Prologue: If you find these observations
completely trivial, that is precisely the idea. The budget speech and most of
the promises made thereunder sound trivial, lacking specifics.
As expected, the budget speech of the finance
minister, while presenting the last full budget of the union government before
the next general election, sounded like an election manifesto. The finance
minister counted the achievements made in the past nine years (since 2014) of her
party’s government; and made many promises for the future, totally lacking on
specifics.
Perhaps for the first time in the history of
independent India, the finance minister used “We will” and “will be” to make all
the budget proposals. The general convention has been to say “I propose to” or “is
proposed”. Besides, the nomenclatures of an overwhelming number of central
sector schemes now use “PM” as prefix. It is obvious that the central
government is too conscious to ensure that the electorate must know that the
benefit provided to them is coming from the central government.
The obsession with complex names of schemes,
apparently reworked from a pre-defined acronym, also continues. As has been the
practice in the past few years, many schemes have been renamed and/or clubbed
to give an impression of new schemes.
The capital allocations made in the budget are
mostly incongruent to the promises made, making the promise less credible. Adjusting
the promises with the funds allocation, the budget is a mundane account
presentation. It provides marginal relief to middle class taxpayers; proposes
to plug some loopholes that are used by high networth individuals to evade
taxes; continues the task of simplification of tax administration, and proposes
to ease compliance for entrepreneurs.
The best part of the budget speech was the
recognition of changing socio-economic paradigm in terms of adoption of
technology and digitalization of routine life. The finance minister not only
used technical jargon in her speech, but also made several proposals that
potentially could enhance adoption of technology in the normal course of
business, e.g., education, business transactions, data storage and exchange,
and public services. The idea is to improve Ease of Doing Business by
increasing the speed and efficiency.
1.
Inclusive Development
2.
Reaching the Last Mile
3.
Infrastructure and Investment
4.
Unleashing the Potential
5.
Green Growth
6.
Youth Power
7.
Financial Sector
·
Proposal to build an open
source digital platform for farmers to improve communication, access and
support for agri based enterprise.
·
Establishment of an agriculture
accelerator fund to transform agriculture practices, increase productivity and profitability. Farm
credit target increased to Rs20trn.
·
Plan to set up massive decentralised storage capacity for marginal and
small farmers.
·
Plan to
materially improve teachers’ training.
·
National
digital library for students.
·
Further enhancement
of 740 Tribal residential schools.
·
Digitization
ancient inscriptions.
·
PM Skill
Development 4.0 to be launched; and include coding, AI, robotics, mechatronics,
IOT, 3D printing, drones, and soft skills.
·
33%
increase in total capital expenditure outlay to Rs10trn.
·
100
critical transport infrastructure projects, for last and first mile
connectivity for ports, coal, steel, fertilizer, and food grains sectors.
·
Simplification
of KYC
·
Expansion
of Digilocker scope
·
PAN to be
common business identifier across agencies.
·
Unified
filling process. No need to submit same information to multiple agencies.
·
Provision
to ensure prompt payment to MSME vendors.
·
Rs350bn
outlay for energy transition.
·
Green
credit program to be unveiled.
·
2yr Mahila
Samman Savings Certificate bearing 7.5% p.a interest
·
Senior
Citizen Savings Scheme limit doubled to Rs30lacs.
·
Limit of
monthly income account increased to Rs9lacs for single account and Rs15lacs for
joint account.
·
No improvement projected in Tax
to GDP. Tax revenue to grow exactly in line with nominal GDP growth of 10.5%.
·
Interest payment to rise by
14.8% to Rs10.8trn.
·
No provision for disinvestment
proceeds.
·
Sharp cut in capital allocation
for school and higher education.
·
Sharp cut in allocation for
MNREGA, Food subsidy and assistance.
·
Negative real growth in
allocation for smart city, PM Awas Yojna, national Livelihood mission, etc.
·
Abysmal Rs42.4cr (-17%)
allocation for capex in agriculture and farmer welfare.
·
Poor 1.7% hike in revenue
expenditure for agriculture and farmer welfare.
·
Poor capital expenditure outlay
for skill development (Rs99.2cr); Science & technology (Rs88.3 cr); forest
and climate change (Rs145cr) food and PDS (Rs150.3cr).
·
Doors opened for opaque off
shore derivative instruments (P Notes) through IFSC (GIFT city).
·
Discouraging foreign travel and
investments through higher TCS (20%)
·
Increase in limit for
presumptive tax – MSME from Rs2cr to Rs3cr; Professionals from Rs50lacs to Rs75
lacs.
·
Payment to MSME to be allowed
as expense on actual payment basis, subject to the time limits under section 15
of MSMED Act.
·
New cooperative that commence
manufacturing activity before 31 March 2024 may avail lower tax rate of 15% as
available to new manufacturing companies.
·
Now the new start up units
established before 31 March 2024 could avail tax benefits.
·
Cost of all
self-developed/earned intangible assets to be treated as NIL for capital gains
purposes.
·
New tax regime introduced in
FY21 to be the default tax regime for all individual assesses.
·
Deduction u/s 54 and 54F in
respect of capital invested in a residential house to be capped at Rs10cr.
·
If the aggregate premium on
insurance policies issued on one life exceeds Rs5lac in any previous year
during the term of the policy, the proceeds from such policies would be taxable
as other income. Deduction will allowed for premium paid, if such deduction has
not been claimed earlier. This does not apply to ULIP, Keyman insurance and
proceeds received post death of the insured.
·
All income from online gaming
to be subject to TDS.
·
Conversion of physical gold
into electronic gold receipts not be treated as transfer for capital gain
purposes.
·
Income tax slabs under new
personal income tax scheme reduced to five from seven earlier.
·
Minimum exemption limit
increased to rs3 lacs from rs2.5lacs earlier.
·
Standard deduction to be
available under new tax scheme also.
·
Effective maximum marginal tax
rate reduced from 42.74% to 39% by capping all surcharges at 25%.
·
Limit for exemption in respect
of leave encashment increased from rs3lacs to rs25lacs.
·
Income from investment in
Market Linked Debentures to be taxed as Short Term Capital Gain on debt
securities.
·
Overseas tour package and
remittance under LRS (for purposes other than education) in excess of Rs7lacs
to attract 20% Tax Collection at Source.
·
The debt repayment component of
distribution made by REIT and InVIT to its unit holders to be fully taxable in
the hands of unit holders as income.
Some key budget statistics
Fiscal Trends
Trends in government expenditure
