Finance Minister Nirmala Sitharaman presented the Union Budget for 2022-23 in Parliament today amidst the backdrop of the Uttar Pradesh Assembly Elections in February and March and the repeal of the farm laws last November. There are elections due in four more states as the country battles with Omicron and a never-ending pandemic and a slow economic recovery.
In the 4th budget of the second term of the Modi Government, Sitharaman said that the Union Budget will lay the foundation for the economic growth and expansion of India for the next 25 years. Infrastructure, Railways, Metals, Solar Energy, Cement, and Construction were the clear winners in this year’s budget with an increase in allocation in Education, Digital Finance, Telecommunications, Solar Energy and EV. The Healthcare sector also turned out to be an important part of the 2022 budget. Among the losers of the Budget, Public Sector Banks, Coal, Thermal Power, Steel and the Automobile Sector.
Sitharaman in her shortest ever budget speech, presented in the Lok Sabha with an aim to boost growth amid rising inflation and high expectations. In a nation severely hit with a pandemic that saw small businesses struggle, with rising unemployment and deepening inequalities. Direct taxes were left unchanged, with an agri cess on imported goods, an increase in customs duty on electronics and a reduction of the same on chemicals, diamonds and precious gems.
The FM proposed to increase the annual spending of the economy to 39.5 trillion rupees (US$529 billion) to support growth and predicted India to become a US$5 trillion economy by 2026.
Budget explained - 10 Key Takeaways from FM’s Budget Speech
Here are the ten most important things that you need to know from the Union Budget 2022-2023:
1. Economy and Expenditure
Capital Expenditure for FY 2023 saw a rise with ₹7.5 lakh crore allocation to government spending which is about 2.9% of GDP. This target expanded by 35.4% as compared to the previous financial year.
The capital expenditure (Capex) for FY2023 is pegged at ₹10.7 lakh crore
A fiscal deficit of 6.4% of GDP is projected for FY 2022-23 and the deficit for 2021-22 was revised to 6.9% of GDP. A fiscal target of 4.5% is aimed at for the financial year 2026.
FM Sitharaman also announced a big increase in financial assistance to States for Capex to ₹1 lakh cr in FY23 in the form of interest-free loans. This figure was ₹15,000 cr in FY22.
2. Infrastructure gets a big boost
PM Gatishakti remained in focus to boost infrastructure development and drive economic growth. The PM Gati Shakti National Master Plan includes a transformative approach with 7 engines - roads, railways, airports, ports, mass transport, waterways and logistics infrastructure.
These engines will be supported by the role of various sectors like energy transmission, IT communication, bulk water and sewerage and social infrastructure.
National Highways Network to be expanded by 25,000 km in FY 2023. Moreover, ₹20,000 crores will be whipped up through innovative ways of financing to complement the public resources.
3. Railway and Transport
The railway budget which used to be announced separately was merged with the Union Budget in 2016. With an allocation of ₹1,40,367.13 crore, Railways is a clear winner.
400 Vande Bharat trains were announced which will be started in India in the next three years. Moreover, 100 Gati Shakti Cargo terminals will also be added to the railway sector which will be developed in the next three years.
FM also mentioned 100% electrification of Broad Gauge Routes by the year 2023.
A one-station-one product plan was announced to help local businesses and supply chains. The Railways will develop new products and efficient logistic services for small farmers and SMEs as well as the integration of the postal and railway network to provide seamless solutions.
4. Education goes Digital
The 2022 Budget gave a push to digital education through a world-class Digital University as ‘digital’ remained the theme for all initiatives related to education.
Acknowledging the impact of the COVID pandemic on crores of children and loss of formal schooling since the last 2 years, FM announced the expansion of the PM E-vidya Scheme from the existing 12 educational television channels to 200, giving a boost to regional languages.
Skill courses were also announced with a focus on agri education.
5. Income Tax Rates Unchanged
GST collections were at a record high at ₹1.38 lakh Cr, the highest since the GST system was launched in India. The Finance Minister declared that no set-off of any loss will be allowed on undisclosed income detected during search and seizure operations.
However, there were no tax reforms for the salaried class. Personal Income tax structure remained unchanged despite demands from various sectors. More importantly, taxpayers can file updated ITR within 2 years of the relevant assessment year. In a change to TDS rules, missing ITR filing for even 1 year can result in higher TDS.
However, receivers of digital assets will be taxed at a high rate of 30%. Experts are calling this a “Crypto tax” where the transfer of a virtual digital asset will be taxed at 30% at the recipient’s end.
6. Focus on Agriculture and Farmers
A ₹2.37 Lakh Cr MSP (Minimum Support Price) was announced for farmers, with the usage of technology, green energy and chemical-free farming gaining prominence. Kisan Drones were announced for crop assessment, promotion of digital land records, paddy procurement and spraying of insecticides were also announced.
As the farm laws were repealed, ‘inclusive development’ remained a priority for the Modi Government. For providing finance to agri startups and rural enterprises, a fund with blended capital raised under the co-investment model through NABARD will be facilitated by the government.
7. Banking & Extension of ECLGS
All post offices are slated to come under the core banking system. A digital currency by RBI was also announced in the budget which will be launched in FY 2023 using blockchain technology.
The FM also announced the setting up of 75 digital banking units in 75 districts by scheduled commercial banks. The Budget also extended the Emergency Credit Line Guarantee Scheme (ECLGS) till March 31, 2023. Furthermore, the guarantee cover for ECLGS will also be expanded by ₹50,000 crores, to a total of ₹5 lakh crore. The additional amount will be focused on hospitality and related enterprises.
The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) will be infused with funds providing an additional credit of ₹2 lakh crore for SMEs, thus expanding employment opportunities. Changes were also announced in the Insolvency and Bankruptcy Code (IBC)
8. Going Green - Solar Energy and EV Batteries
With an aim to promote clean energy, funds of ₹19,500 cr were additionally allocated under the PLI scheme for manufacturing high-efficiency solar modules.
A battery swapping policy was announced to allow the setting up of charging stations at scale with private companies encouraged to model the swapping. Issues of green bonds were announced for mobilizing resources for setting up green infrastructure projects.
9. Startups & MSMEs are a priority
With several benefits extended to MSMEs and start-ups, the digital ecosystem, manufacturing sector and industries remained a budgetary focus. Tax benefits were increased by 1 more year in addition to the current three-year exemption.
Start-ups will be promoted to facilitate ‘Drone Shakti’ through varied applications and for Drone-As-A-Service (DrAAS) for which skilling would be provided at ITIs.
With Delhi becoming the Startup Capital of India, India now has more than 61,400 startups recognized by the Department for Promotion of Industry and Internal Trade (DPIIT). At least 14,000 recognized startups were added in 2021-22.
MSMEs portals such as Udyam, e-shram, NCS & Aseem will be interlinked and their scope will be widened. A 5-year program was announced to accelerate MSME performance with an allocation of Rs 6,000 crore for the next 5 years.
10. Housing and Urban Planning
PM Awas Yojana saw an allocation of ₹48,000 cr with 80 lakh houses built for the identified beneficiaries in 2022-2023. ₹60,000 cr was allocated to provide tap water connections to 3.8 crore households in 2022-23. 5 existing academic institutions for urban planning will be designated as Centre for Excellence with an allocation of ₹250 cr. The government also aims to promote public transport in urban areas.
A proposal was also put forward to reduce the Minimum Alternative Tax to 15% from 18% for cooperative societies.
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