Budget 2023 LIVE Updates: Benefit in New Tax Regime

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On February 1st, 2023, Finance Minister Nirmala Sitharaman presented the Central Budget 2023.

Citizens had hoped that this budget would include various local initiatives and measures to support India’s $5 trillion economy goal. With increased investment in infrastructure, development of fundamental frameworks, and incentives for key sectors, it is now not just an ambitious goal but also a well-prepared plan of action for implementation.

The objective of this budget is to address ongoing challenges and strengthen the nation for the next decade. Several measures have been included to boost spending in the economy, reduce compliance burden, support MSMEs and middle-class, and simplify and make the tax system more effective.

The budget mentions inclusive development, reaching the last mile, infrastructure and investment, enhancing capacity, green development, youth empowerment, and financial sector as its seven priorities. Let’s decode Budget 2023.

Budget 2023 Highlights:- Direct Tax

Change in New Tax Regime

The new tax regime is now the default tax system. To make the new tax regime even more attractive, the government has introduced five major measures. However, taxpayers have the option to choose the old tax regime.

• There have been changes in the tax slab for the new tax regime for FY 2023-24 (AY 2024-25).

• The new tax system has introduced a tax exemption for incomes up to 7 lakhs. Therefore, if your taxable income is less than 7 lakhs under the new tax system, you will not have to pay any tax.

• Under the new tax system, a standard deduction of Rs. 50,000 has also been introduced.

• Under the new tax system, the highest tax rate for individuals earning more than 5 crore rupees has been reduced from 37% to 25%. This step reduces their tax rate from 42.74% to 39%.

The estimated taxable income limit has been revised for the financial year 2023-24.

* The increase in the limit is subject to the condition that 95% of the receipts should be made through online channels.

Read More:-What is Income Tax in India?-Accounts Profession 2023

Start-ups

The only condition is that shareholders who hold at least 51% of the shareholding should keep the shares issued in circulation during the year, in order to carry forward and set off such losses.

Co-operative Societies

There are some proposed measures announced for cooperative societies.

• New Manufacturing Initiative: The government has provided a benefit of 15% concessional tax rate to new cooperative societies starting their manufacturing operations by March 31, 2024.

• Sugar Co-operatives: Before 2016-17, Chinese cooperative societies were not allowed to claim any expenses, but now they can claim expenses by submitting an application to the valuation officer.

• Section194N: The cash withdrawal limit for TDS has been increased to INR 3 crores for cooperative societies.

• Cash deposit limit: The cash deposit and loan limit per member is being increased up to a maximum of 200,000 by primary agriculture cooperative societies (PACS) and primary cooperative agriculture and rural development banks (PCARDBs).

Other Direct tax updates

• Leave encashment: The exemption limit for leave encashment for non-government employees has been increased from Rs. 3 lakhs to Rs. 25 lakhs. This means that during retirement, leave up to Rs. 25 lakhs can be converted into cash. For a maximum period of 10 months, leave encashment is tax-free under Section 10(10AA).

• TDS on EPF withdrawal: The TDS rate on taxable EPF withdrawals has been reduced from 30% to 20%.

• Payment Based Deduction: Only payments actually made to MSMEs will be considered as eligible expenses for the purpose of expenditure, as per section 43B.

• No Penalty:- No penalty will be imposed under Section 269SS or 269ST when a primary agriculture credit society or primary cooperative agriculture and rural development bank accepts or repays a loan to its members or vice versa.

• Capital Gain Exemption Limit: The capital gains exemption under Section 54 to 54F is limited up to 10 crore rupees. Previously, there was no threshold limit.

Budget 2023 Highlights:- Indirect Tax

Customs Duty Changes

The proposals for indirect taxes (Indirect Tax) in Budget 2023 promote exports, encourage domestic production, increase domestic value addition, and boost green energy and sustainability.

The customs duty on the following items in the list was modified:-

• National Calamity Contingent Duty (NCCD) has been increased on specified cigarettes.

• Customs duty has been increased on the import of silver doors, bars, and articles, alloyed with gold and platinum, as well as on precious metal jewelry made from gold, silver, and platinum.

• The exemption of Basic Customs Duty (BCD) on raw materials for the production of CRGO steel, ferrous scrap, and nickel cathode has been extended.

• The FM has reduced the Basic Custom Duty (BCD) on the seeds used for the production of Lab Grown Diamonds (LGDs).

• The Basic Custom Duty has been increased on electric kitchen chimneys.

• The Finance Minister has reduced the basic customs duty on open cell components of TV panels to encourage domestic manufacturing of televisions.

• Custom duty exemptions have been issued for the import of capital goods and machinery used in the manufacturing of lithium-ion cells for batteries in electric vehicles.

• A exemption has been granted for the GST-charged compressed biogas used in mixed compressed natural gas for the levy of excise duty.

• Basic customs duties, tariffs, and levies on imported consumer goods such as toys, bicycles, automobiles, and petroleum have undergone minor changes.

GST Changes

• Section 10 has been amended to provide an option for a taxpayer to choose a composition scheme, even if they are supplying goods through E-Commerce Operators, where TCS is collected under Section 52.

• Section 16 has been amended to provide that in cases where a recipient fails to pay the invoice value, including GST, to their supplier within 180 days from the date of issue of the invoice, they will be required to pay interest calculated under Section 50.

• Sections 37, 39, 44, and 52 have been amended to prohibit taxpayers from filing GSTR-1 (for outward supplies), GSTR-3B (summary return), GSTR-9 (annual return), and GSTR-8 (for e-commerce operators) after the expiry of three years from the due date of filing for the relevant tax period.

• E-commerce operators will be charged a fee equal to the amount of 10,000 INR as a penalty or any amount higher than that:-
  • An unregistered person may be allowed to supply goods or services or both through them, except for those who are exempted from GST registration.
  • Allow any registered person to supply goods/services in inter-state transactions through them, where they are ineligible for it.
  • A person who is exempted from obtaining GST registration should not fail to provide accurate details of any sale made through them in the GSTR-8.

• The following offenses have been reduced.
  • Yes, if any person obstructs or prevents an officer from performing their duties under the CGST Act,
  • Where any person tampers with or destroys physical evidence or documents,
  • Where any person fails to provide necessary information for supply under the CGST Act or provides incorrect information.

• Regarding the compensation for offenses, the maximum limit of including up to 100% of the amount has been changed by adjusting the 25% limit.

• A new section 158A has been added to the CGST Act to allow businesses to now share GST data digitally with consent. It specifies the methods and conditions for sharing information submitted by a registered person on the GST portal with other systems that can be notified-
  • such as GSTR-1/3B/9 returns,
  • registration application,
  • details of outward supplies,
  • e-invoice or e-way bill generation,
  • or any other information as may be notified.

Read More:-GSTIN to GSTIN acclaimed Cash Ledger Balance Transfer by Form GST PMT-09-Easily transferable within a minute

The main feature of Budget 2023:-Inclusive Development

The government’s policy of “Sabka Saath, Sabka Vikas” has benefited various sections of society including women, scheduled castes, scheduled tribes, other backward classes, and other marginalized groups. Budget 2023 will continue to build upon these efforts.

The main feature of Budget 2023:-Reaching the last mile

• Based on the success of the ambitious district program in Akankshi

• the government has proposed to spend 15,000 crores in the next three years for the Primitive Vulnerable Tribal Group (PVTG) to improve their social-economic conditions.

• The expenditure for the PM Awas Yojana has been increased by 66% to 79,000 crores.

• In the next three years, there is a plan to appoint 38,800 teachers and support staff for 740 Eklavya Model Residential Schools of the Central government, which will provide education to 3.5 lakh tribal students.

The main feature of Budget 2023:–Infrastructure and investment

• The proposed capital expenditure has been increased by 33% to 10 lakh crore rupees.

• The state governments will get a one-year extension on a 50-year interest-free loan, resulting in an outflow of 1.3 lakh crore rupees.

• A planned expenditure of 2.4 lakh crore rupees will be made for the railways.

• To enhance regional air connectivity, 50 airports, heliports, water aerodromes, and improved landing grounds will be revived.

• Additionally, a Urban Infrastructure Development Fund (UIDF) will be established with an annual expenditure of 10,000 crore rupees to create basic urban infrastructure in Tier 2 and Tier 3 cities.

The main feature of Budget 2023:–Unleashing the potential

• Trust from Conflict I: During the COVID period, if MSMEs fail to fulfill their contracts, the government and its subsidiaries will return 95% of the confiscated amount related to performance security.

• The KYC process will be streamlined and the PAN card will be adopted as a unique identifier.

• A national data governance policy will be presented to facilitate access to unidentified data by startups and educators for research and innovation purposes.

• 39,000 complaints have been reduced for ease of doing business in India, and 3,400 provisions have been removed from the category of crimes.

• To achieve the vision of “Make AI in India and Make AI work for India”, three Centers of Excellence for Artificial Intelligence (AI) will be established in top academic institutions.

• The unified filing process will eliminate the need to submit information separately to different government departments. People will now have the option to voluntarily share information with other government agencies on a common portal.

The main feature of Budget 2023:–“Green Growth“

The government has included “green development” in seven focus areas of this year’s budget with the aim of achieving net-zero carbon emissions in India by 2070. The following announcements have been made to support this goal:

• Green Hydrogen: Rs. 19,700 crore has been allocated for the National Green Hydrogen Mission, which will boost low-carbon intensity in the economy, reduce dependence on imported fossil fuels, and establish the country as a technology and market leader in this growing industry.

• Energy Transmission: A proposed construction of a 13 GW renewable energy transmission system from Ladakh with a total investment of 20,700 crore rupees, including 8,300 crore rupees of central support.

• The Green Credit Program : It has been launched to encourage environmentally friendly practices under the Environmental Protection Act.

• Vehicle Replacement: The central government has allocated funds for scrapping old vehicles owned by it, and will also provide assistance to states in replacing their old vehicles and state ambulances.

• Energy Transition: To achieve energy transition, net zero targets and enhance energy security, a significant investment of 35,000 crore rupees has been allocated.

• Battery Storage: Battery energy storage systems with a capacity of 4,000 megawatt-hours have been allocated funding through the viability gap funding for battery energy storage systems.

The main feature of Budget 2023:-Youth Power

• The PM Skill Development Program will be launched to provide skills to millions of youth, including new-age courses.

• The National Education Promotion Scheme will provide scholarships to 47 lakh students in the next three years through Direct Benefit Transfer (DBT).

The main feature of Budget 2023:- Financial Sector

• Revamped credit guarantee schemes for MSMEs will be implemented from 2023 with an investment of 9,000 crore rupees. This will provide an additional collateral-free guaranteed loan of 2 lakh crore rupees and also reduce the cost of credit by almost 1%.

• To improve business operations in GIFT IFSC, the government will implement an integrated IT system for registration and approval with SEZ officials, IFSCA, GSTN, SEBI, RBI, and IRDAI.

• Under the Companies Act, a Central Scrutiny Centre will be established to provide businesses with quick responses through various forms of centralized operations.

• An integrated IT portal will be established to assist investors in reclaiming unclaimed dividends and benefits of shares not claimed from the Investor Education and Protection Fund Authority (IEPFA).

• The “Mahila Samman Bachat Praman Patra” scheme has been launched, which offers a maximum deposit of Rs. 2 lakhs and a fixed deposit plan for two years for women. The scheme is valid until March 2025 and will receive a guaranteed interest rate of 7.5%.

• The Senior Citizens Savings Scheme (SCSS) has increased the maximum investment limit from 15 lakh rupees to 30 lakh rupees for the quarter ending on March 31, 2023, with an interest rate of 8%.

• The Monthly Income Scheme of the Post Office (POMIS) – Under this scheme, the deposit limit for single accounts has been increased from Rs 4.5 lakhs to Rs 9 lakhs and for joint accounts from Rs 9 lakhs to Rs 15 lakhs.

Budget 2023 Highlights: What’s Cheap and What’s Expensive?

Budget 2023 Highlights: Key Figures and Budget Allocations

The projected GDP growth rate for FY23 is 7%, and the government plans to spend 2,200 crore rupees on high-value horticulture crops as part of the Atmanirbhar Swachh Bharat Abhiyan program to increase the supply of disease-free planting material.

The agriculture credit target will be increased to 20 lakh crore rupees.

• The current fiscal deficit of the GDP is 6.4%, and the government aims to bring it below 4.5% by 2025-26.

• The government has announced a 2% interest subsidy on effective interest rates of up to 7% per annum for short-term loans of up to 3 lakh rupees to help farmers.

• The Reserve Bank of India (RBI) has increased the limit for collateral-free agricultural loans from 1 lakh rupees to 1.6 lakh rupees.

Expectations from Budget 2023:

According to the Income Tax Department, a large percentage of taxpayers are salary earners. In 2022, nearly 50% of the ITR-1 filed were by individuals in the salaried class. However, in the past few budgets, salaried individuals were not very happy with the new tax system. They have some expectations and hope that they will be fulfilled. This is understandable because the impact of deductions, salary cuts, rising inflation, and the fear of a global recession have made it difficult for them in recent years.

Potential changes that could be included in Budget 2023 for the salaried class are as follows:

• Tax Exemption Limit

The current tax exemption limit of 2.5 lakh rupees was set in 2014-15. Considering factors such as inflation, it should be increased to 5 lakh rupees.

• Increased Standard Deduction

The government can increase the standard deduction limit from 50,000 rupees to 1,00,000 rupees in this budget.

• Decluttering Section 80C

Section 80C of the Income Tax Act currently provides a wide range of investment options such as public provident fund, employee provident fund, national pension system, term deposits, and home loan repayment. However, the deduction limit is currently restricted to up to Rs 1.5 lakh. Since the last review of this section in 2014, there has been a significant increase in income, which has limited the scope for tax-saving investments. The government should consider reviewing investment options or increasing the deduction limit beyond Rs 1.5 lakh.

• Deductions for Medical Insurance Premium

The government is considering increasing the limit of deductions under section 80D for medical expenses and hospitalization due to the high cost of advanced medical treatments and hospitalization. The limit may be increased from Rs. 25,000/50,000 to Rs. 50,000/1 lakh, respectively.

• Reduced Surcharge Rate

The 37% surcharge increases the tax rate to 42.744% for individuals earning more than 5 crore rupees. This is an attempt by the government to rationalize surcharge rates and review them again.

• Validity of other Deductions

March 31, 2023 is the deadline to claim deductions for interest on housing loans under section 80EEA and on electric vehicle loans under section 80EEB. It is possible to hope for an extension of these deductions for another two years.

• Reviewing Children’s Education and Hostel Allowance

What do you think will be the cost of a child’s education today? The cost of child education and hostel allowance has been fixed at Rs 100 and Rs 300 per month for over 20 years. The government should consider increasing the limit to Rs 1,000 and Rs 3,000 per child per month.

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