We hope this newsletter finds you in good health and high spirits. In this edition, we would like to provide you with an update on the Union Budget 2023 presented by the Honorable Finance Minister Nirmala Sitharaman. The Budget aims to prioritize following key areas:
- Reaching the last mile
- Inclusive Development
- Infrastructure and Investment
- Unleashing Potential
- Green Growth
- Youth Power
- Financial Sector
The budget aims to provide ample opportunities for citizens, especially the youth, and support growth and job creation while also strengthening the macro-economic stability.
The budget includes several amendments in Direct and Indirect Tax Law in the Finance Bill, 2023 which are discussed below:
Income Tax Highlights – Direct Tax
For Individuals:
- Tax Exemption for Income up to Rs. 7.5 Lakhs: The budget has proposed a rebate for income up to Rs. 7 Lakhs, with an additional standard deduction of Rs. 0.5 Lakhs, making a total of Rs. 7.5 Lakhs not liable to tax.
- Default Tax Regime with Revised Tax Slabs: The new tax regime is proposed to become the default option, with revised tax slabs as follows:
Income Slabs | Tax Rate |
Rs. 0 – 3 Lakhs | NIL |
Rs. 3 Lakhs – 6 Lakhs | 5% |
Rs. 6 Lakhs – 9 Lakhs | 10% |
Rs. 9 Lakhs – 12 Lakhs | 15% |
Rs. 12 Lakhs – 15 Lakhs | 20% |
Above Rs. 15 Lakhs | 30% |
- Standard Deduction of Rs. 52,500: The budget has introduced a standard deduction of Rs. 52,500 for taxpayers.
- Reduction in Surcharge Rate: The government has proposed to reduce the highest surcharge rate from 37% to 25% under the new tax regime.
- Cap on Capital Gains Deduction: The government has proposed to cap the deductions from capital gains on investments in residential houses at Rs. 10 Crore.
- Increase in Tax Exemption for Leave Encashment: The budget has increased the tax exemption on leave encashment on retirement of non-government salaried employees to Rs. 25 Lakh from Rs. 3 Lakh.
- TDS and Taxability on Online Game Winnings: The government has proposed to provide for TDS and taxability on net winnings from online games at the time of withdrawal or at the end of the fiscal year.
For Business and Professionals:
- Increased Turnover Limits for Presumptive Taxation: The limit for professionals has been raised to Rs. 75 lakhs for those who have cash receipts not exceeding 5%. The limit for businesses has also been raised to Rs. 3 crores with the same conditions.
- Enhanced TCS on Foreign Remittances: The rate of TCS has been increased from 5% to 20% without a ceiling limit of Rs. 7 lakhs.
- Tax Benefits for Start-Ups: Start-Ups incorporated up to 31st March 2024 will be eligible for tax exemptions under Section 80-IAC and carry forward of losses for up to 10 years from the date of incorporation.
- Higher TDS Limit for Co-Operative Societies: The government has proposed a higher TDS limit of Rs. 3 crores on cash withdrawals from Co-Operative Societies.
- Lower Tax Rate for New Co-Operatives: New Co-Operatives that commence manufacturing till March 2024 will enjoy a lower tax rate of 15%.
Indirect Tax Highlights:
- Time Limit for Delayed Returns: The government has imposed a three-year time limit for the filing of GSTR 1, GSTR 3B, and Annual Return. After the expiration of three years from the due date of submission, the returns will no longer be accepted.
- Composition Levy for E-commerce Operators: E-commerce operators are now eligible to opt for paying tax under the Composition Levy.
- ITC on CSR Expenses: ITC on CSR Expenses has been specifically considered as a Blocked Credit.
- Exemption from Registration: Any person exclusively engaged in the supply of goods, services or both that are not liable to tax or exempt from tax under GST will not be required to register.
- Increased Tax on Certain Cigarettes: The government has increased the tax rate on certain cigarettes by 16%.
- Reduced Custom Duty on Crude and Glycerine: The Basic Custom Duty on Crude and Glycerine has been reduced to 2.5%.
- Increased Import Duty on Silver Bars: The Import Duty on Silver Bars has been increased to align it with the duty on Gold and Platinum.
- Extension of Customs Duty Cut on Mobile Phone Parts: The government has extended the Customs Duty cut on imports of parts of mobile phones by 1 year.
- Promotion of TV Manufacturing: To promote TV manufacturing, the government has reduced the Customs Duty on open cells of TV panels to 2.5%.
- Relief on Customs Duty on Camera Lens Imports: The government has provided relief on Customs Duty on the import of certain parts and inputs, such as camera lenses.
- Extension of Concessional Duty on Lithium-Ion Cells: The Concessional Duty on lithium-ion cells for batteries has been extended for another year.
- Reduction in Basic Custom Duty Rates: The number of Basic Custom Duty rates on goods other than textiles and agriculture has been reduced from 21 to 13. This has resulted in minor changes in taxes on items such as toys, bicycles, and automobiles.
Saving Scheme and MSME:
- The deposit limit for the Senior Citizen Savings Scheme has been increased to Rs. 30 lakh from the previous limit of Rs. 15 lakh.
- The monthly income scheme limit has been doubled to Rs. 9 lakh and Rs. 15 lakh for joint accounts.
- A new saving scheme, the Mahila Samman Saving Certificate, has been introduced for women and will be available for 2 years up to March 2025. This scheme offers a deposit facility of up to Rs. 2 lakh in the name of women or girls for a tenure of 2 years with a fixed interest rate of 7.5 percent and the option for partial withdrawal.
- A revamped credit guarantee for MSMEs will take effect from April 1, 2023, with an infusion of Rs. 9,000 crores in the corpus. This scheme will provide an additional collateral-free guaranteed credit of Rs. 2 lakh crore and reduce the cost of credit by about 1 percent.
Ease of Doing Business:
- The PAN card is set to be used as the common identifier for all digital systems of government agencies.
- A one-stop solution for reconciling and updating identities maintained by various agencies will be established using DIGI Locker and Aadhaar as the foundational identity.
- A Central Processing Centre (CPC) will be established to provide faster responses to companies filing forms under the Companies Act.
- The PAN card is mandatory for all business establishments, and it will serve as a common identifier for specified government agencies.
- The Jan Vishwas Bill has been introduced to amend 42 central acts, aimed at furthering trust-based governance.
- The Finance Minister has announced several measures to boost business activity in the GIFT City.
The Union Budget 2023 has brought in a series of measures to enhance the growth and development of various sectors of the economy. This Budget marks a step forward in the government’s vision of a self-reliant and inclusive India.
We hope this information was helpful to you. Stay tuned for more such updates on the latest developments in the world of finance and taxation.
Contributed by Team Gracia