Budget 2023: Sector-wise Key Highlights

Every year, on the 1st of February, the Finance Minister of India reads out the Budget at the Parliament. This year, FM Nirmala Sitharaman called out some interesting changes, relating to business, startups, and entrepreneurship. 

For Startups

Tax Holiday Date Revision

Startups in India enjoy a “tax holiday”, where they don’t pay taxes for the first 3 years of incorporation. Until now, any startup incorporated before 31st March 2023 could avail this tax holiday benefit.

Implication:

The Budget 2023 extended this date by one year, meaning a startup incorporated before 31st March, 2024 can also enjoy the benefits of tax holiday!

Carry Forward & Set Off Losses

Until now, startups were allowed to carry forward and set off losses if such a loss has been incurred for 7 years since incorporation. The new Budget has extended it to 10 years since incorporation.

Implication:

• Startups can “carry forward and set off losses”, meaning losses from any source can be set off against profit from another source and can be carried forward to future financial years.
• Loss can be adjusted against taxable income, bringing the final payable tax amount lower and offering relief to the business.

In IT

Data Accessibility

In a bid to help bring innovation to the IT sector at a much faster pace, the Budget 2023 emphasized on the power of data accessibility. 

• Budget 2023 introduced the National Data Governance Policy, which will create a large repository of Indian datasets. 
• This data could be from government or private entities and will be made accessible to the research and startup ecosystem to enable innovation.
• The National Data Governance Policy also focuses on promoting transparency, accountability, and ownership in non-personal data and dataset access.

For Businesses

COVID-19 Relief

• In Budget 2023, MSMEs that were not able to execute contracts during COVID will get a 95% return of the forfeited amount related to bid or security by government and government undertakings.
• This will provide relief to Micro, Small, and Medium Enterprises that were affected by the pandemic. 

Credit Guarantee Scheme Revamp

• The credit guarantee scheme is also being revamped – this scheme was introduced to provide collateral-free loans to MSMEs. 
• The revamped scheme will enable collateral-free guaranteed credit of up to Rs 2 lakh crore and will reduce the cost of credit to about 1%.

In Agriculture

The Budget 2023 also focused heavily on the importance of implementing technology into agriculture. 

• The agri-tech industry and startups surrounding it will be supported with new digital public infrastructure.
• This will enable “inclusive, farmer-centric solutions for crop planning, credit, insurance, crop estimation, and market intelligence.”
• An agriculture accelerator fund is also going to be set up for agri-startups in rural areas. 

For Digital India

• This new Budget introduced a Digilocker for MSMEs and big businesses, called the Entity Digilocker – a service enjoyed only by retail customers until now.
• The Budget also included continued support for digital payments and digital public infrastructure. It was pointed out that digital payment transactions increased 76% in 2022.

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Taxes

The most anticipated part of the Budget every year is changes made to tax policy, and this year was no exception: the Finance Minister announced some very exciting changes!

Presumptive Taxation

• With the Budget 2023, MSMEs with a turnover of up to Rs 3 crore and professionals with a turnover of up to Rs 75 lakh – with cash receipts of no more than 5% can avail of the “presumptive taxation” benefit.
• Presumptive taxation is when a taxpayer is exempt from maintaining books of accounts. This offers relief to small taxpayers who find it difficult to maintain books of accounts. 

TDS Rate Chart for AY 2023-24

• Another change made was to TDS: the TDS rate on the taxable part of withdrawals made from EPF was 30% but has been cut to 20%.
• The minimum threshold for TDS which was Rs 10,000 has been removed.

Income Tax

• The biggest news of the Budget 2023 was the change to the income tax rebate limit. 
• Previously, people who earned less than Rs 5 lakhs were exempt from paying taxes.  Now, that limit has been increased to Rs 7 lakhs.
• The new tax regime has now been made the default option when filing tax returns.
• Here is the revised tax slab for FY 2023-24

Income Tax Slab FY 2023-24