FM Nirmala Sitharaman presented the much-awaited Budget, providing an impetus for growth.
Budget 2022 reiterates the fact that the Indian economy is poised to grow significantly from the current levels amidst Covid uncertainties and rising inflation.
There are very few changes in the personal income tax space. Long-term growth has been prioritized in the various measures announced.
Receipts and Expenditure
The Government proposes to spend ₹ 39.45 Trillion in 2022-23. Receipts other than Borrowings are expected to be ₹ 22.84 Trillion. The outlay for capital expenditure to be stepped up sharply by 35.4% from ₹ 4.54 Trillion to ₹ 7.50 Trillion in 2022-23.
A 6.4% fiscal deficit has been projected for India in FY23. The fiscal deficit is the difference between total revenue and total expenditure. This indicates how much the Government must borrow for financing its expenditure. The revised fiscal deficit is estimated to be at 6.9% of GDP. For FY 2022-23, States will be allowed a fiscal deficit of 4% of GSDP of which 0.5% will be tied to power sector reforms.
The estimated revenue deficit for 2022-23 is 3.8% of GDP. Revenue deficit is the excess of revenue expenditure over revenue receipts. This is an indicator that shows how much the Government must borrow to meet its expenses.
GDP has been projected to grow 8.0% – 8.5% in FY23. Indian economy is expected to grow by 9.2% in the current fiscal. The nominal GDP growth rate is estimated to be at 11.1% (real growth plus inflation).
Priorities of Budget
1. PM Gatishakti
PM Gatishakti is a transformative approach for economic growth and sustainable development. This will encompass the seven engines for economic transformation which will pull the economy forward in unison.
- Mass Transport
- Logistics Infrastructure
PM GatiShakti Master Plan for Expressways will be formulated in 2022-23 to facilitate faster movement of people and goods. The National Highways network will be expanded by 25,000 km in 2022-23 and Rs 20,000 crore will be mobilized through innovative ways of financing to complement the public resources
2. Inclusive Development
PM Awaz Yojana has been introduced through 80 lakhs houses to be completed in 2022-23 – 48,000 Crore Digital Banking – Post Offices – 100% of the post offices to come on the Core Banking System
3. Productivity Enhancement and Investment
Spectrum auctions will be conducted in 2022 to facilitate the rollout of 5G mobile services within 2022- 23 by private telecom providers.
4. Sunrise Opportunities
Artificial Intelligence, Geospatial Systems and Drones, Semiconductor and its eco-system, Space Economy, Genomics and Pharmaceuticals, Green Energy, and Clean Mobility Systems have immense potential to assist sustainable development at scale and modernize the country. They provide employment opportunities for youth and make Indian industry more efficient and competitive.
5. Financing of Investments
Capital investment holds the key to speedy and sustained economic revival and consolidation through its multiplier effect. The outlay for capital expenditure to be stepped up sharply by 35.4% from ₹ 4.54 Trillion to ₹ 7.50 Trillion in 2022-23. States will get Rs 1 lakh crore as 50-year interest-free loans to help fund PM Gati Shakti-related investments.
Ministry Wise Allocations
|Ministry Wise Allocations (Rs. Crores)||FY 22||FY 21||Increase||% Increase|
|Consumer Affairs, Food and Public Distribution||2,17,684||2,56,948||-39,264||-15%|
|Road Transport and Highways||1,99,108||1,18,101||81,007||69%|
|Agriculture and Farmer’s Welfare||1,32,514||1,31,531||983||1%|
|Chemicals and Fertilisers||1,07,715||80,715||27,000||33%|
- Ministry of Communications has been allocated the highest when compared to the revised estimate of 2021-22. This is mainly on account of a capital infusion of Rs 44,720 crore in BSNL.
- Allocation to the Ministry of Road Transport and Highways is estimated to increase mainly on account of an increase in investment in NHAI (Rs 1,34,015 crore in 2022-23 as compared to Rs 65,060 crore in 2021-22).
|Funding for Core Schemes||2021-2022 RE||2022-2023 BE||% Increase|
|National Health Mission||34,947||37,800||8%|
|Jal Jeevan Mission||45,011||60,000||33%|
|National Education Mission||30,796||39,553||28%|
Key Changes in Direct Taxes
- There is no change in income tax rates for individuals and corporations.
- A new provision has been introduced to allow taxpayers to update the past return and include omitted income by additional tax payment. The updated return can be filed within two years from the end of the relevant assessment year.
- The tax incentive period is extended by one year for startups. Eligible startups incorporated under Section 80-IAC will now get tax benefits until March 31, 2023.
- Corporate surcharge to be reduced from 12% to 7%.
- Alternate Minimum Tax (AMT) to be reduced to 15% for co-operative societies.
- Any surcharge and cess levied on income are not allowed as business expenditure.
- Brought forward loss cannot be set off against undisclosed income detected during any survey or search.
Taxation of Virtual Assets
- Virtual Digital Assets includes Cryptocurrency, Non-Fungible tokens, and other digital assets to be notified by the Government.
- Virtual Digital Assets will be taxed at a flat rate of 30% without providing for any other deduction except the cost of acquisitions w.e.f FY 22-23.
- Loss of Transfer of VDA cannot be set off against any other income
- Gift of Virtual Digital assets will be taxed in the hands of the recipient.
Rationalisation of Surcharge on Long term Capital Gains
Earlier, the surcharge on long term capital gains on listed equity shares was taxed at 15% while the other long term capital gains were subject to a graded surcharge which goes up to 37%, based on the income slab of the taxpayer. Now, the surcharge on LTCG arising on transfer of any type of assets has been capped up @ 15%
Rationalisation of NPS Provisions
- To bring parity with Central Government employees, the benefit of deduction u/s 80C for employer’s contribution to NPS up to 14% of salary has been extended to State Government employees as well.
- The exemption limit for employer contribution to NPS in the case of employees in the private sector remains at 10%.
Tax Relief to Persons with Disability
The parent/guardian of the differently-abled can get a tax deduction on payment of the annuity or lump sum during the lifetime of the parent or guardian once the parent or guardian has attained 60 years.
Incentives for Startups
Domestic companies which are newly incorporated and engaged in manufacturing have an option to pay tax at 15% (without claiming any deductions) if they start manufacturing by March 31, 2022. Certain start-ups have an option for a tax holiday for three out of the first ten years if they incorporate by April 1, 2022. Both these deadlines have been extended by one year.
RBI will introduce Digital Rupee using Blockchain and other technologies starting 2022-23 which leads to an efficient and cheaper cash management system. This also boosts the Digital Economy.
The Government proposes to issue Sovereign Green Bonds for mobilising resources for Green Infrastructure. The Government is also steadily moving towards bringing down the fiscal deficit to below 4.5% by 2025-26. The strategic transfer of ownership of Air India has been completed. LIC public issue is also expected shortly. Overall, this budget focuses on nurturing growth through public investment to build a stronger and sustainable economy.