Budget 2023-24 key takeaways: FM fires capex bazooka, offers sops for new income tax regime

Finance Minister Nirmala Sitharaman expanded the capex of the government acknowledging its positive impact on promoting growth and crowding in private investment. Sops have been offered to switch to the new income tax regime with reduced slabs, hiking rebate and reducing peak rate.

This was the last full Budget as the Modi government heads into general elections next year. Prime Minister Narendra Modi said that the first Budget of Amrit Kaal will build a strong foundation for building a developed India. This budget will fulfil dreams of aspirational society including poor people, middle-class people, farmers, PM Narendra Modi said.

The big jump in capex is reflective of the seriousness the government attaches to economic growth. Economic Survey presented by CEA V Anantha Nageswaran showcased the importance of capex in pump priming the economy as it leads to crowding in of private investment.

Also read: Will FM Nirmala Sitharaman's income tax proposals leave you with more cash in hand?

Here are key highlights from the Budget 2023:

• Bumper Capex

The government has outlined its priority to pump prime the economy. With a bumper increase in capex, PM Awaas Yajna outlay and hike in Railway capex the Modi government in its last full Budget has targeted job creation and infra development over populism.

CRISIL: The 33% higher capital outlay of Rs 10 lakh crore will fast-track implementation of high-multiplier government programmes such Bharatmala, Ghatishakthi, Parvatmala and Sagarmala.

• PAN as common identifier

With PAN as a common business identifier, the Modi government has taken a big step in order to improve the ease of doing business.

• More lustre for lab grown diamonds

Government will provide R&D grant in lab grown diamond area as well as consider custom duty reduction on key raw material (lab grown seeds). Lab grown diamonds have huge potential in both domestic and export markets. This is positive for lab grown players like Goldiam International.

• Good news for Auto Inc

FM's Budget move to replace old government vehicles will provide a fillip to the economy. It would translate into growing orderbooks of auto companies, increased output and create jobs.

• Credit boost to MSMEs

The revamped credit guarantee schemes will take effect from 2023 through an infusion of Rs 9,000 crore in the corpus. This will enable another collateral-free credit of Rs 2 lakh crore. Further the cost of credit will be reduced by around 1 percent.

• Fiscal deficit

The Union Budget has fixed the fiscal deficit target for 2023-24 at 5.9 percent of GDP. This would represent a reduction of 50 basis points from this year’s fiscal deficit target of 6.4 percent, which Finance Minister Nirmala Sitharaman said would be met.

• Custom duty tweaks

The FM announced a relief in custom duty on import of certain parts of mobile phones like camera lens and batteries by another year. Custom duty hiked on electric kitchen chimney. For more value addition in TVs at the local level, basic customs duty on parts, TV panels reduced to 2.5%.

• New Income Tax Regime

The FM has reduced the number of slabs in the new income tax regime and hiked rebate to Rs 7 lakh. Persons in the new tax regime, with income up to Rs 7 lakh will not have to pay any tax.

The peak rate has also been brought down.  Currently the highest rate is 42.74% income tax under new regime. The FM has proposed to reduce the highest surcharge from 37% to 25% in new tax regime bringing maximum rate down to 39%.

The number of slabs in new regime have been reduced. The tax exemption limit has been hiked.

New slabs

Rs 0-3 lakh Nil
Rs 3-6 lakh 5 per cent
Rs 6-9 lakh 10 per cent
Rs 9-12 lakh 15 per cent
Rs 12-15 lakh 20 per cent
Above Rs 15 lakh 30 per cent

As a result of these proposals, revenue of about Rs 38,000 crore –
Rs 37,000 crore in direct taxes and Rs 1,000 crore in indirect taxes – will be
forgone while revenue of about Rs 3,000 crore will be additionally mobilized. Thus, the total revenue forgone is about Rs 35,000 crore annually.

• Subsidies in FY24

Budget pegs FY24 food subsidy at Rs 1.97 lakh crore vs Rs 2.87 lakh crore this fiscal. Budget pegs FY24 petroleum subsidy at Rs 2,257 crore vs Rs 9,171 crore this FY. Budget pegs FY24 spend on PM Kisan at Rs 60,000 crore, flat from this fiscal.

• Small savings scheme

A one-time new small savings scheme, Mahila Samman Savings Certificate, will be made available for a two-year period up to March 2025. This will offer deposit facility upto Rs 2 lakh in the name of women or girls for a tenor of 2 years at fixed interest rate of 7.5 per cent with partial withdrawal option.

• Green moves

The Budget provides  Rs 35,000 crore for priority capital investments
towards energy transition and net zero objectives, and energy security by
Ministry of Petroleum & Natural Gas.

For encouraging behavioural change, a Green Credit Programme will
be notified under the Environment (Protection) Act.

Budget allocated adequate funds to scrap old vehicles of the Central Government in order to reduce polluting vehicle. States will also be supported in replacing old vehicles and ambulances.

• Agri boost

The agriculture credit target will be increased to Rs 20 lakh crore with focus on animal husbandry, dairy and fisheries.

• Focus on Growth Engines

With a bumper capex push, FM Nirmala Sitharaman signalled that the Modi government will continue to focus on creating capital assets. This is a big leap for the economy as capex tends to have a multiplier effect on the economy. This is expected to crowd in private investment.

Catch all the Budget 2023 highlights here

• Tax tweaks

The new income tax regime has seen changes that is likely to make it attractive for the common man. The rebate limit has been hiked to Rs 7 lakh. The peak rate has also been brought down. The number of slabs have also been reduced.

• LTCG

No major tweaks for LTCG has helped cheer the markets.

• What's cheaper and what's dearer   

Imports that are cheaper

Aeroplanes and other aircrafts; Gold (including gold plated with platinum) unwrought or in semimanufactured forms, or in powder form; Base metals or silver, clad with gold, not further worked than semimanufactured; New or retreaded pneumatic tyres, of rubber, of a kind used on aircraft of heading; Platinum, unwrought or in semimanufactured form, or in powder form; Waste and scrap of precious metal or of metal clad with precious metal; several aquaculture inputs; Some TV, camera parts.

Imports that are expensive 

Vehicles (including electric vehicles); Silver Dore; Naphtha; styrene, Vinyl Chloride Monomer, Compounded Rubber, Articles of precious metals, Imitation Jewellery, Electric Kitchen Chimney, Bicycles, Toys and parts of toys (other than parts of electronic toys)