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Let us understand this year's Budget.


Union Budget 2023 - This year, Individual taxpayers and other industry leaders had high hopes for development in several sectors. Many people were expecting some strong income support measures for developing the rural areas and positively boosting the economy. But did it happen? Let us find out in today's article about the Union Budget 2023.


Estimates of the Budgeted and revised Fiscal deficits:

For FY2023, the Budgeted estimate was fixed at 6.4% of the nation's GDP, and the revised was also the same at 6.4%. There is no change. But it is estimated that in FY24, it will be reduced to 5.9% of the total GDP. Further, the Indian government has taken an oath to reduce the fiscal deficit by 4.5%in FY26 by creating more earning opportunities.


If you look at the graph below, you will see that the government of India has suffered a significant deficit in the years following the pandemic. The reason is clear: there were lockdowns everywhere, many people lost their jobs, and the earning sources were drastically reduced. But thanks to the Indian government, it took the proper steps to save not only India but everyone impacted around the globe by helping them in all possible manners. Thus, during those years, the fiscal deficit was more. Still, from Fy23, everything is getting back on track, and every measure is being taken in various sectors to minimize the Deficit ratio created in the past few years.


Here, we shall see each sector’s performance and its overall impact one by one.


Estimates on the Tax Receipt:

Tax being the primary source of government income, let us first see the scenario here. In the last few years, estimating the tax receipt was challenging for the government because everyone was recovering from the pandemic situation in the entire nation. However, this year we have got some realistic digits or estimates on the same.

The growth in Capital expenditure and investment-oriented sectors:

This year, there was a minimum growth in the revenue expenditure sector; it has been steady at 1.2% in the last three years. Although, this year, the priority has been changed, and expenditure of the capital is focused on other prominent sectors.


This year's numbers clearly show that we are on the path of getting quality instead of quantity. Let us see some essential details in this context.


The revenue expenditure is anticipated to grow by only 7% Year on year in FY24. This rate is the slightest growth prediction over the last eight years.


On the other hand, the government is anticipating an increase in the CAPEX by 37.4% YoY during FY24. This will be a magnificent rise from 23% to 37.4% in the FY23 Budgeted Estimate.


Only the capital expenditure has increased by 2.5% in the last three years.

This continuous growth rate indicates the government prioritizes the nation's infrastructural development.


Why the FY23 RE (FY23BE) revised fiscal deficit prediction is the same:

The total estimate of government receipts and expenditures may be the same, but that's not true. They have increased, which has led to the fiscal Deficit. However, the growth in GDP will ensure the Deficit remains the same and will be reduced eventually.

How to reduce the fiscal Deficit?

Generally, the government manages a fiscal deficit with various market borrowings. These market borrowings are generally Gross Market borrowings (GMBs) and Net Market Borrowings (NMBs). Please find these borrowings' details in the table below for FY23 and FY24.

Increase in the expense: been low for 9 years:

One more interesting point in the union budget 2023 is that the Indian Government is expecting only a 7.5% rise in the total expenditure by 2024. This is a very low estimate since last decade. This implies that the government's efforts for economic growth will subside in the next few years.


Estimated expenditure on various ministries:

As there seems to be a significant reduction in FY24, the expenditures of nearly all the ministries are also expected to be low in the upcoming years. The major expenditure reduction is seen in particular in the rural and defence sector.


What is the overall impact of Union Budget 2023 on Individual Taxpayers:

The Union Budget 2023 has come up with changes in the Taxation policy related to individual taxpayers. Kindly find the major changes in the Taxation policy you should know as a taxpayer.

  • The Tax exemption limit increased to ₹ 3 Lakhs from ₹2.5 lakhs.

  • The Income slabs reduce to 5 from 6.

  • The limit to claim the tax rebates rose from ₹5 lakhs to 7 lakhs.

  • The highest percentage of personal income tax was 42.7%, now reduced to only 39%.

Other than the ones mentioned above, there are other sectors which got impacted in the union budget 2023, which are listed below:


Agriculture sector:

This year the main focus in the agriculture sector is to develop the technology-oriented industry and apply the concept of digitization in this sector. It will help in increasing the overall production in related sectors too.

Plans on how to achieve this?

  • Credit facilities to the people involved in the agricultural and allied industries will empower them.

  • A new program has been launched for reducing chemical fertilizers and encouraging natural and eco-friendly farming practices. The program focuses on Restoration, Awareness, Nourishment, and betterment of mother earth.

  • The public infrastructure development will aid the farmers in attaining important information on agriculture credit and practices.

Automation:

In this sector, the focus is to promote the manufacturing of electric vehicles throughout India. Further, the auto industry will be witnessing great demand, and all the old vehicles will be scrapped in the upcoming years.

Plans on how to achieve this?

  • The best way to achieve this is through the FAME-II scheme. The scheme will help many people to shift from fuel to electric vehicles.

  • The customs duties on the import will increase, because of which the importing of automobiles will be costlier.

  • Reduces duty on lithium-ion battery imports, which will make electric vehicles more affordable for society.

  • When the battery price may go down, on the other hand, the cost of the rubber may go up due to the hike in the custom duty on compounded rubber.

Specialty Chemicals:

In the union budget 2023, the import duties on several raw materials used to make specialty chemicals have increased, while on some others, it has reduced too. But due to this change, there will be a positive impact on the overall industry as many people, instead of importing, will start making by themselves, reducing the cost of chemicals.


Consumer:

  • This sector only witnessed three proposals in the union budget for 2023. This will have a slight impact on the individuals.

  • An increase in the NCCD (National Calamity Contingent Duty) will increase the prices of cigarettes and related products.

  • There will be a rise in the Basic custom duty on the product - Naphtha, which will impact the industry using Naphtha as their raw material.

Cement:

The union budget 2023 has no specific proposal for the cement industry. However, so many proposals related to housing facilities, roads, infrastructure, new healthcare facilities etc., will indirectly lead to high demand for cement.


Financial sector:

There are various proposals for the banking and insurance sector in this union budget 2023. They majorly focus on ensuring the availability of credit. The insurance sector has negatively impacted insurance policyholders.


Plans for the financial sector?

  • The life insurance policies, apart from the death benefits and the ULIPS, those issued after 1 April 2023 with a premium above ₹5 lakhs will be taxable.

  • The proposal for 2 Trillion in additional credit to the credit guarantee trust for Micro and Small enterprises will aid MSMEs in availing of the credit facility.

  • There is a significant rise by allocating more in Pradhan Mantri Awas Yojana for the betterment of people and to fulfil their dream of having a home.

  • The max limit has been increased from ₹15 lakhs to ₹30 lakhs in Indian post-senior Citizen Saving schemes so that they can save considerable amounts at the best interest rate.

Infrastructure:

The main Capex - Capital expenditure was on building the road and railways. Infrastructure has received higher allocations for FY24 by 25% and 50%. This implies that the government is pushing hard on infrastructure development in the coming years. However, the capital expenditure on the defence sector rose only by 8.4%. The impact of this allocation on individuals is neutral.


Logistics:

There is a unique model named the public-private partnership (PPP) model through which it will be carried. This is one of my favourite proposals, in which the government has devised an energy-efficient and low-cost transportation medium. It will be for both passengers and goods.

Metals:

  • There is no import duty for scrap metals, ferrous waste, and raw materials for CRGO steel.

  • There are no new proposals in this sector, but with the development of the infrastructure, the demand for various metals will rise.

  • It has no significant effect on any individual.

Oil and Gas:

The government of India is continuously putting efforts into reducing emissions and going for green and renewable energy. This year's budget includes a special fund of ₹350 Billion to develop the green energy transition, resulting in low emissions.


Real Estate:

The budget covers two main aspects of real estate: real estate investment trusts and reinvestment of capital gains by selling an asset. Please find below the two proposals that can impact you.


The capital gains by selling any asset that can be deducted from any future investment are capped at ₹10 crores. It means if you have gained an amount exceeding ₹10 crores, you are permitted to deduct the amount above ₹10 crore and reinvest them. Instead, you will have to pay the tax on the excess capital gain.


The unit holder has to pay the appropriate taxes on any distributions made by REITS. Thus, REIT units must also pay taxes on any investment product distribution.


So, this was all about the budget for the financial year 2023-2024. To read the complete details, please visit the official government website.

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