The Indian Union Budget 2023-24 is expected to be one of the most crucial budgets in recent times. With the economy still recovering from the COVID-19 pandemic, the government is expected to focus on stimulating economic growth and creating more jobs. The budget is likely to focus on introducing measures such as tax incentives, public infrastructure projects, and increased spending on healthcare, education, and other social welfare programs.
Indian Union Budget 2023-24 Expectation
Budget Expectations for Stock Markets
Last year, stock markets around the world experienced turbulent times. But even amid these uncertainties, the Indian stock market is an outlier, outperforming its peers in developed and emerging markets.
The number of Demat accounts has also increased in recent years. In December 2022, Demat accounts will grow 34% to reach $10.8 billion.
Elimination of long-term capital gains tax (LTCG) could boost stock and mutual fund markets. If a gain is made after an equity investment has been held for more than one year, that gain is now subject to a 10% tax.
But investors want this tax to be abolished. In particular, experts believe such a move would give the market a big boost and further encourage participation in the stock market.
Expectations of Indian companies
Businesses and organizations, especially small businesses, face stress during the Covid-19 pandemic. The lockdown had a negative economic impact on most businesses as it disrupted manufacturing and production. As a result, expectations are relevant for the 2023 budget.
The corporate sector believes that similar tax rates should be introduced to ensure that India is seen as a hub for both manufacturing and services. Currently, there are different tax rates for different sectors.
The corporate sector believes that similar tax rates should be introduced to ensure that India is seen as a hub for both manufacturing and services. India will have one of the most competitive corporate tax rates in the world with a corporate tax rate of 15%.
Income Tax Slabs
Therefore, individual taxpayers expect significant benefits from the upcoming budget. The government may consider raising the threshold for the top tax rate from 10,000 rupees to 20,000 rupees.
In addition, the top tax rate will be reduced from 30% to 25%, making it the same tax rate as corporations. Predictably, this will strengthen the purchasing power of the population and consequently increase demand for domestic goods and services.
Increased budget allocation
Proper use of this year’s quota will initiate the changes mentioned in NDP 2020. This includes providing free or subsidized tuition, improving school infrastructure, establishing scholarships and grants, and incorporating technology-based learning.
You can expect a refined focus and allocation to revised learning methods, including contextualized learning environments (SLE), occupations/internships (hard skills), and incentives for employers to invest in their talent pipeline. The government ensures that no one is deprived of quality education due to socioeconomic conditions.
Tax incentives for startups
Startups play a key role in the development of employment across India, bringing various breakthrough inventions to the market. When it comes to entrepreneurship, the Indian government is already at the forefront of pushing for a series of new measures that will cement India’s position as a global economic leader.
Startups anticipate that single window clearance will be available to allow start-ups to apply for exemptions or deductions under the Income Tax Act without having to register with multiple agencies. Small businesses will benefit as the economy strengthens.
Automobile Sector
The automotive market is the growing electric vehicle market and looks positive in the years ahead. States need to provide more incentives and support to the electric vehicle market in the form of charging infrastructure. More incentives for end-users will also further encourage the purchase of electric vehicles.
Banking Sector
Heavy capital injections have been made to banks as they become major lenders to all sectors to finance the government’s huge capital expenditures.
The banking sector is therefore not asking for help per se in the form of cash injections. However, the sector is eagerly awaiting the government’s stance on the privatization of the Public Sector Bank (PSB).
Experts believe that accelerated privatization of public broadcasters will improve operational efficiency and further improve financial inclusion in the country.
Cooperation with overseas universities
This year, it is important to promote formal partnerships with leading universities abroad to offer online and hybrid degree programs and meet the government-set total enrollment targets.
Additional homebuyers incentives
Homebuyers are key players in one of the most important sectors of our economy, real estate. The current recession, including rising interest rates, has had a major impact on the industry.
They want the government to provide more incentives to increase rent and affordable housing, and increase the Section 24(b) housing tax credit rebate from Rs.2 million to at least Rs.5000.
Experts say the mortgage and real estate sectors could be hit hard by higher interest rates. With rising interest rates, affordability is becoming a key issue for buyers.
Real Estate Sector
The outlook for real estate markets, particularly residential real estate markets, is improving for the first time in a long time. However, rising interest rates and higher inflation are having some impact on the purchasing power of homebuyers.
To deny this, a real estate sector expert believes a raise in the tax-deductible limit on interest paid on mortgages from Rs 2 million to Rs 5000. In addition, the expert believes another section on repayment of principal mortgages, another Section 80C he could introduce at Rs 4 million.
Electronics Sector
Despite a series of economic hindrances, the consumer discretionary and electronics sectors posted strong growth in 2021 and 2022. But sector stakeholders want more government support, which the next budget can provide.
Streamlining the GST rate remains a top priority for the industry and the main request is to reduce his GST rate from 18% to 12%.
The sector wants an overhaul of the country’s current customs structure, which will affect its ability to compete in global markets with countries such as Vietnam, Thailand, and Mexico. Industry experts believe lower tariffs on imported goods will improve operational efficiency and make India even more competitive.
Section 24(b) Increased Mortgage Interest Deduction
Home prices have skyrocketed since the COVID-19 pandemic, especially in subways (creating demand for larger homes).
Adding to the concern of people wanting to buy a house to live in, interest rates have been rising recently (as the RBI tightened monetary policy to keep his CPI inflation in check). Also, his PMI for mortgages is now a higher percentage of the household’s monthly income.
With this in mind, the current deductible limit per financial year under section 24(b) of the Income Tax Act of 1961 for interest paid on a mortgage EMI in the case of an owner-occupied property (SOP) is 2,000,000.
Nifty 50 and Budget
Over the past five years, Nifty has failed to meet its budget. In all years except 2018, the index posted negative returns in January. I’ll also include the budget, but the scenario hasn’t changed much.
Except for 2021, Nifty’s post-budget month-to-month performance was negative. However, the budget’s daily performance over the past five years has been somewhat positive. Of the last five Budget Days, Nifty has posted positive returns on three of them.
Focus on Girl’s education
Girls in 2022 (Ages: 11-16), the enrollment rate in municipal schools is still 23.5%.
The budget needs specific allocations to support a higher proportion of girls’ education in the form of grants, tax exemptions, etc. to meet the NEP 2020 gender goals.
Increase in Child Education Housing Benefit
The education allowance currently available for exemption under section 10(14) of the Income Act is Rs.100 per child per month for a maximum of two children.
Similarly, the exemption from dormitory allowance is Rs 300 per child (up to 2 children). These allowances were introduced long ago to cover rising educational costs and have not been revised since. With education and dormitory costs increasing each year, it makes sense to re-evaluate and increase these allowances.
Introducing a new work-from-home exemption
Since the COVID-19 pandemic, hybrid work cultures or models have been introduced. This allows businesses to save costs for employers.
However, in this situation, the employee incurs certain additional costs in performing and fulfilling the role but does not receive tax benefits or exemptions from the benefits they may receive for doing so. This deterrent must be addressed to make the work-from-home model tax-friendly for workers.
Wrapping Up
Hope the union budget of 2023-24 will be able to address the current economic situation of India and lay the foundation for brighter future initiatives.
Will the union budget by the Modi Government provide a great respite from inflation?
Let’s wait till 1st February.