Expectations rode high on this year’s pre-election Union Budget. And it did manage to fulfil many of them on the Budget date of 2023. Finance minister Nirmala Sitharaman has once again played a delicate balancing act to accelerate public spending while staying on track for long-term fiscal consolidation.
Here are the highlights of Budget 2023, India →
A Seven-Pronged Growth Plan
The 2023 Budget is structured along seven long-term priorities – collectively known as ‘Saptarishi’,
1. Inclusive Development – Targeting initiatives for agriculture and cooperatives like building accelerator funds, providing credit, and setting up storage capacity, Increasing healthcare and education expenditure.
2. Reaching the Last Mile – Providing basic necessities such as housing, water, roads, telecom, education, and health to particularly vulnerable sections of society.
3. Infrastructure and Investment – Creating long-term capital assets for the nation that boost employment, per capita income, and GDP growth.
4. Unleashing the potential – Delivering trust-based governance with new-age digital technologies.
5. Green Growth – Transitioning to alternative fuel, green energy, sustainable farming, electric mobility, green buildings, and green equipment.
6. Youth Power – Offering upskilling opportunities, digital job portals, and apprenticeships to youth, boosting domestic tourism.
7. Financial Sector – Promoting efficient lending, financial inclusion, and enhancing financial stability.
Budget 2023 Income – Tax updates HR executives must know
Budget 2023 has made a big push for the new tax regime, originally introduced in 2020. The new tax regime simplifies individual taxation by eliminating the maze of deductions, exemptions, and tax-saving investments. The new budget has further sweetened the deal for taxpayers to move to the new regime with the following measures,
- No income tax for income upto Rs. 7 Lakh a year
- Standard Deduction of Rs. 50,000/- included in the new tax regime
- The basic tax exemption limit increased to Rs. 3 Lakhs
- Leave encashment exemption for private employees separating from the company raised to Rs. 25 Lakhs
The new tax regime as per income tax Budget 2023 is streamlined with five slabs instead of the earlier seven, as follows:
|Income Slabs||Tax Rate per Union Budget 2023|
|Up to Rs. 3 Lakh||Nil|
|Rs. 3 Lakh to Rs. 6 Lakh||5%|
|Rs. 6 Lakhs to Rs. 9 Lakhs||10%|
|Rs. 9 Lakhs to Rs. 12 Lakhs||15%|
|Rs. 12 Lakhs to Rs. 15 Lakhs||20%|
|Rs. 15 Lakhs+||30%|
Skill Development for New Age Tech
- The government has revived its flagship Pradhan Mantri Kaushal Vikas Yojana (PMKVY). In its new avatar, PMKVY 4.0 will emphasize on-the-job training and industry partnerships. The government plans to introduce courses on cutting-edge tech like AI, mechatronics, IOT, 3D printing, and more.
- The government also plans to set up 30 Skill India International centres to open up overseas opportunities for Indian youth they can access through the Skill India digital platform.
- The finance minister also announced stipend support to 4.7 million youth through direct benefit transfer as part of a pan-India National Apprenticeship Promotion scheme.
Highest Ever Allocation for Education
- The outlay for the education sector has increased to 1.13 lakh crore though it remains at 2.9% of the GDP as earlier.
- Besides allocating funds to the school education department, mid-day meal scheme, and central institutes, the government has announced that it will set up three centres of excellence for Artificial Intelligence (AI) at top educational institutions. Expected outcomes include AI-based solutions in agriculture, health, and sustainable cities.
- The budget has also proposed 100 labs in engineering institutions on 5G-related applications to improve employability and potential business opportunities.
Infrastructure Investment Juggernaut
The government continues to increase investments in infrastructure and productive capacity creation. These outlays will have a multiplier impact on employment and growth.
- Capital Investment outlay increased by 33.4% to Rs. 10 Lakh crore
- Highest-ever capital allocation of Rs. 2.4 Lakh crore for railways
- 50-year interest-free loans to state governments extended for one more year to spur capital investments
- 100 critical transport infrastructure projects identified for a prioritized investment of Rs. 75000 crores
- Rs. 10,000 crores per annum allocated to Urban Infrastructure Development Fund (UIDF) for tier 2 and tier 3 cities
Focus on Sustainable Green Growth
With budget 2023, India continues to focus on the transition to sustainable growth and energy.
- The PM-PRANAM scheme incentivizes the states to reduce the use of chemical fertilizers
- 500 new ‘waste-to-wealth’ plants to be established under the GobarDhan scheme
- MISHTI scheme for mangrove plantations along the country’s coastline
- Funds to be allocated towards replacing old polluting vehicles and promotion of battery energy storage systems
Fiscal Indicators on Track
Stong tax revenue growth and a moderation in inflation can enable the government to meet the fiscal deficit target of 4.5% of GDP by FY 26.
- Estimated FY 23 Tax revenues of 20.87 Lakh crores and Non-Tax revenues of Rs. 2.62 Lakh crores are realistic.
- 33.5% lower subsidies in FY 22 compared to those during Covid levels are expected to help manage the fiscal deficit.
- While the government expects debt to remain elevated in the coming years, capital expenditure ramp-up is expected to accelerate growth in the years to come.
Digital Income Tax Processing and KYC Compliance
- The finance minister informed that the average processing time for Income Tax Returns (ITR) has been reduced to just 16 days with futuristic ITR reforms.
- The Digilocker app will be a one-stop shop for updating and reconciling all individual KYC details.
Enterprises can streamline their HR functions by automating payroll compliance and background verification processes to keep pace with these government reforms.
In summary, following are the major reforms made to budget this year-
Budget 2022-2023 has essentially tried to offer a bigger purse to taxpayers who are now free to spend their income without worrying about investment deductions. On the other hand, this means that the incentives to save, invest and insure are lesser. While it is more or less clear that India will move away completely from the old tax regime sooner or later, the government would do great to incentivize a saving and investment culture that is the bedrock of the stupendous growth India has witnessed so far. But like every year, the payroll managers got a lot of work to do at work as per the new updates. We suggest you take the help of a robust payroll software to stay statutory compliant throughout the year.