Budget 2023 Highlights: PDF Download, Key Takeaways, Important Points
Updated on: Feb 6th, 2023 - 10:54:09 AM
39 min read
The Finance Minister, Nirmala Sitharaman, unveiled the Union Budget 2023 on 1st February 2023.
Generally, the budget before general elections is always a much-anticipated one with everyone hoping for big, bold moves. But most budgets tend to fall short on the surprise factor. This year's budget was no exception as it was mostly just a repackaging of old schemes with additional fund allocation. But salaried taxpayers were in for a surprise. They got the much needed tax break. Various tax relief measures were introduced under the new tax regime. It looks like the government wants taxpayers to switch to the new tax regime and phase out the old tax regime. All we can hope for is enough time to adopt the new regime and make the most of the old one while it lasts.
The increase in duty on cigarettes, which was missing for three years, made a reappearance. Various measures were included to boost consumption in the economy, ease compliance burden, benefit MSMEs and the middle-class and simplify and streamline the tax system.
The Budget mentioned: Inclusive development, reaching the last mile, infrastructure and investment, unleashing the potential, green growth, youth power, financial sector as its seven priorities. Let’s decode Budget 2023.
Budget 2023 Highlights: Direct Tax
'Resident but Not Ordinarily Resident' person to pay taxes on money received (in form of gift) from Residents if it is more than ₹50,000.
Changes in New Tax Regime
The new tax regime is now the default tax regime. The government has taken 5 key measures to make the new tax regime more attractive. However, taxpayers have an option to choose the old tax regime.
Change in new tax regime slabs for FY 2023-24 (AY 2024-25):
Income Tax Rate
Up to ₹ 3,00,000
₹3,00,000 - ₹6,00,000
5% on income which exceeds ₹3,00,000
₹6,00,000 to ₹900,000
₹15,000 + 10% on income more than ₹6,00,000
₹9,00,000 to ₹12,00,000
₹45,000 + 15% on income more than ₹9,00,000
₹12,00,000 to ₹1500,000
₹90,000 + 20% on income more than ₹12,00,000
₹150,000 + 30% on income more than ₹15,00,000
Tax rebate on an income of up to ₹7 lakhs has been introduced under the new tax regime. This means that taxpayers with an income of up to ₹7 lakhs will not have to pay any tax at all!
Salary income: ₹50,000 standard deduction under the new tax regime as well. Effectively, ₹7.5 lakhs is your tax-free income under the new regime.
Family pension: Standard deduction on such pension: ₹15,000 or 1/3rd of pension, whichever is lower.
Highest surcharge under the new tax regime has been reduced to 25% from 37% for people earning more than ₹5 crore. This move brings down their tax rate from 42.74% to 39%.
Presumptive Taxation Limits Revised for FY 2023-24
Sec 44AD: For small businesses
Sec 44ADA: For professionals like doctors, lawyers, engineers, etc.
*The increase in limits is subject to a condition that the 95% of the receipts must be through online channels.
Date of incorporation for income tax benefits
Time limit for set-off and carry forward of losses
7 years from incorporation
10 years from incorporation
Only condition is that shareholders who hold at least 51% shareholding must continue to hold the shares in the year such loss is to be carried forward and set-off.
Some of the proposals announced for co-operative Societies are:
New manufacturing initiatives: The government has extended the benefit of concessional tax rate of 15% to new co-operatives that commence manufacturing by 31st March, 2024.
Sugar co-operatives: Any expenditure that was disallowed to sugar co-operatives prior to 2016-17, can be claimed now by making an application to the Assessing Officer.
Section 194N: TDS limit on cash withdrawals is increased to ₹3 crores for co-operatives societies.
Cash deposit limit: Limit for cash deposits and loans by Primary Agricultural Co-operative Societies (PACS) and Primary Co-operative Agriculture and Rural Development Banks (PCARDBs) is being increased to a maximum of ₹2,00,000 per member.
Agniveer Corpus Fund
To promote Agnipath scheme, the following changes will take place from 1st April 2023:
Contributions made by an Agniveer to the Agniveer Corpus Fund will be considered a tax deduction from their income.
The Central Government's contribution to the Agniveer Corpus Fund will be considered as income for the Agniveer which will also be eligible for deduction.
Any amount received by an Agniveer or their nominee from the Agniveer Corpus Fund will be tax-free.
Other Direct Tax Updates
Leave Encashment: The exemption threshold for Leave encashment has been increased to ₹25 lakh from ₹3 lakh for non-government employees. Thus, at the time of retirement, leave encashment of up to ₹25 lakhs for a maximum period of 10 months is tax-free under Section 10(10AA).
TDS on EPF Withdrawal: TDS rate has been reduced to 20% from 30% on taxable withdrawal of EPF.
Payment Based Deduction: Payments to MSMEs must be made within the time frame agreed upon in writing, with a maximum limit of 45 days. If there is no written agreement, the time frame is 15 days. Any payment made outside this time frame can only be deducted (as expenditure) in the year it is actually paid.
No Penalty: Where a loan is accepted or repaid by a primary agricultural credit society or a primary co-operative agricultural and rural development bank to its members or vice versa, no penalty would arise under Section 269SS or 269ST.
Capital Gains Exemption limit: The capital gains tax exemption under Section 54 to 54F is restricted to Rs. 10 crores. Earlier, there was no threshold.
Online Gaming: Net winnings from online gaming will be taxed at 30%. From 1 July 2023, TDS will be withheld on such net winnings (currently the rate is 30%).
Section 80G donations: Donations made to the following funds will not be eligible for 80G deductions:
Jawaharlal Nehru Memorial Fund
Indira Gandhi Memorial Trust and
Rajiv Gandhi Foundation
Revised time limits for completing assessment
Scrutiny assessment & best judgment assessment
Within 12 months from the end of the assessment year (additional 12 months if case referred to Transfer Pricing officer)
Scrutiny assessment & best judgment assessment in case of updated return
Within 12 months from the end of the financial year in which such return is filed
Fresh assessment post the ITAT order or revision order in case of updated return
Within 12 months from the end of the financial year in which the order is passed
Assessments pending on date of initiation of search or requisition being made
Additional 12 months from regular due date
Budget 2023 Highlights: Indirect Tax
Customs Duty Changes
The indirect tax proposals made in Budget 2023 promote exports, encourage domestic manufacturing, enhance domestic value addition, and boost green energy and mobility.
The customs duties were revised on the following list of items-
Items of which customs duty was revised
Imported capital goods for lithium-ion battery manufacturing
For greener mobility
Imported mobile camera lens
Deepening value addition
Denatured ethyl alcohol
Benefits the chemical industry
Primary inputs for making shrimp feed
Increase in marine exports
Seeds for manufacturing lab-grown diamonds
Extending the concessional Basic Customs Duty (BCD) on copper scrap
Increasing raw material availability for MSMEs
Compounding rubber to bring it at par with natural rubber
To curb duty circumvention
National Calamity Contingent Duty (NCCD) on specified cigarettes was increased.
The customs duty for importing silver dore, bars and articles has been increased to align them with that on gold and platinum. Further, the duty on jewellery made from precious metals including gold, silver and platinum is increased.
Extension is granted to the exemption from BCD on raw materials for manufacturing CRGO Steel, ferrous scrap and nickel cathode.
FM has reduced the basic customs duty on seeds used to manufacture Lab Grown Diamonds (LGDs).
The basic customs duty on the electric kitchen chimneys has been increased.
FM reduced the basic customs duty on parts of open cells of TV panels to encourage domestic manufacturing of television.
The customs duty exemption is being continued for the import of capital goods and machinery that are used for manufacturing lithium-ion cells for batteries in electric vehicles.
Exemption is also granted for excise duty on GST-paid compressed bio-gas used in blended compressed natural gas.
Minor changes are carried out in the basic customs duties, cesses and surcharges on certain consumables imported, such as toys, bicycles, automobiles and naphtha.
Section 10 stands amended such that a taxpayer can opt into the composition scheme even if they are supplying goods through e-commerce operators where TCS is collected under Section 52.
Section 16 is amended for a condition that in cases where a recipient taxpayer fails to pay to their supplier invoice value including the GST within 180 days from the date of issue of invoice, then they must pay with interest computed under Section 50 on it.
Section 17(5) is revised to include another item under ineligible ITC- Expenditure on CSR initiative for corporates.
High sea sales and similar transactions neither supply of goods or services are considered exempt and hence ITC proportional to such sales cannot be claimed as per revised Section 17(3).
Sections 37, 39, 44, and 52 are amended to restrict taxpayers from filing GSTR-1 (return for outward supplies), GSTR-3B (summary returns), GSTR-9 (annual returns), and GSTR-8 (e-commerce operator) for a tax period after the expiry of three years from the due date.
Penalty of Rs.10,000 or an amount equivalent to the amount of tax involved, whichever is higher will be charged for e-commerce operators who-
Allow an unregistered person to supply goods or services or both through them except where such person is exempted from GST registration.
Allow any registered person from making inter-state supply of goods/services through them where they are ineligible for it.
Do not furnish accurate details in the GSTR-8 of any sale of goods made through them by a person exempted from obtaining GST registration.
The following offences have been decriminalised-
Where a person obstructs or prevents an officer in the discharge of their duties under the CGST Act,
Where a person tampers with or destroys material evidence or documents,
Where a person fails to supply information that is required to be supplied under the CGST Act or Rules or supplies false information.
In regard to the compounding of offences, the limits have been changed to 25% of the tax involved up to a maximum amount of 100% of the tax involved.
A new section 158A has been inserted in the CGST Act to allow businesses to now share GST data digitally with consent. It prescribes the manner and conditions for sharing information furnished by a registered person on the GST portal with such other systems as may be notified, as declared in-
Returns filed under GSTR-1/3B/9, or
Application of registration, or
Statement of outward supplies, or
Generation of an e-invoice or e-way bill, or
Any other details, as may be prescribed.
Budget 2023 Highlights: Inclusive Development
The government's policy of "Sabka Saath Sabka Vikas" has benefited various sections of society, including women, SCs, STs, OBCs, and other underprivileged groups. The budget will continue to build on those efforts.
Budget 2023 Highlights: Reaching the last mile
Building on the success of the Aspirational District program, government launched
Proposed an outlay of Rs 15000 crores for the newly launched Pradhan Mantri PVTG (Primitive Vulnerable Tribal Group) over next 3 years to improve socio-economic conditions of the vulnerable tribal groups
Outlay for PM Awaas Yojana was enhanced by 66% to over Rs 79,000 crores.
In the next three years, the center plans to hire 38,800 teachers and support staff for 740 Eklavya Model Residential Schools, which will cater to 3.5 lakh tribal students.
Budget 2023 Highlights: Infrastructure and investment
Proposed capital expenditure is increased by 33% to Rs 10 lakh crore.
50-year interest free loan to state governmemnts will be extended for one more year resulting in an outflow of rs 1.3 lakh crore.
Planned outlay of Rs 2.4 lakh crore towards railways
Fifty airports, heliports, water aerodromes, and advanced landing grounds will be revived to enhance regional air connectivity.
Urban Infrastructure Development Fund (UIDF) will be established with an outlay of Rs 10,000 crore per annum to create urban infrastructure in Tier 2 and Tier 3 cities
Budget 2023 Highlights: Unleashing the potential
Vivad se Vishwas I: During the Covid period, if MSMEs failed to fulfill their contracts, the government and its undertakings will refund 95% of the forfeited amount relating to bid or performance security.
KYC process will be streamlined and PAN card will be adopted as a single identifier.
A National Data Governance Policy will be introduced, providing access to anonymized data for the purpose of research and innovation by startups and academia.
To improve the ease of doing business in India, 39,000 complinaces have been reduced and 3,400 provisions have been decriminalised.
Three centres of excellence for Artificial Intelligence (AI) will be set-up in top educational institutions to achieve the vision of “Make AI in India and Make AI work for India”.
Unified filing process will eliminate the need for filing the same information with different government departments. People will now be allowed to voluntarily share the information with other government agencies over a common portal.
Budget 2023 Highlights: "Green Growth"
The government included "Green Growth" among the seven focus areas of this year's Budget, with the aim of achieving net zero carbon emissions in India by 2070. To support this following announcements were made:
Green hydrogen: allocated Rs 19,700 crore for the National Green Hydrogen Mission, which will promote a shift to low carbon intensity in the economy, decrease reliance on fossil fuel imports and establish the country as a technology and market leader in this growing industry.
Energy transmission: Proposed construction of a transmission system of 13 GW renewable energy from Ladakh with a total investment of Rs 20,700 crore including central support of Rs 8,300 crore
Green credit programme: Introduced green credit program to encourage environmentally friendly behavior under the Environment Protection Act.
Vehicle replacement: allocated funds for scrapping old vehicles owned by the central government, and will also provide support to states in replacing their old vehicles and state ambulance
Energy transition: allocated Rs 35,000 crores for crucial capital investments towards achieving energy transition, reaching net zero targets, and enhancing energy security.
Battery storage: Viability gap funding introduced for battery energy storage systems with a capacity of 4,000 MWh
Budget 2023 Highlights: Youth power
The PM Kaushal Vikas Yojana 4.0 will be launched to skill lakhs of youth, covering new-age courses.
National Apprenticeship Promotion Scheme to provide stipend to 47 lakh youth over next three years through Direct Benefit Transfer (DBT).
Budget 2023 Highlights: Financial sector
Revamp credit guarantee schemes for MSMEs will be implemented starting 2023, with an infusion of Rs 9,000 crore. This will provide additional collateral-free guaranteed credit of Rs 2 lakh crore. Further, the cost of the credit will be reduced by nearly 1%
To improve business operations in GIFT IFSC, government will Implement a unified IT system for registration and approval from SEZ authorities, IFSCA, GSTN, SEBI,RBI and IRDAI.
Central Processing Center will be established to provide quicker responses to businesses through centralized handling of various forms under the Companies Act.
Integrated IT portal will be established which will help investors to reclaim unclaimed shares and unpaid dividends from the Investor Education and Protection Fund Authority (IEPFA).
Mahila Sanman Savings Certificate- A one-time deposit scheme for women with a maximum deposit of Rs.2 lakh and a tenure of up to two years has been introduced. This scheme is valid till March 2025 and will fetch a fixed interest rate of 7.5%.
Senior Citizen Savings Scheme (SCSS) - The maximum investment limit has been raised from Rs.15 lakh to Rs.30 lakh, with an interest rate of 8% for the quarter ended 31st March, 2023.
Postal Monthly Income Scheme (POMIS) - Investors under this scheme too saw an increase in deposit limit from Rs.4.5 lakh to Rs.9 lakh for single accounts and Rs.9 to Rs.15 lakh for joint accounts.
Budget 2023 Highlights: What’s Cheaper and What’s Costlier?
What got cheaper
What got costlier
Travel by flights
Compressed gas for EVs
Lithium-ion batteries for mobile phones
Electric kitchen chimney
Budget 2023 Highlights: Key Numbers and Budget Allocation
FY23 GDP growth estimated at 7%. To spend Rs 2,200 crore on high-value horticulture crops as part of the Atmanirbhar Clean Plant Programme to enhance the supply of superior, disease-free planting material.
The agricultural credit target will be increased to Rs 20 lakh crore.
While the current fiscal deficit is 6.4% of GDP. the government aims to bring it down below 4.5% of GDP by 2025-26.
The government has stated that it will offer a 2% interest subsidy to help farmers obtain short-term loans of up to INR 3 lakh at an effective interest rate of 7% per year.
The Reserve Bank of India (RBI) has increased the limit for collateral-free agriculture loans from INR 1 lakh to INR 1.6 lakh.
According to the income tax department, salaried individuals comprise a large percentage of taxpayers. In 2022, nearly 50% of the ITRs filed were ITR-1 by salaried class individuals. But the salaried individuals had very little to cheer about in the last few budgets except the new tax regime. They have a few expectations they hope will be met. Rightly so, because the last few years have been difficult for them given the harsh impact of layoffs, pay cuts, rising inflation and the fear of global recession.
Potential changes that may be included in the budget for the salaried class are:
Tax Exemption Limit:
The current tax exemption limit of Rs.2.5 lakh has stayed the same since 2014-15. It should be increased to Rs 5 lakh, considering factors such as inflation.
Increased Standard Deduction
The government may raise the standard deduction limit from Rs 50,000 to Rs 1,00,000 in this budget.
Decluttering Section 80C
Section 80C of the Income Tax Act currently offers a wide range of investment options such as the Public Provident Fund, Employee Provident Fund, National Pension System, Fixed Deposits, and home loan repayment. However, the deduction limit is restricted to Rs 1.5 lakh. Since the last review of this section in 2014, incomes have risen significantly, leaving limited scope for tax-saving investments. The government should consider reviewing the investment options or raising the deduction limit from Rs 1.5 lakh.
Deductions for Medical Insurance Premium
The government may consider increasing the deduction limits under Section 80D from Rs.25,000/Rs.50,000 to Rs.50,000/Rs.1 lakh, respectively, due to high medical expenses and hospitalisation costs.
Reduced Surcharge Rate
The surcharge rate of 37% brings the tax to 42.744% for people earning more than Rs.5 crores. It is time for the government to rationalise and revisit the surcharge rates.
Validity of other Deductions
31st March 2023 is the last date to claim deductions like 80EEA (interest on housing loan) and 80EEB (interest on electric vehicle loan). We can expect to see a 2-year extension on these deductions.
Reviewing Children's Education and Hostel Allowance
How much do you think a child's education would cost today? The Child Education and Hostel Allowance have remained the same at Rs.100 and Rs.300 per child per month for over 20 years. The government should consider raising the limits to Rs.1,000 and Rs.3,000 per child per month, respectively.
The key highlights of Budget 2022 was embracing trust-based governance, it introduced ITR-U in Budget 2022, allowing taxpayers to declare their undeclared income or update their return within two years from the end of the relevant assessment year. The tax rates did not change in the financial year 2022-23, but we saw some aggressive moves that discouraged crypto transactions in India.
A 30% tax was introduced on Virtual Digital Assets (VDA) like cryptocurrency without allowing the losses of one cryptocurrency to be offset against income from other cryptocurrencies. Also, no deductions were allowed besides the acquisition cost. This meant that crypto investors paid taxes on the gains, but in the event of losses, they solely bore the brunt.
Investors and traders also took a 1% cut in the form of TDS on payments exceeding Rs.10,000 per annum on VDAs. The Finance Act 2022 added Section 194S, where 10% TDS was introduced for persons providing benefits or perquisites over Rs.20,000 per annum, particularly impacting doctors, music bands, and influencers.
A host of amendments were made under the GST law. Significant ones include sequential filing of GST returns, restriction to Input Tax Credit (ITC) claims to those that appear only in Form GSTR-2B of the buyer and adding a condition that filing of GSTR-1 is compulsory before filing GSTR-3B of the same period. The annual time limit for amendments to sales invoices/debit-credit notes and ITC claims belonging to a financial year was revised as 30th November of the following year.
FAQs On Budget 2023:
1. Will the government discontinue the old tax regime?
The Finance Minister stated that the new tax system will now be the default tax system in Budget 2023. Regarding what would happen to the previous tax system, taxpayers were confused. However, taxpayers should be aware that the previous tax system is still available to them and is not being abandoned.
2. Can we continue to switch between the old and the new tax regimes?
Taxpayers without business income can switch between the old and new tax regimes every year. However, taxpayers with business or professional income can switch only once in a lifetime.
3. Which tax regime is better?
To make the new tax system more appealing, several tax relief measures were implemented in the 2023 Budget. Which tax system is preferable between the old and new ones will depend on a person's specific situation. This calculator can help you determine which regimen will benefit you the most.
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