On February 1st, 2023, Nirmala Sitharaman, the Union Finance Minister of India, announced the budget for the fiscal year 2023-24. It is essentially the government’s financial statement from the duration of April 1st 2023, to March 31st, 2024, which includes the yearly operational budgeting of the country’s governance and management. Read on to learn more about India’s latest budget presentation and other key pointers, such as the areas of impact and the top changes made compared to the previous fiscal year of 2022-23.
Components of a Budget
Article 112 of the Indian Constitution states that, with respect to each financial year, the President has to lay down the expected receipts and expenditures of the Government of India before both Houses of parliament. In order to understand a government’s budget more coherently, one needs to go through a few of the highlighting factors of a budget. Following are some of the key points concerning a country’s budget components:
- Capital Receipts: The capital receipts include the funds gained by the government through the RBI (Reserve Bank of India), foreign institutions and the government.
- Capital Expenditure: Capital Expenditure is used for either the creation of assets or the reduction of liabilities. It consists of long-term investments such as roads and bridges or the capital spent by the government in the form of loans.
- Revenue Receipts: Revenue Receipts are essentially money earned by the government through the means of taxes or other fields such as profits, dividend income, or interest receipts.
- Revenue Expenditure: Revenue Expenditure includes interest payments, pension, salary and other administrative expenses that do not affect the assets.
- Fiscal Deficit: Fiscal Deficit of a country is essentially the gap experienced by the government between the receipts and the expenditure requirements faced. It is the amount of capital that is needed to be borrowed by a country at the end of a fiscal year.
- Revenue Deficit: The revenue budget is essentially the costs required in order to run a government. A revenue deficit is created when the expenditure in revenue is exceeded, and a fiscal deficit is created when the government exceeds the total spending.
India’s Budget 2023 – 24
On Tuesday, January 31st, 2023, the Economic Survey forecasted that in the fiscal year 2023-24, India’s economy would spike by 6-6.8%. On the first Wednesday of February 2023, Sitharaman announced what she called “ the First Budget of Amrit Kaal.”
It was also mentioned that the per capita income of Indians had experienced more than 2X growth, to INR 1.97 lakh since 2014. The Union Finance Minister then laid out the seven major priorities in this year’s budget, which was called the “Saptarishi” that will guide the Amrit Kaal of India. The “Saptarishis” are mentioned as follows:
- Inclusive development
- Reaching the last mile
- Infrastructure and investment
- Green growth
- Unleashing the potential
- Youth power
- Financial sector
A few of the key pointers from the 2023 budget are listed below:
- One of the key pointers of the 2023-24 budget is the increase in tax slabs. The government has changed the tax slab in the new regime. An income of up to INR 7 lakh a year will not require payable taxes.
- The tax slabs of the new regimes are as follows: No tax upto INR 3 lakh, 5% on income between 3-6 lakh, 10% on income upto 6-9 lakh, 15% on income upto 9-12 lakh, and 20% on incomes upto 12-15 lakh and 30% tax on incomes above 15 lakh.
|Upto 3 Lakh||Nil|
|15 Lakh +||30%|
- The most applicable tax rate in India, surcharges, is reduced from 42.7% to 39%. Surcharges are basically a tax on tax which is not specifically imposed for an explainable purpose; it is under the discretion of the Union Government.
- The Government has announced a total of INR 2.4 lakh crore for the railways, which is 4X last year’s budget and the highest in the decade.
- Government agencies will use the Permanent Account Number (PAN Card) as the common identifier. There will be a simplification of the KYC (Know Your Customers) process. In order to streamline the process of duplication, a system of Unified Filing Process will be implemented.
- In order to implement Green Growth, the government is streamlining the consumption of green fuel with an end goal of 5MT Green Hydrogen production by the year 2030.
- The Fiscal Deficit target for the upcoming financial year is 5.9% of the GDP.
- The Budget 2023-24 presents a hike of 33% in CAPEX (Capital Expenditure) up to Rs 10 lakh crore.
- There has also been an increment in the agricultural sector. The annual agricultural capital is INR 20 lakh crore, and the PM Awas Yojna has seen a growth of 66%, resulting in a capital of more than INR 79,000 crore.
- The government has also promised a total of 50 new airports as well as helipads in the country.
Areas of Impact
The critical areas of impact through the budget 2023-24 are as follows:
- The Union Minister mentioned that the budget for the upcoming fiscal year primarily focuses on the empowerment of women, tourism, and green growth.
- The new tax regime offers the citizens better incentives. It is one of the significant areas of impact of the upcoming fiscal year as the new tax slab has changed the payable taxes on incomes up to 7 from incomes up to 5 lakhs per year. This further on provides tax relief for middle-class individuals.
- It focuses on capital investments and aims to give a leg up to MSME ( Micro, Small, and Medium Enterprises), providing a push to the private sector.
- The government has further changed the Capital Expenditure up to 33%.
Major Changes – Budget 2023
There are three significant changes in the budget 2023-24 of India. They are stated as follows:
- Tax Slabs: The newly introduced tax slabs of the fiscal year 2023-24 shows one of the significant changes. As the newly introduced payable tax slabs are charged at an income of more than INR 7 lakh per annum, in the previous fiscal year, the taxes were charged INR 5 lakh per annum.
- Railway Budget: In the fiscal year 2023-24, railways have garnered an all-time high capital allocation of up to INR 2.4 lakh crore. This is the highest in the decade and about 4 times higher than the budget of last year’s railway allocation.
- CAPEX: The CAPEX targets for the upcoming fiscal year are up by a record 33%.