Budget 2023: An Overview for Personal Tax Payers and Support for Startups

Budget 2023 An Overview for Personal Tax Payers and Support for Startups

The Union Budget for new financial year was presented by Finance Minister Nirmala Sitharaman on February 1st, 2023. It has been widely anticipated as a crucial step towards India’s goal of becoming a $5 trillion economy. This year’s budget is geared towards boosting capital expenditures, modernizing infrastructure, and providing incentives to several key sectors of the economy to spur growth and development. With the Indian economy still recovering from the effects of the global pandemic, the Union Budget 2023 was eagerly awaited by citizens, businesses, and investors alike, who hoped to see a well-rounded package of reforms and measures aimed at reviving the economy.

The government has emphasized the importance of entrepreneurship and innovation, as well as inclusive growth, in the budget. It has outlined several measures aimed at providing relief to startups, small businesses, and the youth, who are seen as the drivers of economic growth. Additionally, the budget has proposed changes to the tax structure and provided support for various sectors such as agriculture, healthcare, education, and manufacturing, among others.

In order to stay abreast of the latest developments and changes in the tax code, it is crucial for businesses and individuals to seek the assistance of an efiling expert. The Union Budget 2023 is set to bring about several changes to the tax system and regulations, and a knowledgeable expert can help businesses and individuals make informed decisions about their finances and comply with all legal requirements. This year, it is more important than ever for companies to seek the assistance of an efiling expert to ensure compliance, reduce their tax liability, and stay ahead in a rapidly changing financial landscape.

Indian Budget 2023 - 2024

The budget addresses the current challenges facing the country and seeks to strengthen it for the future by boosting consumption, reducing compliance burdens, supporting small and medium enterprises, and simplifying the tax system. The seven priorities mentioned in the budget include inclusive development, reaching remote areas, investing in infrastructure, unleashing potential, promoting green growth, empowering the youth, and strengthening the financial sector. The budget aims to ensure sustainable and comprehensive growth for the country.

In this comprehensive article about the latest Union Budget we will be exploring aspects with respect to personal taxation, income tax benefits, support for startups and MSMEs and how the Budget serves a great purpose for the financial soundness and economic stability of the country’s future and that of its citizens.

Introducing: A Unified Filing Process

The Budget 2023 announced the creation of a “Unified Filing Process” to eliminate the need for submitting the same information to various government agencies. This will involve filing simplified forms on a single portal, which can then be shared with other agencies according to the filer’s preference.

Simplified KYC and Mitigation of Financial Fraud Risks

The Budget 2023 aims to simplify the Know Your Customer (KYC) process by adopting a risk-based approach instead of a one-size-fits-all approach. Regulators in the financial sector will be encouraged to have a KYC system that is well-suited to meet the needs of a digital India. This simplified process will improve customer experience by reducing the time and cost involved in the traditional KYC process.

This will be achieved by utilizing technology such as artificial intelligence and biometrics to automate and streamline verification procedures. Additionally, it will help reduce the risk of financial crimes like money laundering and fraud by providing fintech companies with more secure and efficient methods of verifying their customers’ identities.

Change in new tax slabs 2023 - 2024

Understanding New Regime: Key Highlights for Individual Taxpayers

The new tax system is now the default option for taxpayers, with the government implementing five measures to make it more desirable. However, taxpayers have the option to choose the old system instead. The new tax regime includes the below mentioned amendments:

  1. A tax rebate has been introduced for taxable income below Rs 7 lakhs, meaning no tax is owed for individuals with taxable income below this amount.

  2. A standard deduction of Rs 50,000 has also been introduced under the new regime.

  3. The highest surcharge under the new system has been reduced to 25% from 37% for individuals earning more than Rs 5 crore, resulting in a lower tax rate of 39% compared to 42.74% in the previous regime.

Benefits for Startups: Budget 2023 HIghlights

The government has taken several measures to support startups, and these initiatives have proven successful. India is now the world’s third-largest startup ecosystem and is ranked second in innovation and quality among middle-income countries.

The Finance Minister, Nirmala Sitharaman, recognizes the importance of entrepreneurship for the economic development of the country and has proposed extending the carry forward of losses for startups in case of a change in shareholding. The new proposal increases the period from seven to ten years of incorporation.

In addition, the Minister has also proposed extending the period of incorporation for startups to receive income tax benefits by one more year, until March 31, 2024. This proposal emphasizes the government’s commitment to supporting the growth and development of startups in India.

Benefits for MSMEs: Budget 2023 Highlights

Changes to the Presumptive Taxation Scheme Threshold Limits

The Finance Minister has announced an increase in the threshold limits for the presumptive taxation scheme, from INR 2 crores to INR 3 crores, to encourage non-cash transactions and simplify compliance. However, this increased limit will only apply if the amount received in cash throughout the year doesn’t exceed 5% of the total gross turnover/receipts.

Concessionary Tax for New Manufacturing Co-operative Societies

In the Budget 2023, new co-operative societies that are established on or after April 1, 2023, and commence production or manufacture by March 31, 2024, have the option to pay tax at a concessionary rate of 15%. This is available as long as they do not avail of any specified deductions or incentives.

Relaxation for Start-up Loss Carry-forward and Setting Off

The Budget 2023 has provided relief to start-ups by increasing the carry-forward of losses on a change of shareholding from seven years to ten years. Additionally, the requirement for a minimum 51% shareholding continuity for setting off carried-forward losses has been relaxed for eligible start-ups if all company shareholders continue to hold their shares.

Extension of Start-up Incorporation for Tax Exemption

Some start-ups are eligible for tax benefits if they are incorporated before April 1, 2023. In the Budget 2023, the period of incorporation for these eligible start-ups to receive tax benefits has been extended by an additional year, until April 1, 2024.

Simplified Process for Amortization Deduction of Preliminary Expenditures

Currently, to claim amortization of certain preliminary expenses, the assessee or a concern approved by the Board must carry out the enterprise activity. The Budget 2023 has proposed to simplify this process by removing the requirement for Board approval. The government will soon release a format for reporting these expenses by the assessee.

Encouragement of Timely Payments to MSMEs

The Budget 2023 aims to promote timely payments to MSMEs by including payments made to MSMEs under Section 43B of the Income Tax Act, 1961. As a result, a deduction for these payments will only be allowed when they are actually paid and will be recorded on an accrual basis, following the time frame prescribed by the Micro, Small, and Medium Enterprises Development Act.

The Union Budget 2023 Key Highlights, presented by the Finance Minister Nirmala Sitharaman, focused on fostering growth and providing financial assistance to various sectors in the country. One of the key highlights was the women’s savings scheme which provides a 7.5% savings facility if the scheme is held for two years. The budget also provided relief in the form of reduced taxes on mobile phones, televisions, electronic vehicles, and components. In addition, a new credit guarantee scheme has been introduced to support the youth, while the PM Skills Development Scheme 4.0 aims to uplift the Micro, Small, and Medium Enterprises (MSMEs) sector.

This Union Budget 2023 Key Highlights lays emphasis on empowering the youth and MSMEs to drive the country’s economic development, and promote inclusive growth for all. Another noteworthy feature of the budget was the increase in the threshold limits for the presumptive taxation scheme. The limit was raised from Rs. 2 crores to Rs. 3 crores, to encourage non-cash transactions and ease compliance procedures. Furthermore, the budget provided relief to startups by extending the period for carrying forward losses from seven years to ten years and the period of incorporation for tax benefits by an additional year.

Another important aspect of the budget was the introduction of tax concession and reductions in tax for new manufacturing co-operative societies, and the ease in claiming amortisation deduction of preliminary expenditures. The government aims to simplify the process of claiming amortisation of preliminary expenses by removing the requirement of approval from the Board. Additionally, the budget aims to promote timely payments to MSMEs by including payments made to them under Section 43B of the Income Tax Act, 1961.

With so many changes and amendments made in the Union Budget 2023, it is important for companies to understand their obligations and take advantage of the benefits offered. Companies must also ensure that their tax filings are accurate and up-to-date, which can be achieved with the help of an efiling expert. This year, companies need to be extra careful and proactive in managing their taxes and finances, as non-compliance can result in penalties and legal consequences. An efiling expert can provide the necessary guidance and support, ensuring that companies are able to comply with all tax laws and regulations, and make the most of the benefits offered in the budget.

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