The Indian budget for 2023 was tabled on 1 February by Finance minister Nirmala Sitaraman, for the uninitiated, the Indian budget is an annual financial statement presented by the Union Finance Minister in the Parliament. The budget lays down the government's revenue and expenditure estimates for the next financial year.
The budget has far-reaching implications for various sectors of the Indian economy, including agriculture, education, healthcare, infrastructure, and defence.
Going into the budget, the market was jittery and wary of government tweaking with the LTCG (Long term capital gain) tax regime. To the relief of the Investment community, it was left as is and no changes were made to it.
Big change came in tax slabs, now anybody earning less than ₹7 lakhs per annum is exempt from paying any tax, earlier you were paying ₹33,800 as the tax on your 7 lakh income.
To be fair, this was long due. These old slabs were outdated and inflation has made sure that 5 lakh of yesteryears is definitely a lot more than 7 lakhs of today. Having said that, FM could have ignored it and kicked the can for another year and therefore this was a welcome change.
Second order effect of this decision was a sudden fall in insurance company’s shares. Market correctly presumed that this will have a negative effect on the top line of insurance companies.
The reason for this top line decline would be the fact that if taxpayers move to the new tax regime (claim no exemptions), investments made in ULIP schemes will diminish and 2. If annual premium paid on ULIPs is more than 5 lakh - maturity proceeds will now be taxable.
The budget has made substantial allocations to the healthcare sector, with the aim of strengthening the medical infrastructure in the country and providing affordable medical facilities to all citizens. This will include the setting up of new medical colleges, hospitals, and research centres.
The budget has also made substantial allocations to the agriculture sector, with the aim of improving the income and livelihood of farmers. This will include the expansion of the Pradhan Mantri Fasal Bima Yojana and the creation of a new scheme for the development of the agriculture sector.
The budget has also proposed several measures to boost the infrastructure sector, with the aim of improving connectivity and increasing economic activity. This will include the development of new airports, ports, and power projects, as well as the expansion of existing infrastructure.
In conclusion, this was a good budget as it increased the disposable income of the middle class by ₹33,800. With insurance companies becoming an unintended collateral damage. And most importantly, it left the LTCG and STCG taxes as is.
Manish Dhawan is the smallcase manager and co founder of Mystic Wealth