The Modi Government 2.0 has announced a fourth budget in February under the leadership of Finance Minister Nirmala Sitharaman. There are lots of sectors that were considered to boost them for growth amid high & rising inflation and continuing Covid uncertainties.
However, there are few changes when it comes to personal income tax structure in a year that has been continuous demand to seek some sort of relief or another in times of pandemic. Aside from that, the announcement of a digital rupee was another big news item in a budget that saw no major populist giveaways.
Let’s see sector wise glimpse of various measures Finance Minister Nirmala Sitharaman announced.
Economy
- Capex target expanded by 35.4 per cent — from Rs 5.54 lakh crore to Rs 7.50 lakh crore. FY23 effective capex seen at Rs 10.7 lakh crore
- India’s growth highest among all major economies; we are now in a strong position to withstand challenges
- The goal is complementing macro-growth with micro-all-inclusive welfare, digital economy and fintech, tech-enabled development, energy transition and climate action
- ECLGS cover expanded by Rs 50,000 to Rs 5 lakh crore
- Top focus of the budget this year are: PM Gati Shakti, Inclusive Development, Productivity Enhancement, Sunrise Opportunities, Energy Transition, Climate Action, Financing of investments
- Productivity-linked incentive schemes in 14 sectors have received excellent response; received investment intentions worth Rs 30 lakh crore
- Economic recovery benefitting from public investment and capital spending. This Budget will provide impetus to growth
- In 2022-23, states will be allowed fiscal deficit of up to 4 pc of GSDP
Expenditure and deficit & other key numbers
- Proposed fiscal deficit of 4.5% of GDP by 2025/26
- Projected fiscal deficit of 6.4% of GDP in 2022/23
- Revised fiscal deficit for 2021/22 at 6.9% of GDP
- 50 year interest free loans over and above normal borrowing allowed for states
- Scheme for financial assistance to states for capital investment outlay to be Rs 1 lakh crore for 2022/23
- Public issue of Life Insurance Corporation expected shortly
- Initiatives from last year’s budget have been provided adequate allocations in this budget
- Receipt from disinvestment proceeds in next financial year pegged at Rs 65,000 crore, lower than the current year’s mobilisation of Rs 78,000 crore.
Taxes
- Govt vows a stable and predictable tax regime
- Govt to provide one-time window to correct omissions in ITRs filed, updated returns to be filed within 2 years
- Any cess or surcharge on income not allowed as business expenditure
- 1 percent TDS on transfer of virtual assets above a threshold, gifts to be taxed
- Surcharge on long-term capital gains capped at 15 per cent
- The government will tax income from digital asset transfers at 30%
- No deduction allowed while computing income except cost of acquisition
- Loss cannot be set off from any other income
- Gift of cryptocurrencies to be taxed at receiver’s end
- A new provision to allow taxpayers to file an updated return
- Updated return can be filed within 2 years from the end of the relevant assessment year
- Alternate Minimum Tax for cooperative societies to be cut to 15%
- Proposal will reduce surcharge on cooperative societies to 7%, for those whose income is between Rs 1 crore and Rs 10 crore
- Tax deduction limit increased to 14% on employer’s contribution to NPS account of state govt employees
Duties on Industry
- Import duty on certain chemicals being/to be cut
- Customs duty exemption on steel scrap will be extended for another year for MSMEs
- Will revoke customs duty on stainless steel, flat products, high steel bars
- Beginning October 2022, unblended fuel to get additional duty of Rs 2/litre
- Import duty on cut and polished diamonds and gemstones to be cut 5 per cent and on sawn diamond to nil
- Customs duty concessions to be given to certain consumer electronic devices to promote manufacturing across wearables, hearables and specific mobile phone components
Jobs
- ECLGS extended till March 2023, 60 lakh jobs eyed in next 5 years
- Efforts of central, state governments leading to jobs, entrepreneurial opportunities
- Digital ecosystem for skilling and livelihood to be launched.
- This will aim to skill, reskill, and upskill citizens through online training.
- API based skill credentials, payment layers to find relevant jobs and opportunities
Steps on digital currency
- Launch of blockchain-based digital rupee starting 2022-23
- To launch scheme for taxation of virtual digital assets
- Losses from sale of virtual digital assets cannot be offset against other income
- Income from virtual digital assets to be taxed at 30%
MSMEs & startups
- Rs 6,000 crore programme to rate MSMEs to be rolled out over 5 years
- MSMEs such as Udyam, e-shram, NCS & Aseem portals will be inter-linked, their scope will be widened
- They will now perform as portals with live organic databases providing G-C, B-C & B-B services such as credit facilitation, enhancing entrepreneurial opportunities
- A fund with blended capital raised under co-investment model facilitated through NABARD to finance startups in agriculture & rural enterprises for farm produce value chain
- Startups will promote for Drone Shakti
- PE/VC invested Rs 5.5 lakh crore in startup, expert committee will be set up to suggest measures to help attract investment
- Existing tax benefits for startups, which were offered redemption of taxes for 3 consecutive years, to be extended by 1 more year
Electric Vehicles
- Battery swapping policy to allow EV charging stations for automobiles will be framed
- Private sector will be encouraged to create sustainable and innovative business models for battery and energy as a service, improving the efficiency in the EV ecosystem
Finance & inclusion
- Rs 1 lakh crore financial assistance to states to be provided in 2022-23 to catalyse investments
- Proposed to introduce Digital Rupee by RBI using blockchain technology, starting 2022-23
- Measures will be taken to step up private capital in infra sector
- Digital Rupee to be rolled out by 2023
- 100% of 1.5 lakh post offices will come on the core banking system, enabling financial inclusion and access to accounts through net banking, mobile banking, ATMs, and also provide online transfer of funds between post office accounts and bank accounts
- This will be helpful especially for farmers and senior citizens in rural areas, enabling inter operability, and financial inclusion
- IBC amendments to enhance efficiency of resolution process
- Facilitate cross-border insolvency resolution
- 75 digital banks in 75 districts will be set up by scheduled commercial banks to encourage digital payments
- The use of surety bonds as a substitute for bank guarantee will be made acceptable in government procurements
- International arbitration centre will be set up in GIFT city to provide faster dispute resolution
- World-class university to be allowed in GIFT IFSC free from domestic regulation
- Payment of annuity and lump sum amount to the differently abled dependent during the lifetime of parents/guardians, i.e., on parents/ guardians attaining the age of sixty years
Ease of Business & living
- 75,000 compliances have been eliminated and 1,486 union laws repealed to make it easier for businesses
- India to launch the next phase of Ease of Doing Business EODB 2.0 and Ease of Living.
- Voluntary exit for corporates to be cut down to 6 months from 2 years
- Special Economic Zones Act to be replaced with new legislation
Climate & Net Zero
- Energy transition and action on climate to be major priority for govt
- Risks of climate change are the strongest externalities for the world
- Funds will be used for projects that will help reduce carbon intensity of the economy
- Sovereign green bonds to be launched to fund green infra, to be part of government’s borrowing programme in FY23
- Proceeds to be deployed in public sector projects
- 4 pilot projects for coal gasification to be set up
- Rs 19,500 cr additional allocation for PLI for manufacturing high efficiency solar modules has been made
- Low carbon development strategy opens up employment opportunity
Beside these all, the other sectors are also considered while designing budget such as, travel, infra & manufacturing, housing & urban planning, agri, education & skilling, healthcare, telecom, women & child, defense and transportation including railway.
