Income Tax Budget for the Fiscal Year 2023-24

Our Union Finance Minister Nirmala Sitharaman unveiled the budget for 2023-24 in parliament at 11 am in New Delhi on Wednesday 1 February 2023. This was the final full-year budget before the 2024 national elections and key state elections later this year. Like two previous budgets, the Union Budget 2023-24 came in a paperless format. In this article, you will learn more about the income tax budget for the fiscal ay 2023-2024. Let’s dive into it.

The economic agenda for achieving focuses on three things:

First, to provide citizens, especially young people, with ample opportunities to achieve their aspirations. Second, providing a strong impetus for growth and job creation. Third, strengthen macroeconomic stability.

The budget embraces seven priorities: They complement each other and act as ‘Saptarishi’ to guide us through Amrit Kaal.

• Inclusive Development 
• Reaching the Last Mile
• Infrastructure and Investment
• Unleashing the Potential
• Green Growth
• Youth Power 
• Financial Sector

To ease the burden on taxpayers, the Finance Minister proposed to change the tax structure in the new personal income tax regime by reducing the number of slabs to 5 and raising the tax exemption limit to ₹3 lakh. The country’s current tax rate is 42.74%, which is among the highest in the world. 

Budget 2023 proposed to reduce the highest surcharge rate from 37% to 25% in the new Tax regime and reduction of the maximum tax rate to 39%. FM also announced that under the new tax regime, it increase the tax rebate limit from Rs.5 lakh to Rs.7 lakh. At present, a person whose income is Rs 5,000 does not need to pay income tax. The new tax regime proposes to increase the limit on rebates to Rs 7,000.

What Is the Tax Relief under New Personal Tax Regime FY 2023-24

Here are tax reliefs in new individual income tax regime:

1. The new personal and HUF tax regime introduced by the Finance Act 2020 is now proposed as the default regime.
2. Any natural person, HUF, AOP (excluding cooperatives), BOI, or AJP who does not choose to be taxed under this new system may choose to be taxed under the old system. Individuals who have income under the heading “Profits and gains from a Business or Occupation” and elected the old system can opt out once and then continue to be taxed under the new system. For those who have no income under the heading “Profit and gains from Business or Occupation”, the old scheme option can be exercised at any time.
3. A resident individual whose gross income is up to Rs. 5,00,000 lakh does not have to pay the tax due to refunds under both the old and new regimes. It is proposed to increase the rebate for individuals living under the new regime so that they do not have to pay tax if their gross income is less than Rs.7,00,000 lakh.
4. The employee’s standard deduction of 50,000 to salaried individuals and deductions from the family pension of up to 15,000 are now only permitted under the old system. It is proposed that these two deductions should also be allowed under the new rules.
5. Income tax surcharge under both old and new regimes is 10% for income over Rs. 50 lakh and up to Rs. 1 crore and 10% for income over Rs. 1 crore upto Rs. 2 crore is 15% and 25% if income is above Rs. 2 crores and up to Rs.5 crore, and 37% if income is above Rs.5 crore. The surcharge on these individuals, HUFs, AOPs (excluding cooperatives), BOIs, and AJPs are proposed to be the same under the new regime, except that the 37% surcharge rate will be reduced.
6. The highest surcharge will be 25% for income above Rs. 2 crores. This would reduce the maximum rate from 42.7 % to 39 percent. In that case, the surcharge will not charge for those who opt to be under the old regime.
7. For employees (other than Central or State Government employees), reimbursement of paid leave up to 10 months of average salary at retirement shall be subject to under sub-clause (ii) of clause (10AA) of the Income-tax Act section 10. Currently, the maximum can be exempted from Rs. 3 lakh. It is proposed to issue a notice extending this limit to Rs. 25 lakh.

What Is the New Tax Slab for FY 2023-24

There are five major announcements to make in FY 2023-24. First and foremost, all hard-working middle-class people benefit from this. First related discount. Individuals with an income of up to Rs 5 lakh are currently not required to pay income tax under either the old or the new tax regime. The new tax regime will raise the cap on rebates to  Rs 7 lakh. Therefore, under the new tax regime, individuals with an income of up to Rs 7 lakh will not have to pay taxes. The second proposal relates to middle-class individuals.

As Finance Minister had introduced, in the year 2020, the new personal income tax regime with six income slabs starting from 2.5 lakhs. Now proposed to change the tax structure in this regime by reducing the number of slabs to 5 and increasing the tax exemption limit to Rs.3 lakh. The rebate limit increased from Rs 5 lakh to Rs 7 lakh in the new tax regime.  The new tax rates are:

What is the New Tax Regime Exempts for FY 2023-24

New tax regime exempts income up to Rs 7 lakh. The government has lowered income tax rates and introduced a revised employee tax rate. As part of the 2023 budget announcement, Finance Minister Nirmala Sitharaman said tax rebates on income have been extended up to Rs 7 lakh under the new tax regime.

There are three categories of individual taxpayers:

People (under 60), including both residents and non-residents, resident seniors (ages 60-80), and resident super seniors (ages 80 and over).

What is the Maximum Deposit Limit for Senior Citizens in FY 2023-24

The maximum deposit limit for the Senior Savings Program will be increased from Rs.15 lakh to Rs.30 lakh. The maximum deposit limit for the monthly account scheme will be increased from Rs.4.5 lakh to 9 lakh for an individual account and Rs.9 lakh to Rs.15 lakh for joint account holders.

What the 7 Priorities or ‘Saptrishi’ Mean

Here are the 7 priorities mean:-

Inclusive development

The government’s Sabka Saath Sabka Vikas policy has benefited many groups including women, SC, ST, OBC, and other underprivileged groups.

Reaching the last mile

Building on the huge success of the Aspirational District program, as recently launched the Aspirational Blocks program covering 500 blocks to saturate government services.

Infrastructure and investment

Capital investment increased by 33% to Rs 10 lakh crore, equivalent to 3.3% of GDP.

Unleashing the potential

National data governance policies are in place to allow access to anonymized data to unlock innovation and research from start-ups and academia.

Financial sector

The revised schemes will take effect from 2023 with an infusion of Rs 9000 crore into the Corpus.

Green growth

The budget provides a capital investment of Rs 35,000 crore capital towards energy transition and net-zero targets and energy security by the Ministry of petroleum and natural gas.

Youth power

PM Kaushal Vikas Yojana 4.0 is launched to skill lakhs of young people. The program includes new-age courses.

How Much Investment is Allowed for Senior Citizens in FY 2023-24 

The 2023 budget has increased the maximum allowed investment in senior savings, a popular investment for older people. The monthly income of the post office has also become attractive.

1. Finance Minister Nirmala Sitharaman doubled the Senior Citizen Savings Scheme (SCSS) from Rs 30 lakh to Rs 15 lakh. The program guarantees an interest rate of 8% per annum. Interest is paid quarterly. 
2.  In addition, the investment limit under the popular Post Office Monthly Income Scheme (POMIS) has been increased from Rs 4.5 lakh to Rs 9 lakh. For joint accounts maintained with POMIS, the investment limit has been increased from Rs 9 lakh to  Rs 15 lakh. The system pays monthly interest at an interest rate of 7.1% per annum.

How Much will the IT Department Grow in FY 2023-24

1. The Ministry of Electronics and Information Technology’s budget proposal was increased from Rs 11,719.95 crore to Rs 16, 549.04 crore.
2. The allocation for 2021-22 is Rs 8,118.65 crore, almost double its budget estimate nearly double of what it was two years back.

What Are the Highlights of the Union Budget 2023-24

Here are some highlight points of the union budget of FY 2023-24

1. Digilocker:

FM Nirmala Sitharaman announced the expansion of Digilocker service for storage of government digital certificates for the Fintech sector. Document availability will be the focus of digitLocker extensions for the fintech sector, which is facilitated by Digital Services as Prime Minister Jandan Yojana, Indian Stack, and UPI.

2. Health:

In the Budget 2023 that the government will begin the mission to eliminate sickle cell anemia by 2047. This includes raising awareness creation, universal screening of 7 crore people in the age group of 0-40 years in tribal areas, and collaborations between central institutions and state governments.

3. On educational infra:

Eklavya Modern Schools for the next three years.

new nursing schools will be established in collaboration with 157 existing medical colleges established since 2014.

4. Another year of the big jump in capex:

The center’s capex target for 2023-24 is Rs 10 lakh crore, 33% higher than the budget estimate of Rs 7.5 lakh crore for 2022-23.

5. Pradhan Mantri Awas Yojana:

The Budget 2023-24. It allocated Rs 79,000 crore for the Pradhan Mantri Awas Yojana (PMAY), giving a further boost to the government’s program to provide housing to the urban poor.  The finance minister Nirmala Sitharaman, who announced the union budget on February 1, said PMAY spending had increased by 66% to over 79,000 rupees.

6. PAN Card:

Federal Budget 2023-24 announced the legalization of Permanent Bank Account Numbers (PANs) as a unified corporate identity. The move is to allow businesses to use PAN as a unique identifier in place of other data to enter a nationwide single window system.

7. On MSMEs:

The modified plan will be implemented by putting 900 crores into the Corpus from 2023. – This will enable another unsecured loan of Rs 2 crore.

In addition, borrowing costs will be reduced by approximately 1%.

8. Banking on construction:

From malls to streets to highways to affordable housing, the budget is banking on fueling domestic demand and public investments to propel growth as the world braces for a recession.

9. DBT scheme for youths:

Direct profit transfer will be introduced as part of India’s nationwide apprenticeship program to help 47 lakh youths over three years.

10. Custom duty:

Mobile phone production in India increased from 5.8 crore units worth about Rs 18,900 crore in 2014-15 to  Rs. 31 crore units worth about Rs 2,75,000 crore last year.

11. Cigarettes:

National calamity contingent duty by 16% on certain cigarettes. Cigarettes are getting more expensive,

12. Direct Taxes:

This year, the tax portal, processed more than 654 tax returns. The average handle time decreased from 93 days in 2013-14 to 16 days. 45% of returns are processed within 24 hours.

13. Health and family welfare ministry:

There has been allocated Rs. 89,155 crores in the union health and family welfare ministry. The Union Budget FY24 marked a rise of a meager 12% than the revised budget estimate for FY 23.

For the next financial year, Rs 86,175 crore was allocated to the Department of Health and Family Welfare and Rs 2,980 crore to the Department of Health Research.

What’s Cheaper and What’s more expensive things in budgets 2023

Budgets 2023 Highlights: Goods and Services Tax

1. Section 10 has been amended to allow taxpayers to opt-in to equalization schemes even if they supply goods through e-commerce operators that are subject to TCS under Section 52.
2. Section 16 provides that if the recipient taxpayer does not pay the supplier’s invoice amount including GST within 180 days from the date of issuance of the invoice, they shall pay interest calculated in accordance with Section 50.
3. Sections 37, 39, 44, and 52 allow the taxpayer to pay GSTR-1 (shipment returns), GSTR-3B (summary returns), GSTR-9 (annual returns), and GSTR-8 (e-commerce) for a tax period after the expiry of 3 years from the due date. 
4. For the compounding of offences, the limit has changed from 25% of the relevant tax to a maximum of 100% of the relevant tax.
5. A new Section 158A has been added to the CGST Act allowing a business to share its GST data digitally with consent. It prescribes that conditions registrants may provide information on the GST Portal and share it with other systems that can notify.

• Returns submitted under GSTR-1/3B/9; or
• Application for registration or
• Declaration of shipment or
• Creating an e-invoice or e-way invoice, or
• All other details as required.

Budgets-2023 Highlights: Fiscal

1. The Union budget for the FY24 Nominal GDP Growth Declines to 10.5% From 15.4% in FY23 (first progress from NSO estimate).
2. Economic reports predicted real GDP of 6.5% growth compared to the baseline. that is overall rating gives a wider range of 6-6.8
3. Actual capital investment (direct capital investment GoI plus grants to states to raise capital assets) relative to GDP is budgeted to 
4. increase to 4.5% in FY24 from 3.9% FY23 (RE).
5. Gross spending growth is included in the budget 7.5% in FY24 (BE). Capital expenses are budgeted to show a strong increase of 37.4%  while revenue expenditure Growth is estimated at just 1.2%

Budgets-2023 Highlights: Corporate Tax

1. Added new provisions for tax revenue Winnings from online games become income tax Total net profit and income tax that will be incurred 30% Taxpayer’s remaining income (after reduction) This will be applied from 1 April 2024. TDS is to be done on net winnings from any online games at rates in force from 1 July 2023.

2. Last date of incorporation for claiming start-up incentives is extended by another year up to 31 March 2023.
3. TCS rate increased to 20% (as against 5%) it will effect from 01 July 2023 on remittances under Liberalized Remittance Schemes (including overseas tour packages) other than for medical and educational purposes.
4. Capital gains rollover deduction for investments in new residential property in India is now restricted to Rs. 100 crores from 1 April 2024.

Budgets-2023 Highlights: Customs

1. 146 exemptions will be extended for a period of one year, i.e., up to 31 March 2024, for the purpose of verification.
2. A validity of 2 years will not apply to exemption notifications issued in relation to:

• Multilateral or bilateral trade agreements,
• Obligations under international agreements, treaties, etc.
• Privileges of constitutional authorities,
• Schemes under Foreign Trade Policy,
• Central Government schemes having a validity period of more than two years,
• Re-imports, temporary imports, goods imported as gifts or personal baggage, and all other duties of customs.

3. The order shall be passed by the Settlement Commission within a period of 9 months from the last date of the month in which the application is made. 

Budgets-2023 Highlights: Agriculture

1. Support of Rs 5300 crore for the Upper Bhadra Project Refilling surface tanks for sustainable micro-irrigation and drinking water.
2. 10,000 organic input resource centers will be established at the national level, a decentralized production network for micro fertilizers and pesticides.
3. 500 new ‘Waste to Wealth’ plants will be built as part of the GOBARdhan scheme to promote a circular economy.
4. To set up a laboratory using 5G service at the Precision Agriculture Engineering Laboratory
5. Agricultural credit target to be increased to Rs.20 lakh crore
6. Establishment of Agriculture Accelerator Fund to promote agriculture startups
7. Expenditure of Rs 2200 crore on the Atmanirbhar Horticulture Clean Plant scheme to increase the availability of quality planting materials
8. Issued  Rs 6000 crore to Prime Minister Matsya Sampada Yojana, A market for fishermen and small businesses.

Conclusion

In this article, we tried to cover all the important information about the income tax budget for the fiscal year 2023-24. The finance minister has boosted small taxpayers by increasing rebates and eliminating income tax on incomes below Rs7 lakh. Additionally, the revised section sum tax payment and extended standard deduction under the new tax regime will allow salary grades to have extra cash on hand to boost consumption.