On 1 February 2023, the Finance Minister (FM) presented the last full budget of the Modi Government.
This Budget comes at a time when the world is witnessing geopolitical tumult, demand slowdown and rising inflation. Despite these challenges, the FM was quite clear about her intention of steering the Indian economy on a high growth trajectory by having a technology-driven and skill-based economy, with a robust financial sector. Further, this Budget also focuses on providing impetus to growth and strengthening macro-economic stability.
On the tax front, the proposals laid down by the FM aimed to maintain continuity and stability of the tax regime and rationalization of tax provisions.
Several measures were announced on the personal income tax front. These include revamping personal income slabs and tax rates and reduction in highest surcharge from 37% to 25%. Further, the rebate for personal taxpayers has been increased from Rs 5 lakh to Rs 7 lakh, thereby ensuring that individuals earning up to Rs 7 lakh will not be required to pay income tax under the new regime.
Further, GIFT IFSC also received a major boost in the Budget with the FM indicating a number of measures that will be undertaken to enhance attractiveness of this financial hub. One such important measure is regarding extension of period of tax benefits to funds relocating to IFSC by two years.
Meanwhile, the MSMEs will also get a boost, with increase in the turnover limit to avail of the presumptive taxation regime from Rs 2 crores to Rs 3 crores. The FM also proposed a 'Vivad se Vishwas' scheme for MSMEs whereby the government will return 95% of forfeited amount related to bid or performance security in case of failure of MSME to execute contracts during the COVID-19 period.
In order to promote the entrepreneurial spirit, the eligibility for claiming income tax holiday for eligible start-ups is proposed to be extended by one more year.
The FM also gave a boost to ease of doing business by announcing reduction of 39,000 compliances and decriminalization of more than 3,400 legal provisions. With the aim to reduce the pendency of appeals with Commissioner (Appeals), the FM proposed deploying of 100 Joint Commissioners for disposal of small appeals.
The FM has laid out her intention that the focus of this Budget is to give further boost to the momentum that the Indian economy has got coming out of the pandemic. The significant increase in the tax collections as well as the resilience to global shocks manifests that the economy has rebounded from the pandemic induced slump.
Not to forget, India has assumed the G20 presidency for 2023, which lands India with the opportunity to emerge as a leader to solve some of the most pressing global issues.
All in all, Budget 2023 is a fiscally prudent and growth-oriented budget, that lays down the blueprint for growth of the Indian economy over the foreseeable future. The FM has to be commended for walking on a tight rope by balancing the growth momentum while keeping fiscal deficit and inflation in check.
Himanshu Parekh is Partner and Head of Tax (West), KPMG in India and Ravish Kotadia is a Chartered Accountant