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No tax on income up to Rs 7 lakh, standard deduction allowed under new tax regime

Finance Minister Nirmala Sitharaman

NEW DELHI: Finance Minister Nirmala Sitharaman on Wednesday announced no tax for those with an annual income of up to Rs 7 lakh under the new tax regime but made no changes for those who continue in the old regime that provides for tax exemptions and deductions on investments and expenses such as HRA. Doling out sops on small savings, the FM also announced one of the biggest hikes in capital spending in the past decade as she did a tight rope walk between staying fiscally prudent and meeting public expectations in the year before general elections.

In what is being seen as a push for the salaried class to switch to the new tax regime where no exemptions on investments are provided, the FM in her budget for 2023-24 allowed a standard deduction of Rs 50,000 under the new regime.

The old tax regime provides for a similar deduction and no tax on income up to Rs 5 lakh. Also, the basic exemption limit has been raised to Rs 3 lakh from Rs 2.5 lakh. The move will lead to a saving of Rs 33,800 for those earning up to Rs 7 lakh annually and opting for the new tax regime. Those with income up to Rs 10 lakh would save Rs 23,400 and Rs 49,400 saving would accrue to those earning up to Rs 15 lakh.

For high-salary people, Sitharaman also reduced the surcharge from 37 per cent to 25 per cent for high-networth individuals with income above Rs 2 crore.

This would translate into a saving of around Rs 20 lakh for those having a salary income of about Rs 5.5 crore.

Besides, the deposit limit for senior citizen savings schemes has been doubled to Rs 30 lakh and for Monthly Income Account Scheme to Rs 9 lakh. A new small savings scheme for women, offering 7.5 per cent interest rate on deposits of up to Rs 2 lakh for a tenor of 2 years, has been announced.

She also announced customs duty relief on mobile phone components, as well as on capital goods for lithium batteries and other such items to boost green energy and exports.

The budget also has defence allocation up by 12.95 per cent — from Rs 5.25 lakh crore to Rs 5.94 lakh crore — to allow the military to develop and/ or buy advanced weapons systems

This is the final full budget before the general elections next year. An interim budget is to be presented in February next year and the new government will present the full budget sometime in July 2024.

Budget was a tightrope walk between staying fiscally prudent and meeting expectations

The world has recognised India as a bright star, our growth for current year is estimated at 7.0 per cent, this is the highest among all major economies, in spite of massive global slowdown caused by pandemic and the war

— Nirmala Sitharaman, Finance Minister

Representatives of the Madras Chamber of Commerce & Industry (MCCI) shared their perspectives on the budget presented on Wednesday by Finance Minister Nirmala Sitharaman.

TR Kesavan, president of the MCCI, believes that the budget is “balanced, focused, inclusive, fiscally responsible and ensures continuity.” The seven priorities spelt out in the Budget, comprehensively cover the key economic engines of agriculture, manufacturing and infrastructure. It is a welcome sign that the budget focuses on sustainability with significant investments in the area of green economy, Kesavan added.

According to the industry body representative, the special focus on agriculture and agri related sectors which continues with Rs 20 lakh crores credit and creation of Agriculture Accelerator fund, Digital Public Infrastructure for Agriculture on an open platform, 10000 Bio input resource centres, setting up of massive rural storage facilities linked digitally, and a number of initiatives for the cooperative sector will provide a significant impetus to the agriculture sector and the rural economy. The Centres of Excellence for precision and AI-driven agriculture are welcome moves too.

Kesavan opines that the sharp increase in outlay for infrastructure at Rs 10 lakh crore, continuation of 50-year interest free loan to State Governments, setting up of infrastructure finance secretariat, setting up of urban infrastructure development fund with an outlay of Rs 10,000 crore and 100 last mile connectivity projects would provide a boost to infrastructure and urban development.

With regard to the industry, Kesavan said that the enhanced outlay for MSME Credit guarantee with the reduction in rates will provide some relief to MSMEs. “Harnessing youth power through enhanced skill development programs, improved national apprenticeship schemes, Centres of excellence for AI and setting up of Skill India International centers for skilling resources to target overseas opportunities are innovative moves to enhance job creation,” he remarks.

The industry body has noted that rationalisation of personal income tax slabs and the increased exemption limits will provide cushion to the middle class against inflation. The chamber always bats for ease of doing business. Decriminalisation of more than 3,400 legal provisions, adopting PAN as common identifier for all digital systems and unified filing process are positive moves in this direction. “It is heartening to note that the fiscal deficit has been budgeted to be in line with the glide path proposed in the 2021-2022 budget. On the whole, we feel that the budget is growth oriented without compromising on fiscal responsibility or sustainability,” says the president.

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