Key Facts

• This is the last Budget of Modi 2.0 before Next General Elections 2024.

• This is also the first budget of the “Amrit Kaal”.

• This Budget hopes to build on the foundation laid in the previous Budget, and the blueprint drawn for India@100, which envisions a prosperous and inclusive India, where the fruits of development reach all regions and citizens, especially our youth, women, farmers, OBCs, Scheduled Castes and Scheduled Tribes.

India's  Growth strategy had two prongs:-

• One was to incentivise the private sector in the economy to invest in the productive capacity and thereby create jobs and push growth.

• The second part was about the government’s role in the economy. Here, the mantra has been minimum government. That in turn meant increasing the capital expenditure, on the one hand and raising more revenues via disinvestment on the other. In essence this was done to ensure that the government maintains fiscal prudence and doesn’t splurge money on populist schemes.

Key priorities of this Budget

• Finance Minister listed seven priorities of the Union Budget and said that they complement each other and act as the ‘Saptarishi’ guiding us through the Amrit Kaal. 

• They are as follows: 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

Priority 1: Inclusive Development

• The Government’s philosophy of Sabka Saath Sabka Vikas has facilitated inclusive development covering in specific, farmers, women, youth, OBCs, Scheduled Castes, Scheduled Tribes, divyangjan and economically weaker sections, and overall priority for the underprivileged (vanchiton ko variyata). There has also been a sustained focus on Jammu & Kashmir, Ladakh and the North-East. This Budget builds on those efforts.

Agriculture and Cooperation

• Digital Public Infrastructure for Agriculture: This will enable inclusive, farmer-centric solutions through relevant information services for crop planning and health, improved access to farm inputs, credit, and insurance, help for crop estimation, market intelligence, and support for growth of agri-tech industry and start-ups.

• Agriculture Credit: More Credit to Agriculture Sector: 186 lakh cr in FY22

• Agriculture Accelerator Fund to encourage Start-Ups in rural areas

• Atmanirbhar Bharat Horticulture Clean Plant Program to boost production of high value horticultural crops

• 20 lakh cr credit for Animal Husbandry, Dairy and Fisheries sector

• Additional storage capacity for farm produce

• Support to making India a Global Hub For Millets: 'Shree Anna'

Affordable Health for all

• Enhanced Health Expenditure: 2.1% of GDP in FY23

• Sickle Cell Anaemia elimination Mission to be launched

• 157 New Nursing Colleges to be established

• Joint Public and Private Medical Research to be encouraged via select ICMR labs

• New Programme to promote research in Pharmaceuticals to be launched

Accessible Education and Skilling

• Enhanced Education Expenditure: 2.9% of GDP in FY23

• Revamped Teachers' training via District Institutes of Education and Training

• National Digital Library to be set up for children and adolescents

• States will be encouraged to set up physical libraries at Panchayat and ward levels

• PMKVY 4.0 to be launched to skill lakhs of youth

Priority 2: Reaching the Last Mile "No One To Be Left Behind"

• Pradhan Mantri PVTG Development Mission to be launched

• Financial assistance for sustainable micro irrigation in drought prone regions of Karnataka: Central assistance of Rs 5,300 crore will be given to Upper Bhadra Project to provide sustainable micro irrigation and filling up of surface tanks for drinking water.

• 38800 more teachers for 740 Eklavya Model Residential Schools

• Free food grain to all Antyodaya and priority households for one year, under PMGKAY

• Bharat SHRI to be set up for digitization of ancient inscriptions

• Outlay of PM Awas Yojna enhanced by 66%

Priority 3: Investment in Infrastructure and Productive Capacity

• Growth and Employment Multiplier

• Increase in capital investment outlay by 33.4% to 210 lakh crore

• Infrastructure Finance Secretariat to assist stakeholders for more private investment in infrastructure

• Urban Infrastructure in Tier 2 and 3 cities via establishment of UIDF'

• Continuation of 50-year interest free loan to State Governments

Priority 4: Unleashing the Potential "Towards a transparent and Accountable Administration"

• Phase 3 of E-Courts to be launched for efficient administration of justice

• Vivad se Vishwas I for less stringent contract execution for MSMEs

• Vivad se Vishwas II for easier settlement of contractual disputes of Govt and Govt undertakings

• 'Input Based' to 'Result Based' Financing for better allocation of scarce resources

• Entity Digi Locker to be setup for businesses for secure online storing and sharing of documents

Priority 5: Green Growth "Moving Forward Achieve the Climate Goals"

• Green Credit Programme to be launched to incentivize sustainable actions

• PM Programme for Restoration, Awareness, Nourishment and Amelioration of Mother Earth will be launched to incentivize States and Union Territories to promote alternative fertilizers and balanced use of chemical fertilizers.

• 500 new 'Waste to Wealth' plants to be established under GOBARdhan Scheme: GOBARdhan (Galvanizing Organic Bio-Agro Resources Dhan) scheme will be established for promoting circular economy. These will include 200 compressed biogas (CBG) plants, including 75 plants in urban areas, and 300 community or cluster-based plants at total investment of  Rs 10,000 crore.

• MISHTI: The government will take up mangrove plantations along the coastline under the new MISHTI scheme. Under this the government would promote conservation values through a scheme to encourage the optimal use of wetlands. Further, a green credit program will be notified to incentivize environmentally sustainable and responsible actions by companies.

• Amrit Dharohar to be implemented over next 3 years for optimal usage of wetlands

Priority 6: Youth Power

• Empower the youth and help the ‘Amrit Peedhi’

• Pradhan Mantri Kaushal Vikas Yojana 4.0

• On-job training, industry partnership, new age courses like Al, robotics, mechatronics, 3D printing, drones, etc

• Skill India Digital Platform

• Expanding digital ecosystem to enable demand-based formal skilling, linking with employers and facilitating access to entrepreneurship schemes.

• National Apprenticeship Promotion Scheme: To provide stipend support to 47 lakh youth in three years

• Boosting Tourism: 50 destinations to be selected and developed as complete package for domestic & foreign tourists

• Setting Up Of Unity Malls In State Capitals: For promotion and sale of ODOPS (One District, One Product), GI and handicraft products

Priority 7: Financial Sector

• Credit Guarantee for MSMEs: The Finance Minster said that last year, she proposed revamping of the credit guarantee scheme for MSMEs and announced happily  that the revamped scheme will take effect from 1st April 2023 through infusion of  Rs 9,000 crore in the corpus. This will enable additional collateral-free guaranteed credit of Rs 2 lakh crore. Further, the cost of the credit will be reduced by about 1 per cent.

• Setting up of National Financial Information Registry: To facilitate efficient credit flow, promote financial inclusion, and foster financial stability.

• Setting up of a Central Data processing Centre: For faster handling of administrative work under the Companies Act

• Credit Guarantee for MSMES: Rs. 9,000 Cr infusion in corpus from 1st April 2023.

• Mahila Samman Bachat Patras: One-time new small savings scheme for 2-year period with deposit facility of up to Rs 2 lakh for women

• Benefits for Senior Citizens: Enhanced maximum deposit limit for senior citizens savings scheme from Rs 15 lakh to Rs 30 lakh

• GIFT IFSC: Several initiatives to promote business activities in GIFT IFSC

Fiscal Management

• Fifty-year interest free loan to States

• Fiscal Deficit of 3.5% of GSDP allowed for States

• Fiscal Deficit for 2022-23 is 6.4% (RE), for 2023-24 is 5.9% (BE) and is on target to be below 4.5% by 2025-26

Budget Estimates 2023-24

• Total Receipts (Other than borrowings): Rs 27.2 Lakh Cr

• Total Expenditure: Rs. 45 Lakh Cr

• Net Tax Receipts: Rs 23.3 Lakh CrConclusion

• The fiscal deficit is estimated to be 5.9 per cent of GDP.

Personal Income Tax

• Benefiting our hard-working middle class: No Income tax for persons with income up to Rs 7 lakh in the new tax regime

• The tax structure in the new personal tax regime has been changed by reducing number of slabs to five and increasing the tax exemption limit to Rs 3 lakh. This will provide major relief to all tax payers in the new regime.

• Standard deduction of 50,000 to salaried people and deduction up to 15,000 for pensioners under new tax regime also

• Reduction of the highest surcharge rate from 37% to 25% under new tax regime

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

Indirect Tax Proposals

• Common IT Return Form: The Union Budget also proposes to roll out a next-generation common IT return form for tax payer convenience. It also stipulates a plan to strengthen the grievance redressal mechanism for direct taxes.

• Better targeting of tax concessions: For better targeting of tax concessions and exemptions, deduction from capital gains on investment in residential house has been capped at Rs 10 crore. Income tax exemption from proceeds of insurance policies with very high value will also have limit. There are a number of proposals relating to rationalization and simplification of direct taxes in the Union Budget.

• Other major proposals in the Budget relate to Extension of period of tax benefits to funds relocating to IFSC, GIFT City till 31.03.2025; Decriminalisation under section 276A of the Income Tax Act; Allowing carry forward of losses on strategic disinvestment including that of IDBI Bank;  and Providing EEE status to Agniveer Fund.

Cooperation

• The Budget has a slew of proposals for the cooperative sector. New cooperatives that commence manufacturing activities till 31st March next year shall get the benefit of a lower tax rate of 15%. 

• The Budget provides an opportunity to sugar cooperatives to claim payments made to sugarcane farmers for the period prior to assessment year 2016-17 as expenditure. 

• A higher limit of Rs 2 lakh per member has been provided for cash deposits to and loans in cash by Primary Agricultural Cooperative Societies and Primary Cooperative Agriculture and Rural Development Banks. The Budget proposes a higher limit of Rs 3 crore for TDS on cash withdrawal for cooperative societies.

Start-ups

• The Budget proposes to extend the date of incorporation for income tax benefits to start-ups from 31.03.2023 to 31.03.2024. It also provides the benefit of carry forward of losses on change of shareholding of start-ups from 7 years of incorporation to 10 years.

Amendments in CGST Act

• The Budget provides for amending the CGST Act so as to raise the minimum threshold of tax amount for launching prosecution under GST from Rs 1 crore to Rs 2 crore, except for the offence of issuance of invoices without supply of goods and services or both.

• The compounding amount will be reduced from the present range of 50 to 150% of tax amount to the range of 25 to 100%. It will also decriminalize certain clauses of the Act like obstruction and preventing of any officer from discharge of his duties, deliberate tempering of evidence or failure to supply the information.

Implications of tax changes

• Announcing the changes in the direct and indirect taxes, the Finance Minister said that revenue of about Rs 38,000 crore will be foregone as a result of these proposals, while revenue of about Rs 3,000 crore will be additionally mobilised. She said thus the total revenue foregone is about Rs 35,000 crore annually on account of these proposals.

Proposals relating to MSMEs

• Describing MSMEs as growth engines of our economy, the Budget proposes enhanced limits for micro enterprises and certain professionals for availing the benefit of presumptive taxation. To support MSMEs in timely receipt of payments, the Budget allows deduction for expenditure incurred on payments made to them only when payment is actually made.

Green Mobility

• To exempt excise duty on GST-paid compressed bio gas

Electronics

• To provide relief in customs duty on import of certain parts of mobile phones

• To reduce basic customs duty on parts of open cells of TV panels to 2.5%

Electricals

• To increase basic customs duty on electric kitchen chimney from 7.5% to 15%

• To reduce basic customs duty on chimney heat coils from 20% to 15%

Chemicals and Petrochemicals

• To exempt basic customs duty on chemicals and petrochemicals

• To reduce basic customs duty on acid grade fluorspar and crude glycerine to 2.5%

Marine products

• To reduce duty on key inputs for domestic manufacture of shrimp feed

Lab Grown Diamonds

• To reduce basic customs duty on seeds used in their manufacturing

Precious Metals

• To increase customs duties on articles made from gold and platinum

• To increase import duty on silver dore, bars and articles

Compounded Rubber

• To increase basic customs duty rate on compounded rubber from 10% to 25%

Cigarettes

• National Calamity Contingent Duty (NCCD) on specified cigarettes to be revised upwards by about 16%

1: Raising capital expenditure by the government

• Capital expenditure is the money that is spent on building productive assets such as roads and bridges and ports. This has a greater return to the economy and every Rs 100 spent leads to Rs 250 gain for the economy. Revenue expenditure on the other hand returns less than Rs 100.

• In the latest budget capital expenditure by the government has been raised to Rs 10 lakh crore — this is more than double the amount of money allocated when compared to 2020-21 (Rs 4.39 lakh crore).

2: Fiscal Prudence

• The FM has assured that the fiscal deficit (market borrowing by the govt ) will fall to 5.9% of the GDP, as promised in the glide path. This will have a salutary impact on the broader economy as it suggests that money will be available for private entrepreneurs to borrow.

3: New Personal Income Tax regime is now the default

• This will be perhaps the most talked about decision of the Budget. Salaried Indians were expecting some relief on the income tax front. The FM seems to have provided it but in the so-called new personal income tax regime, which was introduced last year, but did not have many takers.

• The FM has used the incentives to popularise the income tax regime while also declaring that it will now be the default scheme. Until last year it was optional for people with the proviso that once you adopted it you could not go back to the old income tax regime.