The Union Budget 2023, presented by Finance Minister Nirmala Sitharaman, is a balanced and well-thought-out document that aims to provide financial stability and support the growth trajectory of the Indian economy. Despite the challenging global macroeconomic conditions, the Budget has made significant investments in capital expenditure, with a planned allocation of Rs 10 lakh crores for the coming financial year. This should help to further improve India’s prospects for strong GDP growth and job creation across various sectors, including infrastructure, railways, power, and others.
Overall Impact
The Budget also sends a strong message on fiscal discipline, with a fiscal deficit target of 5.9 percent for the next financial year, while retaining the original glide path of reducing the fiscal deficit to 4.5 percent by FY26. This will bring cheer to the bond markets and reinforce the government’s commitment to consolidating the fiscal deficit.
Relief for Salaried Class?
In terms of tax and savings-related announcements, the Budget provides several benefits for the middle-class segment. The new tax regime for individual taxpayers, introduced in 2020, has been strengthened with additional reforms aimed at reducing the tax burden by 20-25 percent for income slabs between 9-15 lakhs. The introduction of a standard deduction of 52,500, and the increase in the basic income limit to 3 lakhs and rebate up to 7 lakhs, should encourage a higher shift towards the new regime.
What do we have for Senior Citizens?
For senior citizens and retired investors, the Budget has also increased the limit for the senior citizen savings scheme from Rs 15 lakhs to Rs 30 lakhs, providing a safer investment option. On the other hand, the capital gains tax remains unchanged, providing a big relief for the markets, which were initially worried about possible changes in the form of a holding period and lower slabs.
Surcharge and Capital Gain
For the ultra-high net worth segment, the Budget has mixed announcements. On the one hand, the maximum marginal tax slab has been reduced by lowering the highest tax surcharge slab from 37 percent to 25 percent for taxable income over INR 5 crore. On the other hand, there is a negative impact in the form of a ceiling of Rs 10 crores on the capital gains exemption when investing in a house property under section 54.
KYC Process Simplification
The Budget also includes several important reforms aimed at simplifying the financial system, including a simplification of the KYC process, which should improve the efficiency of financial transactions with faster account opening and setups. The conversion of gold from physical to digital form and vice versa has also been made a non-taxable event from capital gains, providing another important simplification in the tax regime.
Conclusion
In conclusion, the Union Budget 2023 presents a well-rounded and balanced approach to the Indian economy, providing financial stability and support for growth. The investments in capital expenditure, the commitment to fiscal discipline, and the tax and savings-related benefits for various segments, along with the important reforms aimed at simplifying the financial system, should help to improve the macroeconomic picture of India and provide a strong foundation for future growth.
