The fiscal deficit (the difference between the government’s total revenue and expenses in the year) is expected to be at 5.9% of GDP. This is a good reduction from the current fiscal deficit of 6.4% for the financial year ending March 2023. Bond markets reacted positively as the yields softened during the budget.
Budget 2023-24 primarily focuses on Capital Expenditure than Revenue Expenditure which is a huge plus for the market participants and for the general economy.
Ours is a 302 lakh crore economy (projected in 2023-24) with Rs.45 lakh crore in expenditure and Rs.27 lakh crore in revenue anticipated. 10 lakh crore is planned for the infrastructure sector which includes Railways (2.4 lakh crore), Roads (2.58 lakh crore), and 100 Critical transport infrastructure projects including first and last-mile connectivity for Ports, Coal, Steel etc. 50-year interest-free loans to State Governments who are spending in infra projects upto 1.3 lakh
crore) to incentivise infrastructure investment for the year (2023-24).
Nominal GDP is projected at 10.4% for the fiscal year 2023-24.
Personal finance – Highlights:
- Life insurance savings plan (NON-ULIP) products which carry an annual premium of more than
5 lakhs would be taxable with effect from April 2023. - Highest Surcharge rate on Income above 5 Crores reduced from 37% to 25% in the new
regime - Income limit for a rebate of income tax increased from 5 lakhs to 7 lakhs only in the new tax regime (FY 2023-24). The default tax option to file tax returns will be the New Tax regime. However, Old Tax Regime will continue without any change (the status quo exists for the old tax regime).
- Leave encashment on retirement for non-government employees exemption limit increased from Rs.3 lakhs to Rs.25 lakhs.
- Market Linked Debentures (MLD) will be taxed as short-term capital gain (marginal tax rate as applicable in present Debt scheme vs Earlier LTCG of 10%)
Summary Note:
The government is incentivising taxpayers to adopt New Tax Regime by increasing the limit. As the majority of Indians have not planned for Retirement Corpus and other long-term goals and are underinsured in
health insurance and protection solutions, it is left to the individual to plan their own finances. Hence, It is important that investors should consider the tax arbitrage opportunity by comparing Old Tax Regime Vs New Tax Regime and take an informed decision by consulting Financial Planners and Tax Consultants.
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