UNION BUDGET 2022–23

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TAXES

  • Income tax slabs have been unchanged
  • Taxpayers have been allowed 2 years to file their returns
  • The finance minister has proposed to increase the tax deduction limit from 10% to 14% on employer’s contribution to the National Pension System (NPS) account of State Government employees. This would help in enhancing the social security benefits of the state government employees and bring them at par with central government employees.
  • A concessional tax regime of 15% tax was introduced by our government for newly incorporated domestic manufacturing companies.
  • The budget has proposed to reduce Customs duty on cut and polished diamonds and gemstones to 5%.

CRYPTO

Cryptocurrency, as we all know, is emerging as the new feature of the banking system and the Indian government has chosen to put it in a very grey area. This budget has met one thing obvious by imposing tax rate makes crypto trading official now, and any concern of a ban is off the table, but the 30% tax on any virtual currency without any exemptions clearly states that the government has chosen to go guns blazing on crypto. Investors cannot get any deductions and also won’t be allowed to set off losses from the transfer of such assets against any other income.

When somebody says virtual currency, we assume that to be crypto but what we do not realise is all the NFT is, and other digital currencies are also a part of this.

India is set to launch its digital currency this financial year, and hopefully, that will change the present tax scenario. Industry experts have welcomed the budget proposals, but some feel that the taxation on crypto is very high, which will dissuade people from using this.

The 30% tax rate means that investors would have to aim for higher returns in relation to stocks. For instance, to make a post-tax gain of Rs1.1 lakh from selling stocks after one year, the return would have to be 12% on a principal of Rs 10 lakh. But to make a similar gain from Bitcoin with the same principal and time, the return will need to be about 15.4%.

In a nutshell, the clarity on cryptocurrencies in this budget has been pretty vague. Higher taxation rates on cryptocurrency could be because they want to give the Indian digital currency, which is due to be launched this year, a head start.

MSMEs

In the Union Budget 2022, it was announced that the Udyam, NCS, e-Shram and ASEEM portals will be interlinked. There will be extension of ECLGS (Emergency Credit Line Guarantee Scheme) till March 23 and its guarantee cover will be expanded to Rs 5 lakh crore from Rs 50,000 crore focusing on hospitality and related enterprises. The Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) Scheme will be modified with the addition of additional funds which will facilitate additional credit of Rs 2 lakh crore for MSMEs. The Raising and Accelerating MSME Performance (RAMP) programme will roll out with an outlay of Rs 6000crore over 5 years. A programme named, ‘One Station One Product’ announced in the Union Budget, is expected to accelerate local supply chains and also, impact small farmers & MSMEs to a great extent

Startups

The startups will be encouraged to facilitate ‘Drone Shakti’ through varied applications for Drone-As-A-Service (DrAAS). Its implementation will by the commencement of the required courses for skilling in select it is in all the states. Defence R&D will be opened up for startups, industry and academia with 25% of the defence R&D budget earmarked.

Agriculture

The Union budget for 2022–23 had little to boast about for farmers. The aim of doubling farmer income (DFI) was not mentioned in either Union finance minister Nirmala Sitharaman’s February 1, 2022 budget address or the budget materials.

The omission is surprising given that the timeframe for achieving that goal is 2022. Prime Minister Narendra Modi stated on February 28, 2016, that by the time India celebrates its 75th Independence Day in 2022, the income of its farmers will have doubled.

Main pointer’s of the budget for the agricultural sector are:

A significant reduction in fertiliser subsidies.

  1. Direct purchase and MSP- According to the FM, the Centre would pay 2.37 lakh crore for wheat and paddy purchase under MSP operations.
  2. PM-KISAN scheme — The Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) has been allocated Rs 68,000 crore in the Union Budget 2022–23, which is just 4.6 percent more than the Budget Estimates of Rs 65,000 crore for 2021–22.
  3. Budgetary cuts in MIS-PSS and PM-AASHA
  4. Allocation under Rashtriya Krishi Vikas Yojana has nearly tripled to 10,433 crore which is likely to result in a boost for development schemes.
  5. Kisan Drones and chemical-free natural farming- Drones will be used by the government for agricultural evaluations, land records, sand pesticide spraying.

Education

The Education Budget 2022 has been increased by 11.86% from the previous year with a significant fund allocation for digital education and skill development ( a total of INR 104278 cr). NEP 2020 is all set to change India’s education system.

The National Education Policy, 2020 (NEP) calls for public investment on education to 6% of GDP. India’s education budget has never touched this number yet.

As per the Economic Survey presented by Union Finance Minister Nirmala Sitharaman on Monday, January 31, the expenditure on education as a percentage of GDP was 3.1% for the financial year 2021–22

To meet the 6% of GDP criteria, the education budget for 2022–23 should have been almost double that of last year’s allocation.

Health and sanitation

India will digitise the country’s health care delivery system by building registries of health providers and facilities, providing unique health identity to all residents, preparing a consent framework and ensuring universal access to health care, finance minister Nirmala Sitharaman said in her Budget speech in Parliament.

The Budget has allocated ₹86,200.65 crore for health care in 2022–23, which is about 16.59% more than the previous year’s estimates of ₹73,931.77 crore.

Banking And Insurance

  1. Extension of the ECLGS scheme:

The Emergency Credit Line Guarantee Scheme (ECLGS) has been extended in the budget to cover the next fiscal year ending in March 2023. The total guarantee cover under the scheme has been expanded to ₹5 lakh crore from the ₹4.5 lakh crore provided by the previous budget, with the additional guarantee amount of ₹50,000 crore specifically meant for the hospitality sector.

2. Revamp of the CGTMSE scheme:

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), first started in 2000, has been revamped to facilitate additional credit of ₹2 lakh crore to MSMEs by offering credit guarantees for credits of up to ₹50 lakh per borrowing unit to financial institutions offering credit to MSMEs.

3. Amendment to IBC:

The Insolvency and Bankruptcy Code has been amended to ensure quicker dispute resolution. Further, to accelerated corporate exits, the budget has reduced the exit timeline from 2 years to 6 months.

4. Digital Banking:

The budget has proposed that Scheduled Commercial Banks set up 75 digital banking units in 75 districts. The budget also plans to bring all of the 150,000 post offices under the core banking system enabling financial inclusion and access to accounts through net banking, mobile banking, ATMs, and will also provide online transfer of funds between post office accounts and bank accounts.

DEFENCE

Keeping in line with the security needs of India, the defence budget also got some increase.

Finance Minister Nirmala Sitharaman underlined India’s quest for self-reliance in defence when she mentioned in her Budget speech the prioritisation given to the domestic defence industry and the need to strengthen research and development. The defence sector has remained an important focus for the government, cornering the largest share (13–14 percent) of budgetary allocation over the past few budgets. That is the case this year too, with INR 525,166 crore being allotted to the Ministry of Defence (MoD).

This budget hike comes against the backdrop of multiple security developments. The border stand-off with China’s People’s Liberation Army (PLA) in eastern Ladakh, which began in mid-2020, has entered the stalemate phase, with the latest round of talks achieving little progress. There is every sign that this impasse is likely to last longer. So, the Indian military will have to reinforce its presence in the region to ensure that the PLA doesn’t indulge in further adventurism on the Line of Actual Control. In Kashmir, there are indications that Pak-backed terrorist groups are likely to scale up their activities, with Taliban’s victory in Afghanistan acting as a catalyst. These dynamics have made it imperative that adequate financial resources are made available to secure India.

Economic infrastructure

Economic infrastructure definitely ensures the mobility of labour and capital within/from the economy. It results in the overall growth of towns and cities. Infrastructures provide for a lot of employment generation and employment opportunities. They also play a crucial role in national defence activities.

In budget of 2022–23 Indian government has given a good emphasize on infrastructure of the country. The main areas of focus are-

PM Gatishakti- Infrastructure masterplan will encompass 7 engines of economic transformation namely- roads, railways, airports, ports, mass transport, waterways and logistics infrastructure

Higher Infrastructure Outlay- The targeted capital expenditure increase of 35% to 7.5 lakh crore rupees in FY23 will induce demand for services and manufactured inputs from large industries and micro, small and medium enterprises (MSMEs), and help farmers through better infrastructure. Plans to expand highways and establish new cargo terminals under the PM gatishakti plan.

Other Important announcements

  • 5G spectrum auctions to be conducted in 2022 to enable 5G rollout by 2023.
  • Launch of battery- swapping policy to boost EV
  • To award contracts to lay optical fiber in rural areas, completion by 2025
  • To allocate 195 billion rupees for production linked incentives towards solar equipment manufacturing
  • 48000 crores set aside for construction of 80 lakh affordable housing : PM Awas Yojana
  • For urban development government has sanctioned 76,549cr which is a 50% rise from previous FY 2021–2022.
  • For rural development there is a budget of 2,06,293cr which is almost similar to that of last years.
  • National Highway network to be expanded 25,000 kms in 2022–23 presently it is 1.15 lakh kms Rs 20,000cr to be put in building highway network.
  • 400 New generation Vande bharat trains will be developed and manufactured in next 3 years
  • 5 River Interlinking projects by Investing Rs 44,605cr irrigating 9.05 Lakh hectare of land