Budget 2023 and its benefits
The recent Union Budget 2023 presented by the Indian government is considered promising due to its dedication to revitalize the economy and promote inclusive growth. The budget prioritizes enhancing infrastructure, supporting entrepreneurship, and helping the agriculture and rural sectors. Increased investment in infrastructure, energy, and the banking sector is likely to be productive for investors.
The new budget states that individuals earning up to ₹7 lakh annually will be exempt from paying tax. The new system will be the default option, but the previous one remains available for use. Also, it has a reduced number of tax brackets, from six to five.
The Section 87A rebate amount available under both tax regimes has been altered. Previously, the old tax regime provided a maximum rebate of Rs 12,500 if taxable income was less than Rs 5 lakh. But starting April 1, 2023, the new tax regime offers a rebate of Rs 25,000 if taxable income is below Rs 7 lakh. For taxable income up to Rs 5 lakh, the old tax regime's rebate of Rs 12,500 will still apply.
Please note that according to income tax laws, taxpayers with business income cannot switch between the old and new tax regimes on an annual basis. This means that salaried individuals and pensioners are eligible to choose between the old and new tax regimes annually, as long as they do not have business income.
The new tax regime, with its reduced tax rates and the future introduction of a simplified common ITR form, demonstrates the government's goal of making income tax easier for the general public. For small businesses and professionals, the threshold for presumptive business income has been raised, reducing compliance burdens and encouraging compliance.
The emphasis on simplified KYC, Digi locker for businesses, and a National Data Governance Policy will reduce compliance requirements and provide data for research, allowing start-ups to focus on developing quality products. The revised tax brackets will result in increased disposable income, promoting better savings and increased spending, benefiting the overall economy. To improve the ease of doing business, over 39,000 compliance requirements have been reduced and more than 3,400 legal proceedings have been decriminalized.
The budget aims to make doing business easier and promote entrepreneurship in the country. The government's commitment to fiscal deficit targets and the RBI's efforts to control inflation will increase investor confidence and solidify India's status as a desirable investment destination. The extension of the start-up tax exemption will further support the sector, especially in a challenging economic environment.
Selecting the tax system at the start of the fiscal year is crucial for tax planning purposes. The taxpayer should compare the income tax under the new system with the current one. The taxpayer's investments and calculations for TDS or advance tax will be based on the chosen system. Additionally, the taxpayer must submit Form 10IE to the income tax department before filing their return if they decide to opt for the new tax system.