With more expectations along this new year, the Union Budget for the financial year 2023-24 is also the one for which everyone has an eye. Also called the annual financial statement, the union budget is presented every year by the finance minister of India usually on the 1st Feb.
It’s the time when newspaper articles are all about Budget news, news channels are talking about what the Budget will entail and office space discussions have an air of “Kya lagta hai Budget ka iss baar?” (What do you think the budget will look like this time?).
But, striking the right balance won’t be easy this time as this will be the last full budget before the 2024 Lok Sabha elections, and hence the political temptation to spend will be unmissable with a fiscal deficit at a nine-year high stretch.
The expectations are mostly around relief in taxation, employment opportunities, and healthcare.
Since Budget 2022 offered very few personal tax breaks, expectations for Budget 2023 are high. Let’s discuss a few expectations of the Budget 2023-24:
- Salaried individuals
- Increased Deductions
- Boost the start-up ecosystem
- Cryptos, VDA’s & NFT market
- Digital Payments
Salaried employees, who make up one of the largest groups of taxpayers in India, can greatly benefit from Budget 2023. Up until November 2022, there were around 86 million salaried people nationwide.
What can the salaried people expect from the Budget?
- HRA calculation in terms of the metro cities might need revision. As of now, only four cities are considered metro cities for the HRA calculation. The inclusion of more cities can benefit salaried people with respect to the HRA.
- Home Office Expense: Work from home is going to stay in the future. Even as offices have opened, many people still work from their homes. Therefore, home office expenses should be allowed as a deduction, experts say.
- The income tax slab can have a revision. Even after the introduction of the new tax regime, the majority of the people opted for the old regime only. The tax slabs haven’t changed since 2014, hence we can expect a change of an increase in the limit of Basic Exemption as well from INR 2.5 Lakhs to INR 5 Lakhs.
- ESOP taxation: ESOPs are widely offered perquisites by companies to their employees. ESOPs being unlisted securities are taxed at 20% with indexation in the case of LTCG (if held for more than 24 months) and at slab rates in the case of STCG.
Currently, the rate of taxation and period of holding is different in the case of listed and unlisted securities. LTCG on listed securities are taxed at 10% without indexation benefit and exemption up to Rs. 1,00,000 and STCG is taxed at 15%. We can expect parity in taxation on capital gains which will boost the growth of start-ups and new businesses.
The 80C deduction has not changed for a very long time. The Finance Act of 2014 established the current limit of 1.5 lakhs. Therefore, raising this limit will be advantageous for people.
The ICAI has also proposed increasing the Public Provident Fund (PPF) contribution annual limit from the present Rs 1.5 lakh to Rs 3 lakh in Budget 2023.
Similarly, the deduction limit u/s 80D for medical insurance can also be raised from Rs. 25,000. The insurance companies raised the premium amount for the same coverage, just as they did during the pandemic.
Increase the 80TTA/TTB deduction from Rs. 10,000 to a higher amount and the Standard deduction to be increased from Rs. 50,000 to Rs. 75,000.
Under section 80EEA the last date for loan sanctioned is 31/03/2023 which is expected to be extended to continue promoting home buying.
While tech giants such as TCS, Infosys HCL, etc have already established themselves in the tech sector globally, the rising number of Indian tech start-ups like Zerodha, Udaan, Cred, etc has also been a contributor to driving the digital technology revolution in recent years.
The number of startups in India increased to 72,993 in 2022 from 471 in 2016 and now includes businesses in the fields of FinTech (Quicko, Zerodha), EdTech, HealthTech, Logistics, Retail Tech, and more. Additionally, their scope has expanded to include worldwide expansion. Despite the present “funding cold,” the startup innovation surge is expected to last. The innovation boom requires help from the budget 2023-24.
After the FM imposed a tax of 30% on the income from crypto trading in Budget 2022, crypto experts have certain expectations this time from Finance Minister Nirmala Sitharaman’s Union Budget 2023.
For example, we can expect the classification of crypto either as a regulated asset class, similar to securities, and to bring taxation on parity with equity shares/derivatives or to be treated as a non-speculative business.
The GOI has been promoting digital payments by offering incentives for the past few years. In budget 2019, the FM removed the MDR (Merchant Discount Rate) charges applicable on payments made through the following electronic modes:
- Debit Card powered by RuPay;
- United Payments Interface (BHIM-UPI); and
- Unified Payments Interface Quick Response Code (UPI QR Code).
Introducing the MDR again on UPI & Rupay DC is another measure that the government could consider. Since India has seen a sharp rise in digital transactions using various online payment portals, rolling back the 0% MDR will incentivize the banks to improve the current infrastructure around UPI – leading to better success rates.
What are your thoughts/opinions on the budget for FY 2023-24?