mission Karmayogi.

  • Artificial Intelligence Centers of Excellence

Three centers of excellence for artificial intelligence are to be established in prestigious educational institutions

  • National Data Governance Policy

A National Data Governance Policy will be released, enabling access to anonymized data, to enable innovation and research by start-ups and academics.

  • Smoothening the Process of Know Your Customer (KYC)

The KYC procedure will be made simpler by using a "risk-based" strategy. The authorities of the financial industry will also be urged to develop a KYC system that is entirely compatible with Digital India's requirements.

  • Standard Organizational Identifier

The PAN will be used as the standard identification for all digital systems of the designated government agencies for commercial entities that are required to have one.

  • Unified Filing Process

A mechanism called the "Unified Filing Process" would be put up to do away with the requirement for the separate filing of the same information to several government bodies.

  • Aid for MSMEs

Government and government undertakings would reimburse 95% of the forfeited sum related to bid or performance security to MSMEs in circumstances where they fail to fulfill contracts during the COVID term.

  • Contractual Dispute Resolution

A voluntary settlement process with uniform conditions will be implemented to resolve contractual disputes involving the government and government undertakings where an arbitral judgment is being challenged in court.

  • State Support Mission

For the next 3 years, the State Support Mission of NITI Aayog will support government initiatives to advance national goals.

  • E-Courts

With an investment of ₹7,000 crores, Phase 3 of the E-Courts project would be launched for the effective administration of justice.

  • Fintech Services

The range of documents that are accessible to persons in DigiLocker will be increased in order to facilitate more innovative Fintech services.

  • Entity DigiLocker

An Entity DigiLocker will be created for usage by MSMEs, major businesses, and charitable trusts to securely store and share documents online whenever necessary.

  • Services for 5G

In order to realize a new variety of options, economic models, and employment potential, engineering colleges will construct approximately 100 laboratories for creating applications employing 5G services.

  • Laboratory-Grown Diamonds

An IIT will get a 5-year research and development funding to promote local production of LGD seeds and equipment and lessen reliance on imports.

  • National Green Hydrogen Mission

The recently established National Green Hydrogen Mission, with a budget of ₹19,700 crores, aims to produce 5 MMT of green hydrogen yearly by 2030.

  • Transition in Energy

According to the FM, the budget allocates ₹35,000 crores for the Ministry of Petroleum & Natural Gas to make priority capital expenditures in order to achieve net zero targets and energy security goals.

  • Projects for Energy Storage

Battery Energy Storage Systems with a capacity of 4,000 MWH are to be supported with 18 Viability Gap Funding, together with a comprehensive framework for Pumped Storage Projects, in order to guide the economy toward sustainable growth.

  • Energy from Renewables Evacuation

The construction of the interstate transmission line for the removal and grid integration of 13 GW of renewable energy from Ladakh will cost ₹20,700 crores, including ₹8,300 crores in federal funding.

  • Green Credit Program

A Green Credit Program will be announced in accordance with the Environment (Protection) Act in order to promote behavioral change for economic sustainability.

  • PM-PRANAM

In order to encourage States and Union Territories to promote alternative fertilizers and balanced use of chemical fertilizers, the "PM Programme for Restoration, Awareness, Nourishment, and Amelioration of Mother Earth" will be introduced.

  • GOBARdhan Scheme

A total of 500 latest "waste to wealth" facilities will be built as part of the GOBARdhan Galvanizing Organic Bio-Agro Resources Dhan Scheme to advance the circular economy.

  • Centers for Bio-Input Resources run by Bhartiya Prakritik Kheti

The government would assist 1 crore farmers in switching to natural farming within the next 3 years, wherein 10,000 Bio-Input Resource Centers will be established, resulting in the development of a dispersed national micro-fertilizer and pesticide production network.

  • MISHTI

MISHTI, via the fusion of MGNREGA, CAMPA Fund, and other sources, shall be taken up for mangrove plantation alongside the coastline and on salt pan areas, wherever possible.

  • Amrit Dharohar

Through Amrit Dharohar, a program that will be undertaken during the next 3 years to promote optimal use of wetlands and boost biodiversity, carbon stock, eco-tourism opportunities, and income production for local populations, the government will highlight their distinctive conservation characteristics.

  • Coastal Transportation

Through the PPP method with viability gap finance, coastal shipping will be marketed as the more economical and energy-efficient form of transportation, both for people and freight.

  • Replacement of Vehicles

The Finance Minister has allotted sufficient funding to scrap outdated cars owned by the Central Government in order to carry out the vehicle scrapping program that was specified in the budget for 2021–2022, and States will receive assistance in upgrading their ambulances and vehicles as well.

  • Youth Empowerment

The government developed the National Education Policy, which puts an emphasis on skill development, established economic policies that promote mass job creation, and encouraged business possibilities in order to empower the youth and assist the "Amrit Peedhi" in realizing their aspirations.

  • Pradhan Mantri Kaushal Vikas Yojana (4.0)

Within the following 3 years, the Pradhan Mantri Kaushal Vikas Yojana (4.0) will be introduced to train thousands of young people. Additionally, 30 Skill India International Centers will be established throughout several States to prepare youngsters for possibilities abroad.

  • Digital Skill India Platform

With the introduction of a single Skill India Digital portal, the digital environment for skilling will further develop. This platform will enable demand-based formal skilling, connect with employers, including MSMEs, and make access to entrepreneurship programs easier.

  • National Apprenticeship Promotion Scheme

A pan-India National Apprenticeship Promotion Scheme would use Direct Benefit Transfer to give stipend assistance to 47 lakh youth over the course of 3 years.

  • Tourism

Through the challenge mode, at least 50 locations will be chosen using an integrated and creative strategy. Each place would receive a full development package. To further the goals of the "Dekho Apna Desh" project, entrepreneurial development and sector-specific skills will be integrated. The Vibrant Settlements Program would also assist in the construction of tourist facilities and infrastructure in border villages.

  • Encouragement of Unity Malls

States will be urged to establish a Unity Mall in their state capital, most significant tourist destination, or financial capital for the promotion and sale of their own ODOPs, GI products, and other handicraft products as well as to provide space for such products of all other states.

  • Financial Sector

The Budget suggests expanding the policies currently in place in this sector.

  • MSMEs Credit Guarantee

The updated MSMEs plan would go into effect on April 1, 2023, with a corpus injection of ₹9,000 crores. This will provide for an extra ₹2 lakh crore of collateral-free guaranteed loans. Additionally, there will be a 1% decrease in the cost of the credit.

  • Registry for National Financial Information

In order to ease effective credit flow, advance financial inclusion, and support financial stability, a national financial data registry will be established to act as the primary repository of financial and related information.

  • Regulations for the Financial Sector

Public participation shall be incorporated into the process of creating regulations and issuing subsidiary directives as necessary and practical to satisfy the needs of Amrit Kaal and to support optimal regulation in the financial industry. Additionally, financial sector authorities will be asked to conduct an extensive assessment of current legislation in order to streamline, make compliance easier, and lower the cost of compliance.

  • GIFT IFSC

There will be a number of actions made to improve business operations at GIFT IFSC. Additionally, the government will make it easier for nations looking for digital continuity solutions to build up their data embassies in the GIFT IFSC.

  • Enhancing Investor Protection and Governance in the Banking Sector

Certain changes to the Banking Regulation Act, the Banking Companies Act, and the Reserve Bank of India Act are suggested in order to improve bank governance and strengthen investor protection.

  • Building Capacity in the Securities Market

Norms and standards for education at the National Institute of Securities Markets shall be developed, regulated, maintained, and enforced by SEBI in order to increase the capability of officials and experts in the securities market.

  • Center for Central Data Processing

A Central Processing Centre will be established to handle a variety of documents submitted to field offices under the Companies Act in order to respond to businesses more quickly.

  • Reclaiming Dividends & Shares

An integrated IT site will be built to make it simple for investors to recover unclaimed shares and unpaid dividends from the Investor Education and Protection Fund Authority.

  • Electronic Payments

In 2023–2024, financial support will still be provided for the digital public infrastructure.

  • Azadi Ka Amrit Mahotsav Mahila Samman Bachat Patra

Mahila Samman Savings Certificate, a one-time new modest savings program, will be made accessible for a 2-year period up until March 2025 as a way to commemorate Azadi Ka Amrit Mahotsav, which would provide a deposit facility of up to ₹2 lakhs for a 2-year term at a fixed interest rate of 7.5% with the possibility of partial withdrawal.

  • 50-Year Interest-Free Loan to States

The fifty-year loan to the states is to be used entirely for capital expenditures by 2023–2024. The majority of this will be up to the states' discretion, but some of it will depend on them raising their real capital spending. Additionally, portions of the expenditure will be assigned to or tied to particular goals.

  • State Fiscal Deficit

States will be permitted a budget deficit of 3.5% of the GSDP, of which 0.5% will be related to changes in the electricity sector.

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