Union Budget 2023 – 2024 Highlights

Union Budget FY 2023 – 24 was pro-growth and provided focus on capex while ensuring inclusive developments. The FM has struck a fine balance as she is sticking to the path of fiscal consolidation by targeting a fiscal deficit of 5.9% of GDP for FY24 against 6.4% for FY23 and keeping the medium target of 4.5% by FY26 intact. There is also a clear focus on improving the quality of spending with FY24 capex spend budgeted at Rs.10 trn (YoY growth of 37% over FY23 RE of Rs.7.3trn) with emphasis on infrastructure development (railways, roads, airports, etc). Since all these categories have significant multiplier effects on the economy and would help realize India’s long-term growth potential.

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Macro Impact:

Let us discuss the macro impact of the budget in this section;

There were seven main priorities in the budget with a focus on medium to long-term development. These priorities of the budget ‘Saptarishi’ were i) inclusive development, ii) reaching the last mile, iii) infrastructure and investment, iv) unleashing the potential, v) green growth, vi) youth power, and vii) financial sector. There were several major schemes announced by the government for the Agriculture sector which will help in building an accessible, inclusive, and informative solution for farmers and boost production.

  1. For metals and logistics, 100 critical transport infrastructure projects identified for last/first-mile connectivity for various sectors including steel at an investment of Rs. 750bn will help in Infrastructure development and be beneficial for CTO and surface express companies.
  2. Ministry of Defence has been allocated a total Budget of Rs 5.93 Lakh crore, which is 13.18 % of the total budget, this expenditure is expected to close critical gaps in the combat capabilities and equip the forces in terms of ammunition, sustenance of weapons & assets, military reserves, etc. as well as fuel India’s Mission of AatmaNirbhar Bharat.
  3. Overall healthcare expenditure increased by ~2.8% to Rs. 890bn for 2023-24 and Pharmaceutical development got a significant boost with an allocation of Rs. 12.5bn which will help boost R&D capability.

Personal finance impacts:

This Budget was Finance Minister Nirmala Sitharaman’s fifth straight Budget, It has something for everyone. In this budget, the middle class finally received some relief especially on the personal tax front amid the rising inflation.

  1. The FM announced that under the new tax regime, there will be no tax on incomes up to Rs. 7 lakh per annum. Earlier, people with a yearly income of Rs. 5 lakh and below were provided tax exemption.
  2. Under the new tax slabs, the income tax slabs will now be as follows;

                  Rs. 0 – 3 lakh – 0% Tax Rate

                  Rs. 3 – 5 lakh – 5% Tax Rate

                  Rs. 6 – 9 lakh – 10% Tax Rate

                  Rs. 12 – 15 lakh – 15% Tax Rate

                  Income above Rs. 15 lakhs – 30% Tax Rate

  1. This new tax regime will mostly benefit those in lower-income groups and young earners. There is also relief being provided to ultra HNIs, as the maximum surcharge is being lowered to 25% from 37%.
  2. Rs. 50,000 of the standard deduction for pensioners and Rs. 15,000 for family pensioners is now proposed under the new tax regime.
  3. A salaried person with an income of Rs 15.5 lakh or more will be eligible for the benefit of Rs 52,500 as a standard deduction.
  4. The limit for tax exemption on leave encashment on the retirement of non-government salaried employees to increase to Rs. 25 lakh.
  5. Since the new regime is the default option, there may be many that might join it without realizing so if any of the taxpayers wish to go with the old tax regime which includes deductions under 80c and the like will have to inform their HR if their taxes are deducted at the source.

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This tax regime was mainly introduced to entice the taxpayers to shift to the new regime to boost consumption without tax-saving being a main consideration instead of savings which could benefit sectors such as retail, durables, and automobiles and to avoid the miss-selling of insurance in the name of investments.

There were also other finer elements that will benefit the retail investors, such as:

  1. Integrated IT site will be built to make it simple for investors to reclaim unclaimed shares and unpaid dividends from the Investor Education and Protection Fund Authority.
  2. Certain changes to the Banking Regulation Act, the Banking Companies Act, and the Reserve Bank of India Act are suggested to improve bank governance and strengthen investor protection.
  3. TDS rate to be reduced from 30% to 20% on the taxable portion of EPF withdrawal in non-PAN cases.
  4. Maximum deposit limit for Senior Citizen Savings Scheme to be enhanced to Rs 30 lakh from Rs 15 lakh.
  5. The Monthly Income Scheme limit doubled to Rs 9 lakh and Rs 15 lakh for joint accounts.
  6. A new small savings scheme called Mahila Samman Savings Certificate with a fixed interest rate of 7.5 per cent will be made available for a two-year period up to March 2025 to boost Women empowerment.

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The 2023 union budget even though has provided some much-needed relief for the middle class under the new tax regime. However, there are some measures that dampen the mood such as

  1. Proposed tax to insurance policies (other than ULIP for which provisions already exist) having premium or aggregate of premia above Rs 5 lacs in a year but there is a concession that this income is proposed to be exempt if received on the death of the insured person. This led to the fall of LIC share by 8.4%, SBI Life by 9.3%, ICICI and HDFC Life by 11% and Bajaj Finserv by 5.65%.
  2. Deduction from capital gains on investment in residential houses under sections 54 and 54F is proposed to be capped at Rs. 10 crore.
  3. It proposed a 30% tax on net winnings in the case of online games and also the removal of the minimum threshold limit of Rs 10,000 for calculating the tax deducted at source (TDS).
  4. Proposal to hike in the TCS (tax collected at source) rate to 20% from 5% for foreign remittances through the Liberalised Remittance Scheme for overseas tour packages, etc.

The Direct Tax proposals mainly aimed at simplification & rationalisation of tax regime and revision of tax slabs and proposing standard deduction in the new tax regime made it more lucrative to the taxpayers but still, the old tax regime would be more beneficial to most of the tax payers. No change in capital gains tax disappointed the retail investors. Overall the budget seems to have a stabilizing effect on the economy by plugging some loopholes along with providing growth opportunities by increasing capex.


This article should not be construed as investment advice, please consult your Investment Adviser before making any investment decision.

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