Opinion

Budget 2023: Balanced and prudent budget with no negative surprises

Overall, there are multiple positives across segments to be taken away from the Budget and it goes a long way to improve India’s macro-economic picture from a growth and fiscal discipline perspective

Vivek Goel Last Updated:February 01, 2023 14:14:46 IST

Finance Minister Nirmala Sitharaman. ANI

The Union Budget 2023 announced by Finance Minister Nirmala Sitharaman is a balanced budget with no negative surprises, prudently maintaining a fiscal deficit target at 5.9 percent while delivering a Rs 10 lakh crores capex and rationalising personal income tax.

Continuing impetus on CAPEX

In a difficult global macroeconomic backdrop, continuing impetus on capital expenditure the finance minister announced a significant jump in planned capex to Rs 10 lakh crores. It should help further improve India’s prospects of continuing to be outshining with strong GDP growth numbers with 10.5 percent FY24 nominal GDP estimates set out. This further helps in job creation across infrastructure, railways, power, and among others.

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A strong message on fiscal deficit

Along with this, a fiscal deficit target of 5.9 percent for FY24 while retaining 6.4 percent for FY23 is a strong message from a fiscal perspective. This additionally included the FM maintaining her originally set-out glide path of bringing the fiscal deficit down to 4.5 percent by FY26 which is a strong reaffirmation of maintaining fiscal discipline. It should bring cheers in the bond markets with the government’s efforts in consolidating the fiscal deficit.

I-T benefits for middle-class

In terms of taxation and savings-related announcements from the Budget, there were multiple areas to look out for. On expected lines, reforms to strengthen the adoption of the new tax regime for individual taxpayers introduced in 2020 were made. This increases benefits focusing on the middle-income segment by reducing tax burden by 20-25 percent for 9-15L income slabs along with increasing basic income limit to 3 lakhs and taking the rebate up to 7 lakhs. Further, the standard deduction introduction of 52,500 is another add-on. Overall, this should help a higher shift towards the new regime.

Increment of the limit for the senior citizen savings scheme from Rs 15 lakhs to Rs 30 lakhs is an important announcement to help senior citizens and retired investors plan their investments in safer areas better.

No change in CGT, a big relief for markets

Further, importantly, no change in capital gains comes as a big relief for the markets. As per initial worries, there were in terms of rationalising benefits on listed equity in the form of a holding period and lower slabs. As seen in 2018 with the introduction of LTCG on listed equity, any move to tweak it would have been negative.

Mixed announcement for HNIs

For the ultra-high net worth segment, there were mixed announcements where on the one hand maximum marginal tax slab has been brought down by reducing the highest tax surcharge slab from 37 percent to 25 percent for taxable income over INR 5 crore. However, on the tax exemption front, there was a negative in terms of putting in a ceiling of Rs 10 crores as a limit from capital gains exemption when investing in a house property under section 54.

KYC process simplification

An announcement to simplify KYC process is a much-needed reform to ease KYC-related requirements. It will help improve the efficiency of financial transactions with faster account opening and setups. This along with tweaking gold-related conversion in terms of physical to digital and vice versa as a non-taxable event from capital gains is another important simplification in the tax regime.

Overall, there are multiple positives across segments to be taken away from the Budget and it goes a long way to improve India’s macro-economic picture from a growth and fiscal discipline perspective.

The writer is Joint Managing Director, Tailwind Financial Services- a new-age wealth management platform. Views expressed are personal

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