INTRODUCTION
The Union Budget 2023-24 expands on the goals established in the previous budgets, providing a roadmap for directing the economy and its potential growth. Finance Minister of India, Nirmala Sitharaman announced the Union Budget 2023-24 as the first budget in ‘Amrit Kaal’[1]. The term ‘Saptarishi’ has been used to emphasize the various attributes highlighted in the budget i.e. inclusive development, reaching the last mile, unleashing the potential, green growth, youth power, financial sector, infrastructure, and investment.
OLD TAX REGIME V/S NEW TAX REGIME
The new proposed budget acts as a choice and the tax-payers have the freedom to choose or stick with the old tax regime. The new tax regime will act as a default option for the salaried class, to change their preference by filing their tax return within the prescribed date. Such a change is possible with every financial year, making the process easier and more people-friendly. People with an income under 7 lakh[2], under the new tax regime will highly benefit from the revision in the current budget. The said reforms aim to encourage people to adopt the new tax regime giving concessions to the middle-income segment by reducing the 20-25% tax burden[3]. Earlier people in this income category were forced to make investments to decrease tax cut[4], now these people can enjoy a tax reduced income without indulging in investments[5]. This will increase savings, however, the government is well aware of the repercussions of the same. If people save income due to tax reduction, it is likely to increase expenditure which again will lead to tax payments. This additional flow of money may allow growth within the economic position of the country. The saved-up income can also be used to benefit the health sector by investing in life and health insurance. However, the government has provided various benefits in the new tax regime which hamper people’s ability to choose the old tax regime without hesitation. The hybrid tax system should be made more favorable by allowing tax slabs and introducing revisions within the existing scenario.
Given how the budget has introduced tax reduction with a special focus on building infrastructure in the country and more of a service-based economy, it can lead to better markets’ functioning giving India a lead alongside other countries that have fully developed markets. According to a survey, a large majority of people preferred to stick with the old tax regime which favored tax deductions in medical insurance policies, more saving options, or previous commitments. People have not received a great concession in the new regime because of the gap between the previous and existing tax regime.[6]
TAX INSURANCE POLICIES
By the budget, the government seeks to tax insurance policies with yearly premiums exceeding Rs.5 lakh that is issued on or after 1st April 2023[7]. Such insurance plans were previously tax-free as they were included in the category of investments following the Union Budget 2022-23. However, unit-linked insurance plans shall be exempted from this category. The taxation of insurance premiums has deeply impacted and upset consumers of high-value savings products. Health insurance premiums have been subjected to previously installed tax exemptions which are to be noted as they may negatively impact the growth of the health sector in the country.
A 25% surcharge is applied instead of a 37% fee for income beyond Rs 5 crore[8]. But this theory does not mean that wealthy people will get a lot of advantages (HNI). The Capital Gains Exemption is subject to limitations stated in the Budget for investments in residential properties[9]. The Budget seeks to establish a cap of Rs 10 crore[10] as opposed to the NIL limit that is already in place to discourage HNI from claiming big deductions and undermining the objective of this exemption.
TAX ON GOLD AND CIGARETTES
The budget showed an increase in the customs duty imposed on gold articles as well as a 16%[11] increase in tax on cigarettes, a commendable initiative by the government. A raised tax slab for beedis, other tobacco products, vapes, etc. should also be imposed to further this initiative of reducing the consumption of tobacco and such harmful ingredients in India. Increased tobacco costs make smoking more expensive, encourage smokers to quit, deter newcomers from taking up the habit, and reduce how much is smoked regularly.[12] Tobacco control will in turn act as a boost to the overall health of individuals making them a much more efficient population.
CONCLUSION
By putting more disposable income in the hands of the salaried population one may assume that the proposed budget intends to advance the private sector. This may prove to be beneficial to Fast-moving consumer goods, generally consumed items, and the automobile industry. This is further supported by the relief provided in Customs duty imposed on the various components used in the electronic industry like camera lenses etc. Consumption has been largely focused on with the revised tax slabs and rates increasing an individual’s disposable income. In India, a large portion of the population is composed of people who are categorized as middle-class. These individuals currently have potential in terms of economic growth and development, however, they do not quite yet possess the income that is possessed and earned by the elite classes. This puts them in a state of discomfort as a little change in policy can have a larger and grave effect on the earning capability of these individuals. Survey shows that the middle-class income can range from 5 lakhs to 30 lakhs[13]. The continuously growing population in this category shows us that the government should frame policies to effectively include all such people for their economic welfare as well as the nation’s wholesome welfare.
Author(s) Name: Esha Sharma (Institute of Law, Nirma University)
References:
[1] ‘Speech of Nirmala Sitharaman – India budget’ (India Budget, 2023) <https://www.indiabudget.gov.in/doc/budget_speech.pdf> accessed 24 February 2023
[2] ‘No tax on income up to 7 lakh, the standard deduction allowed under new tax regime’ (The Times of India, 01 February 2023) <https://timesofindia.indiatimes.com/business/budget/no-tax-on-income-up-to-rs-7-lakh-standard-deduction-allowed-under-new-tax-regime/articleshow/97529422.cms> accessed 24 February 2023
[3] ‘New Income Tax Regime 2023-24’, (The Economic Times, 04 February 2023) <https://economictimes.indiatimes.com/wealth/tax/new-income-tax-regime-2023-24-5-key-changes-you-must-know/budget-2023-key-income-tax-announcements/slideshow/97599865.cms> accessed 24 February 2023
[4] Income Tax Act 1961 s 87A
[5] Income Tax Act 1961, s 80C
[6] ‘Union Budget 2023 key announcements: From tax relief to capex thrust, here’s what Nirmala Sitharam proposed’ (The Economic Times, 02 February 2023) <https://economictimes.indiatimes.com/news/economy/policy/union-budget-2023-key-takeaways/articleshow/97510184.cm> accessed 24 February 2023
[7] Basudha Das, ‘Budget 2023: Govt to impose a tax on insurance policies with premiums above 5 lakh’ (Business Today, 01 February 2023) <https://www.businesstoday.in/union-budget/personal-finance/story/budget-2023-govt-to-impose-tax-on-insurance-policies-with-premiums-above-rs-5-lakh-368521-2023-02-01> accessed 24 February 2023
[8] Ashwini Kumar Sharma, ‘Highest surge rate on income tax goes down: Will HNIs benefit?’ (Money Control, 02 February 2023) <https://www.moneycontrol.com/news/business/budget/new-income-tax-regime-surcharge-rs-5-crore-9987821.html> accessed 24 February 2023
[9] ‘How Rs 10 crore deduction limit imposed on capital gains on re-investment in residential properties will impact HNIs and uber luxury property sales’ (The Times of India, 02 February 2023) <https://timesofindia.indiatimes.com/business/budget/how-rs-10-crore-deduction-limit-imposed-on-capital-gains-on-re-investment-in-residential-properties-will-impact-hnis-and-uber-luxury-property-sales/articleshow/97540119.cms> accessed 24 February 2023
[10] Raghavendra Kamath, ‘Budget 2023: Capital gains cap at Rs 10 crore to hit luxury home sales’ (Business Today, 01 February 2023) <https://www.business-standard.com/budget/article/budget-2023-capping-of-capital-gains-at-rs-10-cr-to-hit-luxury-home-sales-123020101263_1.html#:~:text=The%20finance%20minister%20on%20Wednesday,54F%20to%20Rs%2010%20crore&text=The%20capping%20of%20capital%20gains,homes%2C%20according%20to%20industry%20experts> accessed 24 February 2023
[11] ‘Budget 2023: Smoking to be costlier, custom duty on cigarettes increased’, (The Indian Express, 01 February 2023) <https://indianexpress.com/article/business/budget/budget-2023-custom-duty-cigarettes-8417367/> accessed 24 February 2023
[12] ‘Union Budget 2023-23) (National Portal of India, 24 February 2023) https://www.india.gov.in/spotlight/union-budget-2023-2024 accessed 24 February 2023
[13] Surojit Gupta and Sidhartha, ‘How the middle class has turned cities into India’s growth engine’ (The Times of India, 30 November 2023) <https://timesofindia.indiatimes.com/times-special/how-the-middle-class-has-turned-cities-into-indias-growth-engine/articleshow/95865472.cms> accessed 24 February 2023
