The Union Budget 2023-24 was presented by Finance Minister Nirmala Sitharaman, marking the final budget of PM Narendra Modi’s second term. The budget emphasized seven priorities: inclusive development, rural outreach, infrastructure and investment, unlocking potential, green growth, empowering the youth, and strengthening the financial sector. The most notable aspect of the budget was the five major changes to personal income tax, including revisions to the tax slab under the new tax regime.
Enhanced infrastructure spending will improve connectivity and reduce logistics costs
The budget announced an increase in capital expenditure to Rs 10 lakh crore (33% increase) for infrastructure development in 2023-24, representing 3.3% of the GDP. The announcement of the 50 additional airports, heliports, water aerodromes, and critical transport projects will help improve connectivity and reduce logistics costs. The Union Civil Aviation Ministry received an allocation of Rs 3,113.36 crore in the budget.
A digital initiative focuses on artificial intelligence in the education sector
The budget focuses on digital initiatives, particularly on the use of artificial intelligence in education. Three centers of excellence for AI will be established in leading educational institutions, and 100 labs in engineering schools will develop applications using 5G services. A national digital library will also be established to provide access to quality books for children and adolescents across different regions, languages, and genres. Budget announcement toward these digital initiatives is a welcoming initiative toward skill development in Digital India.
Relief on Customs Duty
To give impetus to the mobile phone production unit in the country, the central government will exempt customs duty on imports of certain parts and inputs in mobile manufacturing, like camera lenses, and mobile phone components to support PLI-linked investments.
Use of PAN as a common business identifier
The Finance Minister, Nirmala Sitharaman, announced in the Union Budget 2023-24 that financial institutions will have the option to adopt a “risk-based” KYC policy instead of the current “one-size-fits-all” approach. The financial sector regulators will be encouraged to implement a KYC system that is suitable for the needs of Digital India. Businesses can use their PAN as a common identifier across government platforms, while individuals can use DigiLocker and Aadhaar as their foundational identity. This will allow changes in address or identity to be reflected across other platforms and help in the ease of doing business. Currently, updating Aadhaar does not automatically update the address on an individual’s Income Tax portal registration. This announcement suggests that the government is working to synchronize citizen data across multiple portals by just updating Aadhaar.
Green Growth with Increased Allocations and Progressive Policies
The Union Budget 2023-24 presented by the Indian Finance Minister, Nirmala Sitharaman, places a strong focus on green growth. The budget allocates INR 10 lakh crores (33% increase) to support sustainable living and energy transition through initiatives such as green energy, green farming, green mobility, green buildings, and green equipment. The budget also establishes the Green Credit Program, regulated by the Environmental Protection Act, to encourage environmentally responsible behavior by individuals, companies, and local bodies. Other initiatives, such as the National Green Hydrogen Mission, funding for battery storage, alternative fertilizers, and renewable energy integration, demonstrate a commitment to achieving net-zero emissions by 2070. The initiatives under the Green Growth priority sector will boost the sustainability move by the supply chain sector and encourage the adoption of paperless operations and place India on a path toward a pro-planet and pro-people way of life.
Rs 2600 crore incentive for Rupay and UPI transactions to boost digital payments
The Union Cabinet has approved incentives worth Rs 2600 crore for using RuPay debit cards and BHIM UPI for person-to-merchant transactions in the financial year 2022-23. The incentives aim to benefit the MSME sector, unorganized sector, and farmers and promote inclusive growth through cooperatives. Acquiring banks will receive financial incentives for promoting Point-of-Sale and e-commerce transactions. The scheme also aims to promote UPI Lite and UPI123PAY as economical and user-friendly digital payment options.
Major announcements on personal income tax
Increased Rebate Limit: The new tax regime proposes to raise the rebate limit to 7 lakhs.
Revised Tax Slabs: The number of tax slabs has been reduced to five with an increase in the tax exemption limit to ₹3 lakh.
Standard Deduction Boost: Salaried individuals earning ₹15.5 lakhs or more will benefit from a standard deduction of ₹52,500.
Lower Highest Tax Rate: The new tax regime features a decrease in the highest surcharge rate from 37% to 25%, resulting in a maximum tax rate of 39%.
Higher Tax Exemption on Leave Encashment: The limit for tax exemption on leave encashment during retirement for non-government salaried employees has been raised to ₹25 lakh.