All that you need to know about this year’s budget

Photo: iStock
Photo: iStock


Finance minister Nirmala Sitharaman’s budget speech was all of 13,761 words, a little over two-fifths longer than her speech in 2022. Here are the major points of the budget.

Finance minister Nirmala Sitharaman’s budget speech was all of 13,761 words, a little over two-fifths longer than her speech in 2022. Here are the major points of the budget.

Personal income tax

The big move here was the increase in the rebate limit to 7 lakh under the new tax regime. Up until now, individuals with an income of up to 5 lakh had to pay no income tax under the new regime and the old regime. Now, it largely makes sense for everyone with an income of up to 7 lakh to move to the new regime.

Changed tax slabs

Further, the government has changed the tax slabs under the new regime. For example, up until 2022-23, those with an income of 5-7.5 lakh came under the 10% tax bracket. From 2023-24 onwards, those with an income of 6-9 lakh will come under this bracket. This seems to be a nudge to tax-filers to move towards the new tax regime, which is simpler but doesn’t come with the deductions and exemptions like the old one does. Nonetheless, if your income is beyond 7 lakh, whether you should be on the new regime or the old one, depends on the exemptions and deductions you claim, and your specific salary structure.

Other goodies

The amount of money that can be invested in the Senior Citizens Savings Scheme has been increased from 15 lakh to 30 lakh. The current rate of interest on this scheme is 8%. Most bank fixed deposits currently offer 7.5% interest to senior citizens. Other than this, the maximum deposit under the monthly income scheme of the post office has been doubled to 9 lakh for a single account.

High net worth individuals

The highest effective income tax rate currently stands at 42.74%. In 2023-24, this will be reduced to 39%. On the flip side, the government has decided to limit income tax exemption from proceeds of insurance policies of high value, with an exemption being available only if the aggregate premium during the year is up to 5 lakh.


The stock market was primarily worried about any increase in the long-term capital gains made on the sale of listed shares and equity mutual funds. The government didn’t increase the tax and the stock market gave it thumbs up as soon as the budget speech ended. But the mood soon changed, with the Nifty 50 index ending the day almost flat at 17,616.3 points. In all this, Adani Enterprises, fell by around 27% to close the day at 2,179.75.

Economic growth

The Economic Survey released on 31 January offered three reasons for the revival of growth in 2022-23; the pent-up consumer demand, a rise in exports during the first few months of 2022 and an increase in the government capital expenditure. The pent-up demand is expected to run out of steam during 2023-24, whereas a high growth in goods exports looks dicey because growth in developed countries is expected to slow down. So, the government has to play a major role in driving economic growth all over again. The budgeted government capital expenditure is at 10 trillion during 2023-24, more than a third-higher than in 2022-23. This money will go towards the creation of new assets and, hence, drive jobs and growth.


The government plans to take up the promotion of tourism on mission mode. If done well, this can create many jobs at the local level. It also plans to launch Pradhan Mantri Kaushal Vikas Yojana 4.0 to skill lakhs of youth. This is an idea which has been tried before. Further, the government plans to set up 100 labs for developing applications using 5G services.

Interest paid on debt

In the last few years, the government has had to spend more to drive economic growth. This extra spending has been majorly financed through higher borrowing, leading to the government having to pay a higher interest on its accumulated borrowings. In 2022-23, the government will end up paying 9.4 trillion as interest on its borrowings or around 22.5% of its expenditure. In 2023-24, the interest payments are expected to jump to 10.8 trillion or around 24% of its expenditure. Interest payments are the government’s biggest expenditure.

Fiscal deficit

The fiscal deficit for 2023-24 is expected to be at 17.9 trillion or 5.9% of the gross domestic product (GDP). Fiscal deficit is the difference between what a government earns and what it spends. This is lower than the fiscal deficit of 6.4% for 2022-23. Nonetheless, the government plans to finance a bulk of this through a net borrowing of 12.3 trillion in the next financial year, slightly more than the 12 trillion it expects to borrow during the current financial year. Now this will happen in an environment where household financial savings have fallen. If the situation stays the same, interest rates will continue to stay high, leading to high EMIs. If savings increase, then consumption will take a beating. There is no free lunch here. The cost of the government driving growth through higher capital expenditure will be paid for somewhere.


Tax collections are expected to be robust in 2022-23, with the revised gross tax numbers standing at 30.4 trillion or a little over 10% more than the budgeted number. This has ensured that the government’s fiscal deficit didn’t go up, despite its expenditure increasing to 41.8 trillion against the budgeted 39.4 trillion. The tax jump also helped cover for the government not being able to meet its disinvestment target of 65,000 crore, with the revised disinvestment figure expected to be at 50,000 crore. The government expects tax collections in 2023-24 to be at 33.6 trillion or around 10.4% higher than in the current financial year, in line with the assumed growth of 10.5% in the nominal GDP (or GDP which hasn’t been adjusted for inflation)

(Vivek Kaul is the author of Bad Money. )

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