Yet another annual event – Budget 2023. Over the years, the expectation from the Union Budget has gradually moved away from being a representation of income & expense to policy and strategy announcements. This year wasn’t different but the good thing was – it was continued the journey towards achieving growth and building infrastructure assets along with being financially prudent, i.e. keeping fiscal deficit in check. A few key data points from the budget are :
- The projections for the year ahead are healthy with nominal GDP growth at 10% (considering major economies would be happy if they are in a positive growth territory).
- Fiscal deficit, i.e. difference between what the country earns vs spends would be approx. 6% and the target is still to control it to 4.5% of GDP by FY 2025-26. Tax and non tax revenues (divestments, dividends, etc) are expected to grow at health 10-15%. Sounds good.
- This Budget continued its emphasis on spending towards infrastructure > roadways, railways, defence, green energy, etc. All this is super good. Money invested here will have multiplier effect on the future GDP. An economy which moves its goods faster, grows faster.
Personal Income Tax
There were a few tweaks which were made, but nothing which I would call as path breaking.
Old vs New tax regime
I guess that it is a matter of time where India may move fully to the New tax regime and this year was yet another step to graduate towards the New. The New regime aims to simplify the taxation, reduce exemptions and widen the tax net. Some of the key updates / refinements made to the New are below :
- Till FY 2022-23, one has to ‘expressly’ choose New tax regime, with old tax regime as a default option. From FY 2023-24 onwards, the New Tax regime will be the default. If a tax payer considers that the Old tax regime as a better option, the person would need to opt for it expressly. – So nothing material, but the emphasis is on the New.
- New Tax slabs have been rationalised further. Number of slabs have been reduced from 6 to 5. A
|For FY 2022-23||Tax rate||For FY 2023-24||Tax rate|
|Upto 2.5L||NIL||Upto 3L||NIL|
|2.5L-5L||5||3L – 6L||5|
|5L – 7.5L||10||6L – 9L||10|
|7.5L – 10L||15||9L – 12L||15|
|10L – 12.5L||20||12L – 15L||20|
|12.5L – 15L||25||Above 15L||30|
3. Tax rates for Old tax regime continues to be the same. This still could be beneficial for individuals who may have deductions greater than approx. 2 lakhs. The table below gives an indication of when Old tax regime could be better, i.e. if the deduction available with a person is over 3.75 lakhs at 15L income, it would be beneficial to go with Old tax regime.
We have uploaded an indicative tax calculation spreadsheet which will give you a rough idea if Old or New regime will be beneficial for you. This is not a comprehensive calculator and hence you may find multiple income sources misisng. Please download the calculator from the link below.
4. Surcharge on higher incomes has been reduced from 37% to 25%. This may bring some joy to people with incomes above 5 crores (how many of them are out there in this bracket ?). Please note Surcharge is an additional tax on top of your existing tax rates. Hence, please do not read that your tax rate got reduced from 37% to 25%.
|Income Level||FY 2022-23||FY 2023-24|
|Upto 50 lakhs||Zero||Zero|
|50L – 1 crore||10%||10%|
|1crore – 2 crore||15%||15%|
|2 crore – 5 crore||25%||25%|
|Above 5 crore||37%||25%|
5. Investments in insurance policies will now be taxable if aggregate annual premiums are more than 5 lakh in a year. This specifically impacted traditional endowment insurance plans which were being rampantly sold as a tax free option. Payment made on death continues to be tax free
6. Capital Gains Tax exemptions where the money was reinvested in real estate properties has now been capped to 10 crore. Step in a good direction, but how many such property deals happen ?
7. Senior citizen saving schemes – the maximum investment amount has been increased from 15 lakh to 30 lakhs. Limits have also been increased for Monthly Income Schemes.
8. International Investing / Remittance – As India was getting geared towards investing directly in overseas markets via LRS route, this budget came up with a hammer blow. From FY 2023-24, tax at 20% would be deducted at source if any money is remitted outside India for any objective other than for education or medical. Till now, a TCS of 5% is applicable if the remittance is over 7 lakhs. From coming year, there will be no minimum slab of Rs. 7 lakhs unless it is for above mentioned two objectives and 20% TDS will be deducted from Rupee 1. To clarify, this TCS could be setoff against tax liability during the year.
And lastly, good news on front of no material tax changes on investment incomes / capital gain taxes on investments. So status quo continues here.