The Finance Minister, Nirmala Sitharaman today presented the Union Budget 2023-2024, which is her fifth consecutive budget, and also the last of the NDA-led India Government before the elections begin next year.
The Budget 2023-24 had something positive for every strata of the society. A few of the main highlights include broadening of tax slabs under the new tax regime, new savings scheme for women, increased deposit limit on senior citizens savings scheme, and many more.
Financial experts say Budget 2023-24 aimed at higher tax savings will promote personal consumption. Here are some of the top five highlights related to personal finance from the Union Budget 2023-2024.
Key Exemptions on Personal Income Tax in Budget 2023
Several big announcements on personal income tax under the new income tax regime have been proposed. Of them, the income tax rebate limit under the new income tax regime has been hiked to INR 7 lakh from the current INR 5 lakh.
During the speech, Finance Minister Nirmala Sitharaman, said “I propose to increase the rebate limit to INR 7 lakh in the new tax regime. Thus, persons in the new tax regime, with income up to INR 7 lakh will not have to pay any tax.”
Another notable announcement under the new income tax regime is that the lowest exemption limit under the slab has been increased to INR 3 lakh from INR 2.5 lakh. The new income tax regime will now have tax slabs, as follows:
The tax rebate on the old tax regime remains unchanged.
Related: Income Tax Slab For FY 2023-24.
The Finance Minister expects changes in the new tax regime to provide major relief to taxpayers. Citing an example, the minister said that taxpayers in the new tax regime whose annual income is INR 9 lakh will be required to pay INR 45,000, which is a reduction of 25% on what he or she is required to pay now, ie, INR 60,000.
Also, the surcharge rate in the new income tax regime has been brought down to 25% from 37%.
Chief Economist and Executive Vice President of HDFC Bank, Abheek Barua, believes “The adjustments in income tax slabs is likely to boost consumption and savings in the economy, benefitting taxpayers particularly at the lower brackets of the income pyramid.”
Related: Direct Tax: Definition, Types & Rates Of Taxation In 2023.
Furthermore, the Union Budget 2023-2024 has proposed to reduce tax deduction at source (TDS) from 30% to 20% on the taxable portion of EPF withdrawal in non-PAN cases. Also, the conversion of gold into electronic gold receipt and vice versa has been proposed not to be treated as capital gain.
New Savings Scheme for Women
The Budget 2023 announced a new savings scheme for women or girls, called Mahila Samman Savings Certificate (MSSC). The fixed deposit scheme will provide a fixed interest rate of 7.5% per annum on deposits up to INR 2 lakh for tenor up to two years, with a benefit of partial withdrawal option.
For Senior Citizen Savings Scheme (SCSS), the maximum deposit limit has been hiked from INR 15 lakh to INR 30 lakh. Provided by banks and post offices, the savings scheme for senior citizens offers an interest rate of 8% per annum.
Similarly, the maximum deposit limit for post office Monthly Income Scheme Account (MIS) has been hiked to INR 9 lakh for single accounts, and up to INR 15 lakh for joint accounts. The MIS scheme for all age groups offers an interest rate of 7.10% per annum.
Furthermore, the tax exemption limit on leave encashment on retirement of salaried employees working on private establishments has been increased to INR 25 lakh from INR 3 lakh under Section 10(10AA) of the Income Tax Act.
Extension of Credit to Cash-starved MSMEs
The Budget 2023-24 has announced the capital infusion of INR 9,000 crore under the credit guarantee scheme for MSMEs to commence from Apr. 1. 2023. According to the Finance Minister, the move will enable additional collateral-free guaranteed credit of INR 2 lakh crore. The cost of the credit has been reduced by about 1%.
Additionally, the government has proposed to return to MSMES the 95% of the forfeited amount relating to bid or performance security.
AK Goel, Chief Executive Officer (CEO) of Punjab National Bank believes “The policies aimed to increase the fund flow to MSMEs by enhancing the corpus of credit guarantee scheme for MSMEs, less stringent contract execution for MSMEs would encourage the banking sector to increase the flow of credit to MSMEs.”
Simplifying Access to Financial Services
The Budget 2023-24 has proposed setting up of a national financial information registry to facilitate flow of credit, promote financial inclusion, and foster financial stability. The Finance Minister has proposed to create a new legislative framework in consultation with the Reserve Bank of India (RBI) to govern this credit public infrastructure.
Further, a central processing center is on cards for faster response to companies through centralized handling of various forms filed with field offices under the Companies Act. Also, an entity digiLocker for MSMEs as well as large businesses and charitable trusts for storing and sharing documents online securely with various authorities, regulators, banks and other business entities.
Krishnan Sitaraman, Senior Director and Deputy Chief Ratings Officer of CRISIL Ratings, said “The move towards democratization of information, with the government planning to set up a national financial information registry to serve as a central repository of financial and ancillary information, should support quicker and more streamlined credit appraisals and monitoring for lenders.”
Aiding Tax Benefits For Companies and Corporations
Similarly, the Budget 2023-24 has aimed to bring in tax compliance in the form of relaxation and benefits of regulatory provisions to promote ease of doing business in India.
The micro enterprises with turnover up to INR 2 crore and certain professionals with turnover of up to INR 50 lakh can avail of the benefit of presumptive taxation. The Finance Minister said, “I propose to provide enhanced limits of INR 3 crore and INR 75 lakh respectively, to the taxpayers whose cash receipts are no more than 5%.”
Similarly, some of the major tax benefits for companies and corporations include:
- 15% corporate tax benefits to new cooperatives commencing manufacturing till March 31, 2024.
- Higher limit of INR 3 crore for tax deducted at source (TDS) on cash withdrawal for co-operative societies.
- Income of authorities, boards and commissions set up by statutes of the union territories or state to be exempted from income tax in certain sectors
- Extension of period of tax benefits to funds relocating to IFSC, GIFT City till March 31, 2025.
- Deduction on payments made to MSMEs to be allowed only when payment is actually made.
Highlights on Govt’s Efforts to Uplift the Marginalized
The outlay for the Indian Government’s flagship housing program, Pradhan Mantri Awas Yojana (PMAY) is being enhanced by 66% to over INR 79,000 crore to construct two crore houses for people belonging to low and middle income families. In the last budget, the government had allocated INR 48,000 crore for the “housing for all” initiative.
Furthermore, the Budget 2023-24 has proposed to cap deduction from capital gains on investment in residential houses under Sections 54 and 54F to INR 10 cr.
Here are some other key announcements related to the personal finance sector:
- PM Jan Dhan created 47.8 crore bank accounts.
- PM Suraksha Bima and PM Jeevan Jyoti Yojana achieved insurance coverage for 44.6 crore policy holders.
- EPFO membership more than doubled to 27 crore in 2022.
- UPI crossed 7,400 crore digital payments of INR 126 lakh last year.
- Taxpayers’ portal received 72 lakh returns in a day and processed over 6.5 crore returns.
- Amendments to the Banking Regulation Act, the Banking Companies Act, and the Reserve Bank of India Act are proposed to improve bank governance and enhance investors’ protection.
The Budget 2023-24 has been a balanced one that has kept the requirements of the common Indian in mind. From personal tax revision to extension of credit to small and medium businesses, Nirmala Sitharaman has suggested via her Budget proposals that saving and spending go hand in hand and her government is determined to help Indians manage their needs and expenses better.