The Union Budget 2023 was presented by the Union Finance Minister Nirmala Sitharaman on Wednesday, which is the fifth budget of the Modi 2.0 government. This budget is considered the last full-fledged budget before the upcoming general elections in 2024.
The Minister highlighted that the Indian economy is on a positive trajectory and heading towards a bright future. The budget emphasized expanding Capital Expenditure spending while tying in Green Growth, Youth Power, and Inclusive Development as top priorities.
Highlights of the Union Budget 2023:
- Major changes in tax slabs under the new tax regime.
- Significant increase in allocation for railways and capital expenditure.
- The current year’s economic growth is estimated at 7%.
- The fiscal deficit target of 6.4% in the revised estimate for FY 2022-23 was reduced to 5.9% for the next fiscal year.
- A commitment to bring down the fiscal deficit to below 4.5% by 2025-26.
- Major tax announcements for the salaried class.
- New Income Tax Regime
- Real Estate
- Saving Scheme
- Green Energy
- Digital India
- Social Welfare
- Key Insights
New Income Tax Regime – New Income Tax Slab 2023
The Union Budget 2023 has brought about changes in the income tax slabs under the new tax regime. The basic exemption limit has been increased from Rs 2.5 lakh to Rs 3 lakh. Additionally, the number of income tax slabs has been reduced from 6 to 5. A rebate under Section 87A has also been raised from Rs 5 lakh to Rs 7 lakh, meaning individuals with an income up to Rs 7 lakh will not have to pay any taxes.
The new income tax slabs under the new tax regime are as follows:
- 0% tax rate (Income from Rs 0 to Rs 3 lakh)
- 5% tax rate (Income from Rs 3 lakh to Rs 6 lakh)
- 10% tax rate (Income from Rs 6 lakh to Rs 9 lakh)
- 15% tax rate (Income from Rs 9 lakh to Rs 12 lakh)
- 20% tax rate (Income from Rs 12 lakh to Rs 15 lakh)
- 30% tax rate (Income above Rs 15 lakh)
|Old Tax Regime||Current Tax Regime||New Tax Regime (2023)|
|Annual Income||Tax Slab (%)||Annual Income||Tax Slab (%)||Annual Income||Tax Slab (%)|
|Upto 2.5 lakh||0||Upto 2.5 lakh||0||Upto 3 lakh||0|
|From 2.5 lakh to 5 lakh||5||From 2.5 lakh to 5 lakh||5||From 3 lakh to 6 lakh||5|
|From 5 lakh to 10 lakh||20||From 5 lakh to 7.5 lakh||10||From 6 lakh to 9 lakh||10|
|More than 10 lakh||30||From 7.5 lakh to 10 lakh||15||From 9 lakh to 12 lakh||15|
|From 10 lakh to 12.5 lakh||20||From 12 lakh to 15 lakh||20|
|From 12.5 lakh to 15 lakh||25||More than 15 lakh||30|
|More than 15 lakh||30|
In the new tax regime, the surcharge for the highest tax rate has been reduced from 37% to 25%. The new tax regime is the default option, but individuals can choose to opt for the old tax regime. The new tax regime was introduced to ease the compliance burden for salaried taxpayers and offer lower tax rates as compared to the old tax regime while also providing the benefits of deductions and tax exemptions.
Capex Budget 2023
The Union Budget 2023-24, presented by Finance Minister Nirmala Sitharaman, focuses on increasing the capital expenditure outlay by 33% to INR 10 lakh crore. The government is taking steps to provide young people with job opportunities and revive growth in the aftermath of the COVID-19 crisis.
To provide support to states, the government has continued to provide a long-term loan of INR 1.3 trillion to states for longer-term investments. Additionally, the year-on-year increase in capital expenditures is only slightly lower than last year’s jump of 35%. The ratio of capital expenditure to GDP is expected to increase to 3.3% in the new financial year, as compared to 2.7% in the previous year.
Finance – Union Budget 2023
The Union Budget for FY 2022-23 focuses on four key priorities:
- PM GatiShakti
- Inclusive Development
- Productivity Enhancement & Investment, Sunrise opportunities, Energy Transition, and Climate Action.
- Financing of Investments.
The budget aims to provide greater fiscal space to states and has increased the allocation for “Scheme for Financial Assistance to States for Capital Investment” from Rs.10,000 crore to Rs.15,000 crore in the revised estimates for the current year.
Railway Budget 2023
The Union Budget 2023-24, presented by the Union Finance Minister Nirmala Sitharaman, has allocated a substantial amount for the Indian Railways. A capital outlay of Rs 2.40 lakh crore has been set aside for the railways, which is the highest-ever outlay in its history. This allocation is about nine times the outlay made in the Financial Year 2013-14 and shows the government’s commitment to strengthening the railway system in the country.
The railway system has been witnessing a lot of development and improvement activities in recent years, and the CAPEX will continue to increase in the coming years. This increase in capital expenditures is expected to make the railway system emerge as an engine of national growth and development. The government is also looking to attract private investment in the railway infrastructure sector, and for this purpose, the newly established Infrastructure Finance Secretariat will assist all stakeholders, including railways, roads, urban infrastructure, and power.
The allocation of Rs 2.40 lakh crore for the Indian Railways in the Union Budget 2023-24 is a significant step towards the development of the country’s railway system and will go a long way in I’m proving the infrastructure, services, and overall experience for passengers and stakeholders.
Real Estate Budget 2023
The budget focused on improving the nation’s infrastructure and real estate, and the following are the major announcements related to these industries:
- Increased PM Awas Yojana budget by 66%, bringing it to over ‘79,000 crores.
- Capped the deduction from capital gains on residential property investment under sections 54 and 54F at 10 crores and limited the income tax exemption from the revenues of insurance policies.
- Changed the guidelines for calculating capital gains in cases of joint property development to include the money received as payment.
- Interest paid on borrowed capital for acquiring or improving a property can be claimed as a deduction from income and can also be included in the cost of acquisition or improvement on transfer, reducing capital gains. It is proposed to not include the amount of interest claimed as a deduction in the cost of acquisition or improvement.
- Changed the rules for calculating capital gains in joint property development to include money paid as consideration.
- Encouraged cities to increase their creditworthiness for municipal bonds by implementing property tax governance reforms and ring-fencing user charges on urban infrastructure.
- Established an Urban Infrastructure Development Fund (UIDF) managed by the National Housing Bank to create urban infrastructure in Tier 2 and Tier 3 cities. The UIDF will be funded through priority sector lending, and states are encouraged to leverage resources from the grants of the 15th Finance Commission and existing schemes. The government expects to make available ₹10,000 crores per annum for this purpose.
Saving Scheme Budget 2023
In Saving Scheme Budget 2023, Government announced the introduction of a new savings scheme called the “Mahila Samman Saving Certificate” with an interest rate of 7.5% for two years.
- The scheme is open to women and girl children with a maximum deposit limit of INR 2 lakh.
- There is also a partial withdrawal facility available. She also mentioned that 81 lakh self-help groups have been created for rural women under the Deendayal Antyodaya Yojana National Rural Livelihood Mission for their economic empowerment.
- The maximum investment limit for the senior citizen saving scheme has been increased to INR 30 lakh, and the postal monthly income scheme has been increased to INR 9 lakh in a single name. The schemes are backed by the sovereign and do not carry credit risk.
Green Energy Budget 2023
The Indian government has allocated Rs 10,222 crore to the Ministry of New and Renewable Energy in the Union Budget 2023, a 47.1% increase from the previous budget allocation of Rs 6,900.
- The finance minister has emphasized the government’s commitment to transitioning to cleaner sources of energy. The budget has allocated Rs 5,331.5 crore for the solar power sector, a 104.58% increase from the previous year’s allocation of Rs 2,606 crore.
- The Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) scheme received Rs 1996.46 crore in the budget.
- The program for wind and other renewable energy received Rs 1,245 crore, of which Rs 31 crore went to hydropower, both off-grid and on-grid.
- The National Institute of Solar Energy received Rs 54 crore, a 20% increase from the previous year’s allocation of Rs 45 crore.
The government has not set a target for the number of green bonds to be issued in the upcoming fiscal year but has recently sold its first sovereign green bonds worth Rs 8,000 crore at yields lower than comparable government bonds.
Jewellery Budget 2023
Key points on the Union Budget 2023-24 for the Gems and Jewellery Industry:
- The industry is disappointed with the budget as it maintains the customs duty at 10% and does not address critical concerns.
- The import duty on silver dore, bars, and articles was proposed to be increased to 10% to align with gold and platinum.
- The basic customs duty on silver dore is currently 6.1%, while on semi-manufactured items, it is 7.5%.
- Import duty on seeds used to make lab-grown diamonds was cut to boost domestic manufacturing.
- The reduction in custom duty on gold from 12.5% to 10% is a step in the right direction, but the hike in the Agriculture Infrastructure and Development Cess has brought the overall duty to 15%, the same as before.
- High taxes will impede efforts to make gold an asset class, particularly at a time when gold prices have risen globally.
- Conversion of physical gold to Electronic Gold receipts will not attract any capital gains, providing an overall digital boost to the industry and promoting investment in electronic gold.
- The budget announced research grants for the indigenous manufacturing of Lab-Grown Diamonds by the IIT for 5 years.
Digital India Budget 2023
The budget for Digital India has been slashed by 55% from the last Budget to Rs 4,795.24 crore, which is 37% lower than the revised estimate of Rs 7,603.50 crore.
However, the overall allocation for centrally-sponsored tech-related schemes has gone up to Rs 12,440.28 crore, which is 16.5% higher than the budget estimate of Rs 10,676.18 crore and 59% higher than the revised estimate of Rs 7,803.50 crore in the previous year’s budget.
Minister of Finance Nirmala Sitharaman called it a “technology-driven” Budget and announced continued support for digital payment infrastructure such as UPI (Unified Payments Interface). Digital payments through UPI have seen wide acceptance with 7,400 crore digital payments of ₹126 lakh crore taking place in 2022.
Key highlights in the digital and technology sectors in the 2023 Budget:
- Digital public infrastructure for agriculture
- Access to anonymized data through the proposed national data governance policy
- DigiLocker facilities for MSMEs (Micro, Small & Medium Enterprises)
- Simplified yet multipronged approach to KYC (Know-your-customer) measures
- The allocation of funds for Digital India has been reduced to Rs 4,795.24 crore.
Agriculture Budget 2023
Nirmala Sitharaman has announced the Agriculture Accelerator Fund to support agro startups and implement cost-effective solutions for farmers through contemporary technologies and increased output. Utkarsh Sinha, Managing Director of Bexley Advisors, believes the government’s Fund-of-Fund strategy will be successful in the agriculture sector and could also be expanded to the manufacturing sector. Sinha says there is a need for both smaller funds to seed innovative technologies and larger funds to take these technologies to scale in the agriculture sector.
- A digital public infrastructure for agriculture will be developed as an open source, open standard, and interoperable public good to provide farmer-centric solutions for crop planning.
- The agriculture credit target has been increased to Rs 20 lakh crore for 2024 with a focus on animal husbandry, dairy, and fisheries.
- The agriculture sector has grown at an average annual rate of 4.6% in the last six years and reached an all-time high of USD 50.2 billion in agricultural exports during 2021-22.
- The government has launched the National Monetisation Pipeline with an investment potential of Rs 9 lakh crore.
- The Economic Survey suggests that while agriculture has performed well, it needs re-orientation to overcome challenges such as the adverse impacts of climate change and rising input costs.
Social Welfare Budget 2023
The world is facing two significant challenges in the form of a looming recession and a climate crisis. These are expected to have a profound impact on the social and economic development of communities globally, especially for vulnerable and marginalized communities. The government is aware of these challenges and is working to address them in its Union Budget 2023-24.
To ensure social sector spending remains a priority, the government must maintain a focus on efficiency and a broad-based approach. This will be important in ensuring that the social sector receives the funding it needs to attain its goals, even as the government balances the need to reduce the fiscal deficit.
- The government allocated Rs 71.61 lakh crores for social sector spending in 2022-23, which was 0.4% higher than the previous fiscal.
- India currently allocates approximately 1.4% of its GDP for social sector spending (excluding health), compared to an average of 2.5% for low- and middle-income countries as per the World Social Protection Report 2021.
- Reducing the already low allocation to the social sector to reduce the fiscal deficit might have negative long-term impacts on the social and economic upliftment of vulnerable and marginalized communities.
- Flagship schemes such as rural development and social sector schemes such as PM KISAN, PM Awas Yojana, Jal Jeevan Mission, PM Grameen Sadak Yojana, and MGNREGA are expected to receive an increased allocation in the Budget. These large-scale schemes aim to improve living conditions and infrastructure in rural areas of India, including access to housing, water, roads, and livelihood opportunities.
Tourism Budget 2023
Finance Minister Nirmala Sitharaman has allocated an outlay of Rs 2,400 crore for
the tourism sector in 2023-24. This allocation remains unchanged from the budget allocation for the previous fiscal year. The tourism sector has been identified as one of the four key transformative opportunities for the government’s ‘Amrit Kaal’ initiative, with a focus on both domestic and foreign tourists.
The government has proposed an integrated development of 50 destinations through a “challenge mode” approach, with active participation from states and public-private partnerships (PPPs). The focus will be on improving the overall tourist experience with physical and virtual connectivity, as well as the development of amenities in border villages. States are encouraged to set up Unity Malls to promote and sell geographical indication (GI) and other handicraft products.
Highlights of the Budget for the Tourism Industry:
- Allocation of Rs 2,400 crore for the tourism sector in 2023-24, unchanged from the previous fiscal year.
- Focus on the integrated development of 50 destinations, with active participation from states and PPPs.
- Improvement of the overall tourist experience with physical and virtual connectivity, as well as the development of amenities in border villages.
- Encouragement of states to set up Unity Malls to promote and sell GI and other handicraft products.
- Increase in the rate of tax collected at source (TCS) on overseas trips to 20% from 5%, leading to higher upfront costs for customers.
While the budget contains initiatives such as the revival of 50 airports and investment in railways and highways, the increase in TCS on overseas trips has received criticism from the industry. The move is seen as negatively impacting the local travel industry and giving an advantage to foreign-based online travel booking platforms over Indian-based travel agents and tour operators. Industry players have called for the proposal to be rolled back immediately.
the Union Budget 2023 has a mixed impact on the tourism industry, with the allocation of Rs 2,400 crore and focus on the development of 50 destinations being positive, but the increase in TCS on overseas trips being a cause for concern. The government’s efforts towards improving the overall tourist experience and encouraging states to promote handicraft products are steps in the right direction.
Here are some key insights for the article:
- Possibility of a looming recession and the climate crisis are widely anticipated to result in significant headwinds for the social and economic development of communities globally and for vulnerable, marginalized communities in particular.
- The government is focused on continuing its social sector spending while also considering the fiscal space available given the ballooning deficit and resultant strain on the exchequer.
- In 2022-23, the government allocated Rs 71.61 lakh crores for social sector spending, which was 0.4% higher than the previous fiscal, largely due to increased spending on healthcare.
- India presently allocates approximately 1.4% of its GDP to the social sector (excluding health), compared to an average of 2.5% for low- and middle-income countries, according to the World Social Protection Report 2021.
- Reducing social sector spending in order to control the fiscal deficit could have negative long-term impacts on the social and economic upliftment of vulnerable and marginalized communities.
- There is support from experts and key voices for higher allocation of programs and policies addressing burning issues such as food security, nutrition, health outcomes, access to education, and livelihood opportunities.
- The government is expected to increase allocation for flagship schemes such as rural development and social sector schemes aimed at improving living conditions and infrastructure, particularly in rural areas of India, including access to housing, water, roads, and livelihood opportunities.
In conclusion, the Union Budget 2023-24 presents a unique challenge for the Indian government as it balances the need for supporting vulnerable communities and driving economic growth.
The budget is expected to allocate a considerable amount of resources towards social sector spending, with a focus on flagship schemes aimed at improving living conditions and infrastructure in rural areas. The budget is also expected to address burning issues such as food security, nutrition, health outcomes, access to education, and livelihood opportunities.
The success of the budget will depend on the efficiency and broad-based approach the government adopts in executing its plans and policies. With the right approach, the budget has the potential to make a positive impact on the social and economic development of communities globally and particularly in India.
1. What is the current state of public finances in India?
The government is expected to meet its budgeted fiscal deficit target of 6.4% of GDP in 2022-23, which is due to lower revenue and non-debt capital receipts.
2. How much was allocated for social sector spending in 2022-23?
In 2022-23, the government allocated Rs 71.61 lakh crores for social sector spending, which was 0.4% higher than the actual spending in the previous fiscal.
3. What is the average allocation of GDP for the social sector in low and middle-income countries?
The average allocation of GDP for the social sector (excluding health) is 2.5% for low and middle-income countries as per the World Social Protection Report 2021.
4. How much does India currently allocate for social sector spending?
India currently allocates approximately 1.4% of GDP for social sector spending (excluding health).
5. What is the current dilemma facing the government regarding social sector spending?
The current dilemma facing the government is that reducing spending in order to curb the fiscal deficit might have a long-term negative impact on the social and economic upliftment of vulnerable and marginalized communities while maintaining or increasing spending is not feasible given the current fiscal scenario.
6. What are some of the flagship schemes aimed at improving rural areas in India?
Some of the flagship schemes aimed at improving rural areas in India are PM KISAN, PM Awas Yojana, Jal Jeevan Mission, PM Grameen Sadak Yojana, and MGNREGA.
7. What is the expected impact of the Union Budget 2023-24 on social sector spending?
It is expected that there will be an increase in allocation for flagship schemes aimed at improving living conditions and infrastructure in rural areas of India, but the exact impact will depend on the government’s approach to balancing its economic growth agenda with its social sector spending priorities.