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India’s Union Budget 2022-23, pro-growth and pro-development, aims to set the economic groundwork for the next 5 years. Despite many waves of COVID-19 infection, supply-chain interruptions, and inflation, the Indian economy is anticipated to rise at a 9.27 % annual pace in the current fiscal year, indicating that overall economic activity has rebounded from pre-pandemic levels.
Table of content
Union Budget 2022-23
The Annual Financial Statement is another name for the Union Budget. Article 112 of the Indian Constitution declares the Government’s expected expenditure and earnings for a certain fiscal year.
- The Budget accounts for the Government’s finances during the fiscal year, from April 1 to March 31.
- The Budget is presented on February 1; until 2016, it was presented on the final working day of February so that it could be implemented before the start of the next fiscal year on April 1.
- When the railway budget was combined with the Union Budget and presented jointly in 2017, a 92-year-old tradition was broken.
- The Lok Sabha must approve the Budget before it can go into effect.
- The Union Budget is broken into two parts: revenue and capital.
- The expenditures and revenues of the Government in the Union Budget include several forms of government money in India, including the Consolidated Fund of India, the Contingency Fund, and the Public Accounts.
- The Economic Survey of India is published before the Budget presentation.
Important Highlights of Budget 2022 for UPSC
The Union Budget 2022-23 concentrates around four major pillars to strengthen local manufacturing and generate jobs following a rise in the loss of jobs over the previous two years.
- Inclusive Development
- Productivity Improvement
- Financing Investments and
- PM GatiShakti.
The Budget emphasized the PM GatiShakti National Master Plan as a revolutionary method of boosting economic growth and sustainable development through its seven engines. Mass transportation, rivers and streams, railroads, highways, airports, harbors, and transport and logistics are included. The strategy also includes a National Master Plan to achieve world-class contemporary infrastructural and logistical synergy.
Union Budget 2022-23: Top Economic Indicators
- GDP increased by 9.2% in FY22.
- 88.5% GDP growth expected for FY23* RBI held repo rate constant at 4 % since May 2020; maintains accommodating monetary policy stance
- Due to a growing trade deficit, the current account posted a % deficit in GDP in H1 FY22; foreign reserves reached US$ 633.6 billion as of December 2021.
- Net FDI inflows totaled $24.7 billion in April-November 2021, a 29.5 % decrease from April – November 2020.
- The fiscal deficit is expected to be 6.9 % in FY22, down from 9.3 % in FY21; the deficit is scheduled to be 6.4 % in FY23. CPI averaged 5.2 % from April–December 2021, mostly due to food inflation and high gasoline costs.
- The INR averaged 74.28 in April–December 2021, compared to 74.63 in April–December 2020.
- Merchandise shipments increased by 49.7 % from April to December 2021, surpassing pre-pandemic norms.
- Improve multimodal connectivity by extending highways by 25,000 kilometers and adding 2,000 kilometers of rail network using indigenous technologies. create eight ropeway projects and 100 freight terminals
- Amendments to the Bankruptcy and Bankruptcy Code to improve the resolution process, notably cross-border insolvency; establishment of a center to shorten the process of voluntary winding up business to six months.
- An International Arbitration Center will be established, and international colleges will be able to operate in GIFT City.
- In FY 22-23, a digital rupee will be launched utilizing blockchain and other technologies. Commercial banks are scheduled to establish 75 digital banking units and expand the basic banking system to post offices.
- A committee or task force will be formed to oversee urban planning, the Motion Graphics, Visual Effects, Entertainment, and Comics sectors, and the regulatory framework overseeing venture capital and private equity investments.
- A 5G spectrum auction is scheduled for FY22, along with introducing a design-led manufacturing program; contracts for installing optical fiber in rural locations would be granted through Public-Private Partnership.
- Data centers and power storage have been granted infrastructure status to improve finance availability.
- A battery swapping strategy and interoperability standards will be developed; an incremental INR 195 billion will be provided to PLI to produce solar PV modules.
- Issuance of sovereign green bonds to reduce carbon intensity; establishing government-backed funds for climate action, technology-based, and agricultural activities; and opening up defense R&D to commercial parties via an SPV model.
- The Emergency Credit Line Guarantee Scheme for MSMEs has been extended till March 2023, with an extra INR 500 billion guarantee cover for hospitality and associated sectors.
- There will be no change in company or personal income tax rates; the surcharge on particular AOPs and long-term capital asset transfers will be limited to 15%.
- Tax breaks have been extended for newly formed businesses until March 31, 2023, and for new manufacturing businesses that begin operations by March 31, 2024.
- Gains on virtual digital assets (VDA) are taxed at 30%; deductions are limited to the purchase cost; set-off and loss carryover are not available; considered gift tax laws apply, and a 1% tax deduction at source (TDS) is implemented.
- Retrospective amendment to disallow any surcharge or cess paid on income and profits.
- Expenditure to offer any advantage or prerequisite to any individual is prohibited if its acceptance violates any laws.
- IFSC (International Financial Services Center):
- Revenue-tax exemption widened to include, among other things, specified non-resident income from leasing a ship to IFSC entities and income from the transfer of certain derivative instruments.
- The tax break on dividends from overseas sources will be phased out beginning in fiscal year 22.
- Option to file an amended income tax return if additional taxes are paid
- The Special Economic Zone Act will be replaced by a new law to allow states to collaborate in establishing enterprise and service centers, make the most use of available infrastructure, and boost export competitiveness.
- Concessional customs tax on capital goods and project imports would be gradually phased down to assist local capital goods sector growth.
Significant Announcements under Different Sectors
Infrastructure Sector:
- PM Gati Shakti National Master Plan 5G spectrum auctions are to be held in 2022 at the cost of 20,000 crore
- The production-linked strategy will include a scheme for design-led manufacturing for 5G.
- Contracts will be awarded to lay optical fiber in rural regions, with completion expected in 2025.
- An extra 195 billion rupees would be allocated for production-linked incentives for solar equipment manufacturers.
Education Sector:
- A networked hub approach will be used to build the Digital University.
- One Class, One TV Channel would be increased from 12 to 200 TV Channels to provide supplemental education in all regional languages.
Health Sector
- The National Digital Health Ecosystem will be implemented.
- A national telemental health program will be established to concentrate on psychological health.
- Twenty-three world-class telemental health centers.
- Mission Shakti, Mission Vatsalya, Saksham Anganwadi, and Poshan 2.0 provide integrated benefits to women and children.
Agriculture Sector
- The domestic initiative launched to lessen reliance on oilseed imports
- NABARD will enable funds with blended capital to assist agricultural and rural sector starts.
- Natural, chemical-free farming will be encouraged across the country.
- Millet Year 2022 – assistance for post-harvest value addition for millet goods
- Kisan drones are being used for crop evaluation and pesticide application.
Défense Sector
- As part of the Atma Nirbhar Bharat strategy, the Budget for 2022-23 would encourage self-reliance in defense production.
- Domestic procurement received 68% of the sector’s capital procurement expenditure.
- Encourage the private sector to design and build military systems and equipment.
Finance Sector
- The long-term capital gain surcharge will be restricted to 15%.
- The plan to guarantee emergency loan lines for small and medium-sized firms will be extended until March 2023.
- The Life Insurance Corporation will soon become public.
- To change the bankruptcy legislation to expedite the resolution procedure.
Railway Sector
- 2,000 kilometers of the railway network would be placed under Kavach as part of the PM Gatishakti Masterplan.
- In addition, 400 new-generation Vande Bharat Trains with improved energy efficiency and passenger comfort will be developed and constructed over the next three years.
MSMEs Sector
- The Raising and Accelerating MSME Performance initiative will be implemented for MSMEs with a Rs 6,000 crore investment split over five years.
- The Emergency Credit Line Guarantee Scheme (ECLGS), which provided much-needed extra credit to over 1.3 crore MSMEs, will be extended till March 2023, with its guarantee cover increased by Rs 50,000 crore to Rs 5 lakh crore.
Union Budget 2022-23: Top Policy Highlights
- IBC modifications are required to advocate for cross-border insolvency remedies.
Budget 2022-23 proposes IBC modifications to support cross-border insolvency settlements. This is expected to lighten the pressure on lenders struggling to collect their debts.
- The introduction of the digital rupee
The government budget 2022-23 calls for introducing a blockchain-powered digitized rupee in the current fiscal year. Blockchain technology is also used to digital power money and non-fungible tokens, a blockchain platform that is constantly updated.
- Taxation on digital assets at 30%
The imposition of a 30% tax on digital assets, along with the Government’s release from its digital currency, means that the GOI intends to discourage such investments and would prefer that only HNIs make such investments and that the GOI would not allow crypto as money. The surcharge ceiling of 15% seemed reasonable, and while no specific relaxation was available to HNIs, this will also benefit such HNIs with significant capital gains income.
- Increased capital expenditures
The GOI has approved a 35.4 % increase in capital spending for supporting different infrastructure projects in 2022-23. According to the FM, the GOI would invest Rs 7.50 lakh crore in capital expenditure next year, up from Rs 5.5 lakh crore in the previous year. Depending on how it is used, Capex expenditure will enable a major push for investment projects and boost economic development in the coming year.
- Greater relaxation for new businesses from Taxation
To encourage the growth of startups in India, the Finance Minister proposed extending the eligibility for claiming a tax break for qualifying businesses by one year, till March 31, 2023.
- Atma Nirbhar Defense
To minimize reliance on imports and boost Atma Nirbharta, the Atmanirbhar Defence Finance Ministry has allocated 68 % of the capital procurement budget to local industry.
- New Special Economic Zone laws
The new legislation will shortly replace the Special Economic Zones Act to establish businesses and hubs. It will include existing industrial enclaves and boost export competitiveness.
- The launch of the DESH e-portal
The Skilling programs will be reoriented in the current year. As per the FM, the Government is preparing to launch a new website named Digital DESH e-portal for the nation’s youth’s skilling, upskilling, and reskilling.
- Implementation of a Battery Swapping Policy
The FM has acknowledged the release of a battery swapping strategy to strengthen India’s EV ecosystem. In the last five years, the EV sector has grown dramatically. The battery swapping strategy will most likely answer the issue of urban space limits for building a charging station at scale. Furthermore, the strategy is anticipated to include interoperability standards requiring EV manufacturers to create EVs with specified, replaceable batteries.
- Spectrum auctions for 5G
Spectrum auctions will be held this year to ensure that significant telecom businesses carry out 5G mobile services.
- Ken Betwa’s connection project is estimated to be valued at around Rs 44,605 crore.
The FM said that the Ken-Betwa river connecting project, totaling Rs 44 605 crores, will be implemented. More than 9 lakh hectares of agriculture in the drought-prone areas of Bundelkhand, 13 districts in Uttar Pradesh and Madhya Pradesh are expected to benefit from the project.
- Supplementary corpus of 19,500 crores for solar module OEMs
FM has approved an increased allocation of Rs 19,500 crore for the Manufacture Linked Incentive to produce a product of high-efficiency modules. The corpus is intended to support the local manufacture of 280 GW of installed solar power by 2030.
- Taxpayers can now amend their I-T returns every two years.
To ensure error-free income tax return submission, the IT department must allow taxpayers to file an amended return within two years of the assessment year.
- The state government’s tax deduction ceiling will be increased from 10% to 14%. Employees
FM has verified that the tax deduction ceiling for state and federal government employees would increase from 10% to 14%. The announcement will put state government employees’ social security benefits on a level with those of the Federal Government.
- Rs 48,000 crore for a housing program under the PM AwasYojana
FM has set aside Rs 48,000 crore for a housing program under the PM AwasYojana in urban and rural areas in 2022-23 to construct 80 lakh houses.
- According to the Union Budget 2022, the Central Government’s effective capital spending in 2022-23 would be Rs 10.6 lakh crore, accounting for approximately 4% of the nation’s GDP.
- In 2022-23, an e-passport with an embedded digital chip will be available.
- The production of 400 Vande Bharat trains is expected to be finished in three years. These trains are anticipated to be outfitted with energy-efficient technologies and amenities to provide world-class travel experiences.
- The net GST collection for January 2022 was 1,40,986 crore, the highest amount ever.
- The Union Budget 2022 proposes a 2.5 percent reduction in import duty on cutting and polished diamonds, including gemstones.
- The FM also announced that a Simplified Regulatory Framework for exporting jewels via an e-commerce network would be released.
- Drones will be pushed for land record digitization, crop evaluation, and pesticide and fertilizer spraying. NABARD will be a financial source for startups and rural firms involved in the agricultural product value chain.
Union Budget 2022-23: Top Tax Highlights
- Cooperative societies pay 18.5 % AMT, whereas corporations pay 15 %. Cooperatives will also have to pay only 15% alternate minimum tax from now on.
- The tax break on foreign-sourced dividends will be phased out beginning in fiscal year 22.
- Revenue-tax exemption widened to include, among other things, specified non-resident income from leasing a ship to IFSC entities and income from the transfer of certain derivative instruments.
- Gains are taxed at 30%; deductions are limited to the cost of purchase.
- Set-off and loss carry-forward benefits are not available;
- Deemed gift tax regulations will apply; a 1% tax deduction at source (TDS) will be implemented.
- Retrospective amendment to disallow any surcharge or cess paid on income and profits.
- The tax vacation has been extended for newly formed businesses until March 31, 2023, and for new manufacturing businesses that begin operations by March 31, 2024.
- Taxpayers now have two years to fix mistakes and file a revised income tax return for the applicable assessment year.
- There will be no change in business or personal income tax rates.
Union Budget 2022 – 23 - Download PDF Here
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