Any process of governance is complete only after planning, preparation, execution and most importantly, review. The Budget 2024 is approaching and it is the perfect time to review the outcome of the previous budget decisions and analyze the implementation of the promises made in the Union Budget 2023.
Priorities of this Budget
The Budget 2023 adopted the following seven priorities. They complement each other and act as the ‘Saptarishi’ guiding us through the Amrit Kaal.
BENEFITS PROPOSED IN PERSONAL INCOME TAX – Direct Tax Regime
Promise
“Lastly, the limit of Rs. 3 lakh for tax exemption on leave encashment on retirement of non-government salaried employees was last fixed in the year 2002, when the highest basic pay in the government was Rs. 30,000/- pm.
In line with the increase in government salaries, I am proposing to increase this limit to 25 lakh”.
Progress
The Central Government has notified the increased limit for tax exemption on leave encashment on retirement or otherwise of non-government salaried employees to lakh w.e.f. 01.04.2023.
Notification No. 31/2023 dated 24.05.2023 has been published and is available at https://egazette.nic.in.
Promise
“My fourth announcement in personal income tax is regarding the highest tax rate which in our country is 42.74 per cent. This is among the highest in the world. I propose to reduce the highest surcharge rate from 37 per cent to 25 per cent in the new tax regime. This would result in reduction of the maximum tax rate to 39 per cent”.
Progress
Reduction in the maximum tax rate for persons in the new tax regime has been brought about
through the Finance Act, 2023.
Promise
“Currently, those with income up to 5 lakh do not pay any income tax in both old and new tax regimes.
I propose to increase the rebate limit to 7 lakh in the new tax regime. Thus, persons in the new tax regime, with income up to 7 lakh will not have to pay any tax”.
Progress
Section 87A of the Income-tax Act, 1961 has been amended to allow rebate of tax resulting in no tax liability to persons having income up to Rs. 7 lakh.
PROMOTION OF CO-OPERATIVES
Promise
“a higher limit of crore for TDS on cash withdrawal is being provided to co-operative
societies”.
Progress
The Finance Act, 2023 has provided relief to the co-operatives by raising the threshold limits to withdraw cash without TDS, from crore to crore under Section 194N of the Income Tax Act, 1961.
Promise
“Thirdly, I am providing a higher limit of lakh per member for cash deposits to and loans in cash by Primary Agricultural Co-operative Societies(PACS) and Primary Co-operative Agriculture
and Rural Development Banks(PCARDBs)”.
Progress
Amendment has been carried out in Section 269SS and Section 269T of the Income-tax Act, 1961.
Promise
“First, new co-operatives that commence manufacturing activities till 31.3.2024 shall get the benefit of a lower tax rate of 15 per cent, as is available to new manufacturing companies”.
Progress
New Section 115BAE inserted in Income-tax Act, 1961 providing reduced tax rate for new manufacturing co-operative societies.
New manufacturing co-operative society set up on or after 1.04.2023, which commences manufacturing or production on or before 31.03.2024 and does not avail any specified incentive or deductions, may opt to pay tax at a concessional rate of 15% for Assessment Year 2024-25 onwards.
Surcharge would be at 10% on such tax.
BENEFIT TO AGNIVEERS
Promise
“Providing EEE status to Agniveer Fund”.
Progress
• Section 80CCH introduced in the Income-tax Act, 1961 to allow deduction for any contribution made by Agniveer or the Central Government to the Agniveer Corpus Fund account, from the computation of the total income of Agniveer.
• Clause (12C) inserted in section 10 of the Income-tax Act, 1961 to exempt from tax, any
payment received by Agniveer or his nominee from the Agniveer Corpus fund.
PROMOTION OF DIGITAL TRANSACTIONS
Promise
“Micro enterprises with turnover up to 2 crore and certain professionals with turnover of up to 50 lakh can avail the benefit of presumptive taxation.
I propose to provide enhanced limits of 3 crore and 75 lakh respectively, to the taxpayers whose cash receipts are no more than 5 per cent”.
Progress
• Finance Act, 2023 has increased the threshold limits for availing the presumptive scheme of
taxation:
a) In case of small enterprises whose cash receipts are no more than 5%, the threshold limit to avail presumptive scheme has been increased from Rs. 2 crore to Rs. 3 crore.
b) In case of professionals whose cash receipts are no more than 5%, the said limit has been increased from lakh to lakh.
JOINT COMMISSIONER (APPEALS)
Promise
“To reduce the pendency of appeals at Commissioner level, I propose to deploy about 100 Joint Commissioners for disposal of small appeals”.
Progress
For effective management of litigation and speedy disposal of appeals, a new authority for appeals has been created at Joint Commissioner/Additional Commissioner level to handle certain classes of cases involving small amounts of disputed demand.
Scheme has also been notified vide Notification No. 33 of 2023 dated 29.05.2023.
EXEMPTION TO DEVELOPMENT AUTHORITIES
Promise
“It is proposed to provide exemption to any income arising to a body or authority or board or trust or commission, (not being a company) which has beén established or constituted by or under a Central or State Act with the purposes of satisfying the need for housing or for planning, development or improvement of cities, towns and villages or for regulating any activity or matter,
irrespective of whether it is carrying out commercial activity.”
Progress
Section 10(46A) has been inserted in the Income-tax Act, 1961 for this purpose.
BENEFITS TO IFSC, GIFT CITY
Promise
“Extension of period of tax benefits to funds relocating to IFSC, Gift city till 31.03.2025”.
Progress
To extend the period of tax benefits to funds relocating to IFSC, Gift City, clause (viiad) of section 47 of the Income – tax Act, 1961 has been amended.
The date for transfer of assets of the original fund, or of its wholly owned special purpose vehicle, to a resultant fund in case of relocation, has been extended to 31st March, 2025 from the earlier limitation of 31st March, 2023.
INCENTIVES FOR START-UPS
Promise
“l propose to extend the date of incorporation for income tax benefits to start-ups from 31.03.23 to 31.03.24. I further propose to provide the benefit of carry forward of losses on change of shareholding of start-ups from seven years of incorporation to ten years”.
Progress
• The period of incorporation of eligible start-ups for tax benefits has been extended by 1 year to those start-ups which have been incorporated before 1st of April 2024.
• The period for eligible start-ups to carry forward and set off losses has been increased from 7 to 10 years (subject to certain conditions).
PROMOTION OF ELECTRONIC GOLD
Promise
“Not treating conversion of gold into electronic gold receipt and vice versa as capital gain”.
Progress
To promote investment in the electronic equivalent of gold, the conversion of physical gold to electronic gold receipt and vice versa would not be treated as transfer and hence would not attract capital gains.
BENEFIT TO MSMEs
Promise
“Moreover, to support MSMEs in timely receipt of payments, I propose to allow deduction for expenditure incurred on payments made to them only when payment is actually made.”
Progress
To promote timely payments to MSMEs, Finance Act, 2023 has provided that any sum payable by the assessee to a micro or small enterprise beyond the time limit specified in section 15 of the Micro, Small and Medium Enterprises Development (MSMED)Act, 2006 shall be allowed as deduction only on actual payment.
Other major changes
In addition, the new income tax regime has been made the default tax regime. However, citizens will continue to have the option to avail the benefit of the old tax regime. — The New Income Tax Regime is currently the default regime, while the option to choose the old regime still exists.
BENEFITS PROPOSED IN INDIRECT TAXES – GST, Customs and Excise
The Finance Minister’s indirect tax proposals aim to promote exports, boost domestic manufacturing, enhance domestic value addition, encourage green energy and mobility.
Announcement
“To further deepen domestic value addition in manufacture of mobile phones, I propose to provide relief in Customs Duty on import of certain parts and inputs like camera lens and continue the concessional duty on lithium-ion cells for batteries for another year.
Similarly, to promote value addition in the manufacture of televisions, I propose to reduce the basic customs duty on parts of open cells of TV panels to 2.5%.”
Accomplishment
In pursuance to provide relief in Customs Duty, the following notifications were issued:
• Sl. No. 3 of notification No. 06/2023-Customs dated 01.02.2023 and Sl. No. (36) of notification No. 02/2023-Customs dated 01.02.2023 refers.
• Sl. No. (33) of notification No. 02/2023-Customs dated 01.02.2023 refers.
These steps will reduce input costs and deepen value addition in domestic manufacturing of electronics.
Announcement
To rectify inverted duty structure and encourage manufacturing of electric kitchen chimneys, the Basic Customs Duty on electric kitchen chimney is being increased from 7.5 per cent to 15 per cent and that on heat coils for these is proposed to be reduced from 20 per cent to 15 per cent.
Accomplishment
In pursuance to rectify inverted duty structure, the following notification was issued:
• Implemented vide Section 135(a) of Finance Act, 2023 and Sl. No. (32) of notification No. 02/2023-Customs dated 01.02.2023 refers.
Changes were brought in to correct inverted duty structure so as to boost domestic manufacturing of electric kitchen chimneys.
Announcement
Basic Customs Duty is also being reduced on acid grade fluorspar from 5 per cent to 2.5 per cent to make the domestic fluorochemicals industry competitive.
Further, the Basic Customs Duty on crude glycerin for use in manufacture of epichlorohydrin is proposed to be reduced from 7.5 per cent to 2.5 %.
Accomplishment
To make the domestic industry competitive and in order to reduce input costs and promote domestic manufacturing of Chemicals, the following notifications were issued:
• Notified vide Sl. No. (7) of notification No. 02/2023-Customs dated 01.02.2023 refers.
• Notified vide Sl. No. (4) of notification No. 02/2023-Customs dated 01.02.2023 refers.
Announcement
Denatured ethyl alcohol is used in the chemical industry.
I propose to exempt Basic Customs Duty on it. This will also support the Ethanol Blending Programme and facilitate our endeavor for energy transition.
Accomplishment
In order to augment availability of inputs for Chemical industry, denatured ethyl alcohol is exempt from the Customs Duty with the following Notification:
• Notified vide Sl. No. (6) of notification No. 02/2023-Customs dated 01.02.2023 refers.
Announcement
I propose to reduce Basic Customs Duty (BCD) on seeds used in their [lab-grown diamonds] manufacture.
Accomplishment
To promote domestic manufacturing of lab-grown diamonds and boost export competitiveness of Gems and Jewellery sector, the change was brought about via the following Notification:
Notified vide Sl. No. (19) of notification No. 02/2023-customs dated 01.02.2023 refers.
Announcement
Exemption from Basic Customs Duty (BCD) on raw materials for manufacture of CRGO Steel, ferrous scrap and nickel cathode is being continued.
Similarly, the concessional BCD of 2.5 per cent on copper scrap is also being continued to ensure the availability of raw materials for secondary copper producers who are mainly in the MSME sector.
To augment availability of raw material for the domestic metals industry, the changes were brought about by the following Notification:
• Notified vide Sl. No. (27), (28) and (29) of notification No. 02/2023-Customs dated 01.02.2023 refers.
Announcement
The Basic Customs Duty rate on compounded rubber is being increased from 10 per cent to ’25 per cent or Rs. 30/kg whichever is lower’, at par with that on natural rubber other than latex, to curb circumvention of duty.
Accomplishment
To prevent circumvention of higher duty on Natural Rubber which would have impacted small rubber growers, the following changes were made:
• Implemented vide Section 135(a) of Finance Act, 2023 refers.
Announcement
National Calamity Contingent Duty (NCCD) on specified cigarettes was last revised three years ago. This is proposed to be revised upwards by about 16 per cent.
Accomplishment
To index cigarette prices to inflation, changes were brought by implementation vide Section 172 of Finance Act, 2023 refers.
Announcement
I propose to reduce the number of Basic Customs Duty rates on goods, other than textiles and agriculture, from 21 to 13.
As a result, there are minor changes in the basic custom duties, cesses and surcharges on some items including toys, bicycles, automobiles and naphtha.
Accomplishment
As part of rationalization of customs duty rate structure, the number of basic Customs Duty rates on goods, other than on textiles and agriculture, was reduced from 21 to 13 to reduce compliance burden and ease of trade via:
• Notified vide Notification Nos. 03/2023-Customs, 04/2023-Customs and 05/2023-Customs dated 01.02.2023 refers.
Announcement
To avoid cascading of taxes on blended compressed natural gas, I propose to exempt excise duty on GST-paid compressed biogas contained in it.
To further provide impetus to green mobility, Customs duty exemption is being extended to import of capital goods and machinery required for manufacture of lithium-ion cells for batteries used in electric vehicles.
Accomplishment
These changes were made to encourage the offtake of Compressed Biogas produced in the country and to avoid double taxation on compressed natural gas following the blending/co-mingling with Biogas/CBG.
BCD exemption was extended to capital goods/machinery for use in manufacture of Lithium ion cells of EV batteries in line with Lithium ion cells of mobile batteries to bring parity and increase value addition in EV manufacturing.
The following Notifications were issued to give effect to these changes:
• Notified vide Notification No. 05/2023-Central Excise dated 01.02.2023 refers.
• Notified vide Sl. No. 2 of notification No. 06/2023-customs dated 01.02.2023 refers.
In conclusion, the Union Budget 2023, presented under the guidance of Union FM Nirmala Sitharaman, demonstrated a commendable commitment to inclusive development, reaching the last mile, infrastructure, investment, unleashing potential, green growth, youth power, and financial sector stability.
The promises made in the budget, particularly in the realms of personal income tax, promotion of cooperatives, benefits to Agniveers, promotion of digital transactions, and incentives for startups, have shown substantial progress and implementation. The extension of tax benefits to IFSC, Gift City, promotion of electronic gold, and support to MSMEs further underscore the government’s commitment to economic growth and development. In the realm of indirect taxes, the Finance Minister’s proposals regarding customs and excise have been effectively translated into action, promoting domestic value addition, boosting manufacturing, and encouraging green energy.
The reduction and rationalization of customs duties demonstrate a strategic approach to enhance ease of trade. As the country approaches Budget 2024, the government’s efforts and accomplishments in fulfilling its promises pave the way for continued economic resilience and progress, and will be a deciding element in the upcoming General elections that are expected to be held in India between April and May 2024 to elect 543 members of the Lok Sabha.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
