Every January brings with it new aspirations and expectations, one of which is a Union Budget wishlist for business people, salaried individuals, and finance specialists alike. Of course, the long-term goals are always lower tax rates, tax savings, and compliance ease. This year is no exception. Let’s have a look at the most important forecasts for direct and indirect taxes in 2023.
What people actually want to see this year is a rise in the basic exemption level, as well as a change in tax slabs and deduction limitations to minimise total tax payment. The 80C deduction ceiling has also been unchanged for nearly a decade, and taxpayers and experts are hopeful that it will be increased to at least Rs.2.5 lakh this year. Separate deductions for premiums paid and medical expenses would be a welcome development in the realm of health insurance.
Another significant adjustment that taxpayers would like to see is an increase in the Public Provident Fund (PPF) maximum. Individuals can currently invest up to Rs.1.5 lakh per fiscal year, and the restriction on this popular investment choice has not changed in years. The Institute of Chartered Accountants of India (ICAI) has proposed that this ceiling be increased to Rs.3 lakh in the pre-Budget memorandum. This change would be especially beneficial to non-salaried taxpayers who do not have the option of investing through the Employees’ Provident Fund (EPF), which requires an equal payment from the employer.
The capital gains tax structure:
In India, capital gains tax is now quite convoluted, with different holding periods specified for different types of assets to determine if the capital gains produced are long-term or short-term, and whether indexation benefits are available. Once detected, these gains are subject to various tax rates and surcharges. Investors are looking for a simpler capital gains tax regime with 2019 Budget, which should reduce litigation and disagreements on the subject.
What salaried class people expects from Union Budget 2023:
The government’s major goal in this Budget should be to broaden the tax base rather than impose harsh rules and surcharges on existing taxpayers. India has a very low taxation base, and the government should make full use of technology to improve that. Potential taxpayers must be urged to file their tax returns, which will require slightly more effort given the recent epidemic and growing inflation. Measures such as simplifying the present tax structure, including surcharges into the tax rate, or instituting a flat tax rate may help to broaden the taxpayer net.
The Union Budget 2022-23 provided little relief to India’s salaried class. Many people are hoping that Finance Minister Nirmala Sitharaman will provide some respite to hardworking workers in her fourth budget for the fiscal year 2023-24, given the post-pandemic economy’s high inflation.
Tax experts have advised an increase in the Standard Deduction for tax computation available on the gross wage of salaried personnel for the forthcoming budget. According to experts, the Finance Ministry should provide some type of tax benefit for the salaried class, which is seeing their savings erode owing to higher transportation, rent, and other expenditures associated with the reopening of offices.
Kapil Kapoor, Chief Technology Officer, CredAble, says “Today, being among the front-runners in the digital race, India has emerged as one of the strongest tech hubs in the world. The Information Technology spending in the country is expected to grow at a rate of 2.6 per cent in 2023.
Measures to reduce the corporate tax rates will help tech companies capture the global market share and will make them more competitive. While the government has been on a continuous pursuit to widen the tax base, there is a rising need to streamline the withholding tax system and bring about measures to simplify tax and GST compliance. Along with ensuring that safe harbour rules for transfer pricing are made available to entities with a higher turnover, there is also a need for greater clarity around international tax rules.
Pramod Sharda, CEO, IceWarp India and Middle East, stated that the Union Budget for 2023-24 is being proposed at a critical moment marked by geopolitical uncertainty, rising inflation, and plummeting global economic development. At this point, targeted actions to boost domestic sources of growth are critical for maintaining a stable economic growth track.
In a continuous pursuit of widening the tax base, the government has introduced a wide gamut of withholding tax provisions over the years, with varied rates and thresholds and overlaps in scope. Thus, there is an urgent need to simplify the withholding tax structure. Further simplification, rationalisation, ease of paying taxes, and reducing tax litigation should be key priorities.
Currently, people across industries are working from home. Employees are likely to incur additional “work from home”-related expenses, such as internet charges, rent, power, furniture, and so on, and companies will need to give allowances to cover these costs. Employees who work from home should be granted exemptions under “work from home” allowance.
Given that the Indian economy has begun to recover from the fiscal consequences of the COVID-19 pandemic crisis, the present administration is expected to focus on measures to accelerate job creation and broaden the tax base by rationalising GST and personal income tax slabs to boost consumption.
The external environment is expected to remain unfavourable for some time. As a result, we must broaden our home economy by developing new growth sectors and pushing job creation in order to enhance domestic demand, inclusion, and growth.
Krishnan Ramachandran, MD and CEO at Niva Bupa Health Insurance, stated that, “Rising medical inflation has resulted in many insurers increasing the premium on health insurance products this year. To reduce the premium cost and make health insurance purchase more affordable for policy buyers, insurers have been requesting the Government to reduce the current 18% GST rate from health insurance products. The Government should consider lowering the prevailing GST rate on health insurance. This will enhance its penetration by making health insurance plans more affordable. Subsequently, increasing the limit to claim tax deductions under section 80D will enhance affordability and encourage more people to opt for health insurance for their family and elderly parents.
The Covid pandemic experience and increasing hospitalization expense is leading people to consider higher sum insured health insurance plans which provides comprehensive coverage against all diseases. The limit increase under section 80D will encourage them to opt for a health insurance plan with adequate sum insured to secure the health of their loved ones.”
Souparno Bagchi, COO, Balancehero, stated that, “India’s economy, which is already expanding the quickest in the world, must continue to grow, if not accelerate. Budget 2023 can assist by opening up growth avenues. In the current macroeconomic climate, recent rate increases by central banks worldwide are a significant obstacle. There are worries that something could snap due to the recent rate hikes’ rapidity, which could cause a global ripple effect. The fintech sector has experienced exponential growth, and the wave of changes has had a significant impact on financial inclusion and penetration. By 2030, it is anticipated that India’s fintech industry will have an output of $1 trillion and generate $200 billion in revenue. To improve partnerships with banks and support the current paradigm, the fintech sector anticipates greater government support. It is important that the union budget focuses on maintaining a healthy inflation rate in order to support private consumption and increase the serviceable market for fintechs.”
Parry Singh, Founder and CEO, Red Fort Capital, says that, “Non-Banking Financial companies (NBFCs) play a pivotal role in facilitating faster economic growth. Therefore, the government should make bold moves to encourage banks to increase the quantum of funding for NBFCs.
In the 2023 budget, while we anticipate a strong mandate for lending NBFCs working to empower underserved small and medium businesses through financial and technological interventions. Furthermore, we anticipate some relaxed tax regulations and liquidity assistance for NBFCs.
Therefore, NBFC taxation must be brought up to par with that of banks. Over time, the RBI has tightened the NBFC regulatory framework, particularly for large and deposit-taking NBFCs, and brought it more in line with bank regulations. However, tax laws have not kept up, and as a result, NBFCs face higher tax costs or compliance burdens than banks in several areas.
NBFCs anticipate a more accommodating compliance framework to provide credit to unbanked and underbanked MSMEs and small business owners and bring them into the official lending system.
Non-banking financial companies (NBFCs) have long complained that restrictions similar to those imposed on full-fledged banks are reducing the benefits of NBFC status. The industry anticipates that the government will put pressure on the RBI to relax industry regulations. However, there are other factors at play as well.
Furthermore, the industry is hoping that the government will standardize taxation and recovery policies. It anticipates tax relief by exempting NBFCs from paying tax on source-deducted income from securitization. A more flexible and cost-effective financing source for NBFCs is also urgently required.
It makes sense to treat NBFCs similarly to banks in some areas to maintain Non-Banking Financial Companies as a crucial layer in formal finance. We look forward to enhancement in Recovery Policies, Leverage and easing limits, simplifying compliance and taxation similarly to Banks.”
Brijesh Samantaray, Co-Founder, Propelld, stated that, “Fintech is no longer considered a trend. The industry has now become one of the fastest-growing segments in technology and transformed the way financial services are fostered.
As our country sets upon the goal of hitting the $5-trillion mark by 2025, I expect the digital economy to grow even further, with a majority of India’s population and small businesses adopting digital means to access payments and financial services. I have great expectations in the budget to ease the financial burden for start-ups in fintech industry. I expect the government to implement policies that would promote collaboration between banks and loan providers to assist customers in getting loans in an accessible manner whether for personal or business purposes.
We expect the government to introduce regulatory changes that would create an easy line of access for start-ups & MSMEs to secure credit from online lending players. This will further help in boosting our economy.
With the new-age innovative approach, the fintech financing solutions help the students fulfill their educational dreams by enhancing affordability. This, in turn, is gradually democratising education across the country. We hope the government recognises this and helps fintech firms helps to finance the dreams of millions.”
Ajay Lakhotia, Founder & CEO, StockGro, says that, “This year’s budget introduced the Amrit Kaal roadmap of the next 25 years – from India at 75 to India at 100. Next year’s budget of 2023-24 will seek on footing action items to drive the economy to the set goals. There are expectations of fresh reforms and tax benefits, investors will be eyeing what the FM says about startups and tax benefits on long-term capital gain. A rational shift to provide impetus to the startup ecosystem along with a boost to the sun-shine sectors like silicon chip and battery manufacturing will also play a crucial role.”
Sunil Badala, Partner and Head Financial Services, Tax, KPMG in India, says that, “The financial sector is pinning its hope on the upcoming Budget to promote innovation and propel investment & growth in the sector to the next level. Some key areas which need immediate attention include, rationalization of headline corporate tax rate for foreign banks by bringing them down to 22 per cent (as applicable to domestic companies) from the current rate of 40 per cent. With the gradual convergence of regulatory provisions applicable to NBFCs and Banks, there is a greater need to bring parity in income-tax provisions between Banks and NBFCs like exemption from TDS on interest, thin capitalization provisions, etc. Growth of fintech sector is critical for digitization of financial services across India. The fintech sector expects more assistance from the government including, Liberalization of both direct tax and GST rates for the next few years; strengthening of the existing model in partnership with Banks, especially in areas like workability of first loan default guarantee (FLDG) provisions without diluting the objective of digitization. Today, IFSC GIFT City is fast becoming one of the preferred locations for financial services players. While a lot has already been done on IFSC front, the Government is expected to keep the ball rolling and make IFSC further attractive for investors.”
Sanjeev Chhabra, MD & CEO, Beetel Teletech, stated that, “Investment in infrastructure is crucial for the growth and advancement of any sector, and we are grateful for the government’s efforts in supporting the telecom industry. Last year, the government recognized the importance of reliable and sustainable power sources by allocating an additional 19,500 crores for the solar PLI scheme. However, with the rollout of 5G networks, the trend of solarizing telecom towers is gaining momentum. We hope that the budget for 2023 will continue to prioritize the needs of the telecom industry and provide the necessary support and incentives for developing telecommunications infrastructure in India.
At Beetel we are dedicated to doing our part to make a change and work towards a sustainable future. With one of our partners, we have already started the rollout of solarisation of existing towers for a Telecom Service Provider, wherein Solar solutions are being installed at sites. Going forward we would also be offering an end-to-end, comprehensive solution, wherein Solution Design, Installation and Commissioning, solarisation, integrated software-based management, and reporting of the health of the infra and energy analytics along with operations and maintenance would be provided.”
Hemant Tathod, COO, Bimaplan says that, “Let me talk specifically about Insurtech start-ups and it can resonate with other industry startups as well. One of the major challenges for start-ups that are addressing the need of underserved and unaddressed segment is multiple partnerships at various levels of providing the product, technology support, and better customer experience. For instance, to achieve the scale support from a larger insurer is required to create curated products at a faster pace.
This time, we expect the government to introduce new policy changes to alleviate such challenges. To make the Insurance products more affordable the GST rates are to be standardized to 5%. In addition, government institutions can identify the challenges impacting the public domain and invite startups to solve them, this enables the startups to test their product/ prototype in the real world. On the other hand, higher valuation cannot be the objective to approach the administration. In my opinion, government and startups can work together with an ‘Access to market’ approach to test out the product, specifically in the underserved segments.
In last year’s budget, the FDI limit in the Insurance sector was increased from 49% to 74%. This definitely helped the penetration of Insurance via better and more affordable products and increased distribution by leveraging technology.”
Arun Kumar Gupta, CFO, Newgen Software Technologies Ltd, stated that “Investments and initiatives toward digital transformation have significantly accelerated in the post-pandemic world. With Union Budget 2022-23, the government should bring policies and reforms to support enterprises in their digital journeys and facilitate their growth.
Initiatives like long-term work-from-home policies, simplification of the GST regime, and streamlining labour laws can facilitate a less-ambiguous and conducive business environment. Also, there is an urgent need to simplify the foreign withholding tax structure to ensure that full set-off is available to IT companies operating in multiple countries.
Special Economic Zones (SEZ) play an instrumental role in driving the Indian IT sector’s growth. Improvements in SEZ-related policies and their extension will help strengthen the sector further.
The IT sector is indisputably an integral part of India’s growth story. However, the government should stay mindful of the recent disruptions in the sector caused by the pandemic and ongoing global business uncertainty. The upcoming Union Budget is expected to bring conducive policy initiatives to incentivize the IT sector and accelerate its growth.”
Chandrika Behl, Managing Director, Exhibitions India Group, mentioned that, “The Indian government has charted a sound roadmap for India’s ascent to its centenary year, which will require moving India’s economy toward sustainability and resilience – rooted in social progress and shared prosperity. While the creation of new technologies is paramount, it is equally important to showcase and demonstrate where and how these innovations fit into a smart and sustainable ecosystem.
As organisers of the 30th Convergence India expo, which has played an integral role in developing the telecom infrastructure of the country, and the 8th Smart Cities India Expo, India’s largest technology and infrastructure expo, we will continue our legacy of curating platforms that foster growth and accelerate nation building. Our aim remains to contribute to India’s growth story and provide a platform to showcase ‘Brand India’.
I look forward to the 2023 Union Budget with optimism. I’m certain that the Government will present a growth-oriented Budget that will accelerate the country’s ascent towards a $5 trillion economy.
Ashwin Chawwla, Founder & Managing Director, Escrowpay, says ” Increase in the GST exemption limit for escrow services: The current GST charged @ 18 per cent for escrow services is very high and needs to be removed completely to provide financial relief to small and medium businesses.
Introduction of tax incentives for businesses relying on escrow services: The government should consider introducing tax incentives for businesses that rely on escrow services. This will encourage more businesses to use escrow services and ensure their transactions are secure.
Banks and Fintechs alliance: The time taken for escrow services is currently 8-10 weeks by a bank. Fintechs like escrow pay, open digital escrows nearly instantaneously. The government should look into ways to reduce the time taken for escrow services and make them faster and more efficient.
Jyoti Bhandari, Founder, and CEO, Lovak Capital, stated, “Union Budget 2023 should bring out policies and incentives to boost consumption and domestic demand, capital expenditure to support credit offtake. This year should see moderate rate hikes to tame headline inflation and maintain the projected GDP Growth at 7 per cent. This will result in a positive impact on sectors like services, trade, travel banking, and the financial industry and make it into attractive sectors from a long-term investment perspective.”