Key Takeaways from Budget 2023: A Comprehensive Guide to the Major Reforms and Announcements

Unpacking the Union Budget 2023: Nirmala Sitharaman's Vision for a Stronger India

The Indian citizens eagerly awaited the Union Budget 2023, hoping for measures that would support the nation's target of reaching a $5 trillion economy. The Finance Minister, Nirmala Sitharaman, delivered by proposing increased Capital Expenditure, upgrades to infrastructure, and incentives for crucial industries. This has turned the goal of a strong economy into a tangible plan that is ready to be implemented.

The 2023 Union Budget aims to tackle current challenges and secure India's future. It includes measures to boost consumption, lighten compliance, support MSMEs and the middle-class, and simplify taxes. This budget sets the foundation for a strong and prosperous nation in the decades to come.

The 2023 Union Budget outlined seven key priorities: inclusive growth, inclusive development, infrastructure and investment, unleashing potential, promoting green growth, empowering the youth, and strengthening the financial sector. Let's take a closer look at the Budget 2023 and understand its impact.

Change in new tax regime slabs for FY 2023-24 (AY 2024-25)

Income Tax Rates as per the Union Budget 2023:

Income Range (INR)	Income Tax Rate
Up to 3,00,000	Nil
300,000 to 6,00,000	5% on income over 3,00,000
6,00,000 to 9,00,000	15,000 + 10% on income over 6,00,000
9,00,000 to 12,00,000	45,000 + 15% on income over 9,00,000
12,00,000 to 15,00,000	90,000 + 20% on income over 12,00,000
Above 15,00,000	150,000 + 30% on income over 15,00,00

Under the new tax regime, a tax rebate has been introduced for individuals with a taxable income of up to 7 lakhs. This means that if your taxable income is less than 7 lakhs, you will not be required to pay any taxes. In addition to the tax rebate, a standard deduction of Rs 50,000 has also been implemented under the new tax regime.

Surcharge Rates under the New Tax Regime:

Income Range (INR)	Surcharge Rate	Tax Rate
Up to 5,00,00,000	Nil	N/A
Above 5,00,00,000	25%	39%

Note: The previous surcharge rate for individuals earning more than 5 crore was 37%. The reduction in surcharge rate brings down the tax rate from 42.74% to 39%.

Presumptive taxation updates

The Union Budget 2023 has brought about a change in the presumptive taxation limits for the financial year 2023-24. The small businesses under Sec 44AD can now reap the benefits of a higher limit, increased from INR 2 crore to INR 3 crore. Similarly, professionals such as doctors, lawyers, engineers, etc. covered under Sec 44ADA will now have a revised limit of INR 75 lakh, up from the previous limit of INR 50 lakh. These changes are expected to bring ease and relief to the small businesses and professionals of the country.

The increase in limits is subject to a condition that the 95% of the receipts must be through online channels

Start ups updates

For start-ups, the previous limit for the date of incorporation to avail income tax benefits was March 31st, 2023. However, the revised limit is now March 31st, 2024. Additionally, the time limit for the set-off and carry forward of losses has been extended from 7 years from incorporation to 10 years from incorporation. These changes have been made to support and encourage the growth of start-ups in India.

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.

Revised proposals for Co-operative Societies:

Concessional tax rate of 15% for new co-operatives starting manufacturing by 31st March, 2024.
Sugar co-operatives can now claim previously disallowed expenditures by applying to the Assessing Officer.
TDS limit on cash withdrawals increased to Rs. 3 crores for co-operative societies.
Cash deposit and loan limit increased to a maximum of 200,000 per member for PACS and PCARDBs.

Other Direct Tax Changes:

Increased exemption threshold for Leave Encashment: Non-government employees can now receive tax-free leave encashment of up to Rs 25 lakhs, up from Rs 3 lakhs, for a maximum period of 10 months under Section 10(10AA).
Reduced TDS on EPF Withdrawal: The TDS rate on taxable EPF withdrawal has been decreased from 30% to 20%.
Payment Based Deduction for MSMEs: Only when payment is actually made to MSMEs, it will be considered as an expenditure and included in Section 43B.
No Penalty for Loan Repayments: No penalty will be imposed under Section 269SS or 269ST for loans 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.
Limited Capital Gains Exemption: The capital gains tax exemption under Section 54 to 54F has been restricted to Rs 10 crores, where previously there was no threshold.

Indirect Tax

Custom duty

Budget 2023 - Indirect Tax Proposals to Promote Exports and Manufacturing.

With a view to promoting exports, fostering domestic manufacturing and enhancing value addition, the Budget 2023 proposes changes to the indirect tax regime. These proposals are aimed at driving greener mobility, boosting the green energy sector and encouraging the development of key industries.

Revised Customs Duties to Drive Transformation

The customs duties have been revised on several items with the following outcomes:

Imported capital goods for lithium-ion battery manufacturing will aid in the development of greener mobility solutions.
The revision of customs duties on imported mobile camera lenses will deepen the value addition of the domestic electronics industry.
Denatured ethyl alcohol, a primary input for the chemical industry, will see its customs duties revised to benefit this sector.
The revision of customs duties on primary inputs for shrimp feed production will increase marine exports.
Seeds for lab-grown diamond production will benefit from revised customs duties, promoting exports in this sector.
The extension of concessional Basic Customs Duty (BCD) on copper scrap will increase raw material availability for MSMEs.
Compounding rubber to bring it on par with natural rubber will curb duty circumvention and support the domestic rubber industry.

These changes in customs duties reflect the government's commitment to fostering a dynamic and sustainable economy, promoting exports and supporting key industries.

GST Updates

The GST regulations have undergone several revisions in the recent budget, aimed at streamlining the process for taxpayers and ensuring compliance.

Under the amended Section 10 of the GST Act, taxpayers now have the option to opt into the composition scheme, even if they are supplying goods through e-commerce operators where TCS (Tax Collection at Source) is collected under Section 52.

In cases where a recipient taxpayer fails to pay their supplier invoice value including the GST within 180 days from the date of invoice issue, they must now pay interest computed under Section 50 as per the revised Section 16.

Section 17(5) has been revised to include another item, expenditure on CSR initiatives for corporates, under ineligible ITC (Input Tax Credit). Additionally, high sea sales and similar transactions that are neither a supply of goods nor services are now considered exempt, and hence ITC proportional to such sales cannot be claimed as per the revised Section 17(3).

Sections 37, 39, 44, and 52 have been 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. E-commerce operators who allow an unregistered person to supply goods or services or both through them, except where such person is exempt from GST registration, or who do not furnish accurate details in the GSTR-8 of any sale of goods made through them by a person exempt from obtaining GST registration, will be charged a penalty of Rs.10,000 or an amount equivalent to the amount of tax involved, whichever is higher.

Several offences have been decriminalized, including obstruction of an officer in the discharge of their duties under the CGST Act, tampering with or destroying material evidence or documents, and failure to supply information that is required to be supplied under the CGST Act or Rules or supplying false information. The limits for compounding of offences 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 share GST data digitally with consent. This section 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, including returns filed under GSTR-1/3B/9, applications for registration, statements of outward supplies, generation of an e-invoice or e-way bill, and other details as may be prescribed.

Changes in Price of Goods and Services:

Cheaper:

Gold
Televisions
Smartphones
Bicycles
Electric kitchen chimneys
Lab-grown diamonds

Costlier:

Travel by flights
Imitation jewellery
Cigarettes
Compressed gas for electric vehicles (EVs)
Silver
Lithium-ion batteries for mobile phones
Industrial rubber

Budget 2023 : Important points