Equity market benchmarks the Sensex and the Nifty pared gains after extending their gains as Finance Minister Nirmala Sitharaman announced tweaks in the new tax regime in her Budget 2023 speech.
Finance Minister Nirmala Sitharaman said people with income up to ₹7 lakh per year would not have to pay income tax in the new income tax regime.
"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," the FM announced.
With ₹9 lakh income, individuals need to pay only ₹45,000 tax, said Sitharaman.
A rebate in tax rates means people will have more disposable income which would boost demand, helping the economy and the market.
“As expressed in our budget expectations, the FM scored in both the economic expansion line as well as relieving the common man with higher personal disposable income in hand. This budget enables domestic consumption growth while boosting business and investment sentiment for corporates,” said Anmol Das, Head of Research, Teji Mandi.
"The government’s relief on personal income tax by providing rebate up to ₹7 lakh and making changes in the slab rate under the new income-tax regime comes as a major boost to the Indian markets. The FM did not tinker with the capital gains which has cheered the markets," said Sanjay Moorjani, Research Analyst, SAMCO Securities.
"As the disposable income increases, the FMCG sector gets a shot in the arm which is already battling inflation. BFSI sector stands to gain as deposits, investments in insurance, and mutual funds rise," said Moorjani.
Equity barometer Sensex rose more than 1,200 points while the Nifty rose above 17,950 in intraday trade.
However, they soon pared gains but still traded over half a percent higher.
Among the sectoral indices, Nifty Bank, Private Bank and Financial Services indices jumped almost 3 percent. Nifty Oil & Gas, however, fell over a percent.
The FMCG and realty indices rose up to 2 percent.
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The FM also announced an increase in FY24 capital investment outlay by 33 percent to ₹10 lakh crore. Besides, the PM Awas Yojana outlay was hiked by 66 percent to ₹79,000 crore in Budget 2023-24.
Chirag Mehta, CIO, Quantum AMC pointed out that the Budget was heavy on capex (at 10 lakh crore, an increase of 37 percent from FY23 revised estimates) which is needed to ensure the cyclical recovery continues.
Infra (railways 2.4 lakh crore, 50 new airports and clean energy 35,000 crores) along with the Agri push will help the rural economy improve by boosting employment and incomes. Allocation to affordable housing of 79,000 crore, an increase of 66 percent, will also help the housing market retain momentum," said Mehta.
"Overall, this Budget push on capex will ensure that the private capex green shoots really sustain, help inclusive growth and make the economy become more resilient in light of the global slowdown. Both equity and bond markets have reacted positively to the Budget, as the thrust to maintain the cyclical recovery and largely maintain fiscal prudence has helped lift sentiments," Mehta said.
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