Union Budget 2022-23

Last updated: Feb, 2022

Introduction

The Union Budget aims to complement macroeconomic growth by focusing on all-inclusive microeconomic welfare. Ms. Nirmala Sitharaman, the Union Minister for Finance and Corporate Affairs, tabled the Union Budget 2022-23 in Parliament on 1st February, 2022.

Key Highlights:

India's economic growth is predicted to be the highest among all large economies, at 9.2%.
Under the productivity-linked incentive scheme (PLI scheme), 6 million new jobs will be created in 14 different industries.
PLI Schemes have the potential to generate an additional Rs. 30,00,000 crore (US$ 401.24 billion) in revenue.
The 'One Station-One Product' concept will be adopted in the railway sector to assist local businesses and supply chains.
The government wants to promote a digital economy, fintech, technology-enabled development, energy transition, and climate action.

The Budget encourages growth with the following priorities: PM Gati Shakti, Inclusive Development, Productivity Enhancement and Investments, Sunrise opportunities, Energy Transition, Climate Action, and Financing of Investments as India enters Amrit Kaal, the 25-year countdown to India's 100th independence anniversary.
Green Bonds will be issued by the government to raise funds for green infrastructure. The proceeds will be used to fund public-sector programmes that reduce the economy's carbon intensity.
The government is pushing the blending of fuel by levying additional differential excise duty on unblended fuel.
The government plans to rely on a virtuous cycle starting from private investment, and the help of public capital investment to crowd-in private investment.

PM Gati Shakti

Roads, Railways, Airports, Ports, Mass Transportation, Waterways, and Logistics Infrastructure are the seven engines that propel PM Gati Shakti. The seven engines for economic transformation, seamless multimodal connectivity, and logistical efficiency will be covered by the PM Gati Shakti National Master Plan.

Road Transport: In 2022-23:
- The National Highways Network would be expanded by 25000 kilometres, with a budget of Rs. 20000 crore (US$ 2.67 billion) set out for the project.
Parks for Multimodal Logistics:
- Contracts for the implementation of Multimodal Logistics Parks at four locations will be given using the PPP approach in 2022-23.
Railways:
- The One Station One Product concept is developed to assist local businesses and supply chains.
- In 2022-23, 2000 km of railway network will be brought under Kavach, a world-class indigenous technology that will increase capacity.
- 400 new Vande Bharat trains will be constructed over the next three years.
- Over the following three years, 100 PM Gati Shakti Cargo terminals for multimodal logistics will be created.
Parvatmala:
- Parvatmala's National Ropeways Development Program will be implemented on a public-private partnership basis.
- Contracts for eight 60-kilometre ropeway projects will be awarded in 2022-23.

Inclusive Development

Agriculture:

Direct payment of Rs. 2.37 lakh crore (US$ 31.67 billion) to 16.3 million farmers for wheat and paddy procurement.
Free of chemicals Natural farming will be encouraged across the county. Farmers' holdings in 5 km broad stretches along the Ganga are the initial focus.
NABARD will facilitate a fund with blended capital to finance agricultural and rural enterprise startups.
Drones called 'Kisan Drones' are used to inspect crops, digitise land records, and spray insecticides and nutrients.

MSME:

The portals of Udyam, e-shram, NCS, and ASEEM will be linked.
Emergency Financing Linked Guarantee Scheme (ECLGS) provided additional credit to 13 million MSMEs. ECLGS would be extended until March 2023.
The ECLGS guarantee cover will be increased by Rs. 50000 crore (US$ 6.68 billion), bringing the total protection to Rs. 5 lakh crore (US$ 66.84 billion).
The Loans Guarantee Trust for Micro and Small Enterprises will facilitate Rs. 2 lakh crore (US$ 26.73 billion) in extra credit for Micro and Small Enterprises (CGTMSE).
The Raising and Accelerating MSME Performance (RAMP) programme would be implemented with a budget of Rs. 6000 crore (US$ 802.1 million).

Education:

PM eVIDYA's 'One Class-One TV channel' programme will be expanded to 200 channels. Virtual labs and skilling e-labs will be established to enhance critical thinking skills and a simulated learning environment.
Digital Teachers will create high-quality e-content for distribution.
A digital university will be built to provide world-class universal education with a tailored learning experience.

AtmaNirbharta in Defence:

The domestic industry would receive 68% of the capital procurement budget in 2022-23, up from 58% in 2021-22.
With 25% of the defence R&D budget set aside, industry, entrepreneurs, and universities will participate.
To meet testing and certification criteria, an independent nodal umbrella agency will be established.

Energy Transition and Climate Action:

An additional Rs. 19,500 crores (US$ 2.606 billion) has been allocated for the Production Linked Incentive for the development of high-efficiency solar modules in order to achieve the target of 280 GW of installed solar power by 2030.
Co-firing of 5-7% biomass pellets in thermal power plants: CO2 savings of 38 MMT per year, additional money for farmers and job opportunities for people, and assistance in preventing stubble fire in agricultural fields.
Four pilot projects will be established for coal gasification and conversion into chemicals for the industry.
Farmers from Scheduled Castes and Tribes who desire to engage in agro-forestry will receive financial assistance.

Public Capital Investment:

In 2022-23, public investment will continue to boost private investment and demand.
Capital expenditures increased by 35.4% to Rs. 7.50 lakh crore (US$ 100.26 billion) in 2022-23, up from Rs. 5.54 lakh crore (US$ 70.05 billion) this fiscal year.
In 2022-23, the outlay will be 2.9% of GDP.
The Central Government's 'Effective Capital Expenditure' is expected to be Rs. 10.68 lakh crore (US$ 142.77 billion), or around 4.1% of GDP.

Mobilising Resources:

Data centres and energy storage systems will be designated as infrastructure.
Last year, Venture Capital and Private Equity invested over Rs. 5.5 lakh crore (US$ 73.52 billion), enabling one of the most significant startup and growth ecosystems in the world.
Measures will be made in order to make this investment scale up.
For sunrise sectors, blended funds will be pushed.
Sovereign Green Bonds will be issued to help fund green infrastructure projects.

Ken Betwa Project:

The Ken-Betwa link project will cost Rs. 1400 crore (US$ 187.2 million) to build.
The Ken-Betwa link project will provide irrigation to 9,08,000 hectares of farmers' land.

Health:

An open platform for the National Digital Health Ecosystem will be launched along with a 'National Tele Mental Health Programme' for high-quality mental health counselling and care.
The National Institute of Mental Health and Neurosciences (NIMHANS) will serve as the nodal centre, with the International Institute of Information Technology-Bangalore (IIITB) providing technical assistance.

Skill Development:

The Digital Ecosystem for Skilling and Livelihood (DESH-Stack e-portal) will be launched to enable citizens to skill up, reskill, or upskill via online training. Startups will be encouraged to facilitate 'Drone Shakti' and Drone-as-a-Service (DrAAS).

Saksham Anganwadi:

Mission Shakti, Mission Vatsalya, Saksham Anganwadi, and Poshan 2.0 will provide integrated benefits to women and children. Saksham Anganwadis would be increased to 2,00,000 anganwadis.

Har Ghar, Nal Se Jal:

This scheme has been awarded Rs. 60,000 crores (US$ 8.02 billion) to cover 38 million households in 2022-23.

Housing for All:

Under the PM Awas Yojana, Rs. 48,000 crores (US$ 6.41 billion) has been set aside for the completion of 8 million residences by 2022-23.

Prime Minister's Development Initiative for North-East Region:

PM-DevINE, a new initiative to fund infrastructure and social development projects in the North-East, has been launched. Under the scheme, an initial allocation of Rs. 1,500 crores (US$ 200.5 million) is granted to facilitate livelihood activities for young women.

Vibrant Villages Programme:

Border communities with scant populations, poor connectivity, and infrastructure on the northern border are being developed through the Vibrant Villages Program.

Banking:

All 1,50,000 lakh post offices would be connected to the central banking system. 75 Digital Banking Units (DBUs) will be established in 75 districts by scheduled commercial banks.

E-Passport:

e-Passports with embedded chips and cutting-edge technologies will be issued.

GIFT-IFSC:

Foreign universities and institutes of international renown will be permitted to operate in the GIFT City. An International Arbitration Centre will be established to expedite the resolution of disputes under international law.

Urban Planning:

Building bylaws will be updated, as well as Town Planning Schemes (TPS) and Transit-Oriented Development (TOD). A battery swapping policy will be released in order to set up charging stations on a large scale in urban areas.

Land Records Management:

For IT-based land record administration, a unique Land Parcel Identification Number is being assigned.

Accelerated Corporate Exit:

The Centre for Processing Accelerated Corporate Exit (C-PACE) will be formed to help corporations wind down quickly.

AVGC Promotion Task Force:

To maximise the sector's potential, a task force for animation, visual effects, gaming, and comics (AVGC) promotion will be formed.

Telecom Sector:

As part of the Production Linked Incentive Scheme, a scheme for design-led manufacturing will be established in order to create a robust ecosystem for 5G.

Export Promotion:

The Special Economic Zones Act will be replaced with a new law allowing states to collaborate on 'Enterprise and Service Hub Development.'

Telecom Sector:

As part of the Production Linked Incentive Scheme, a scheme for design-led manufacturing will be established in order to create a robust ecosystem for 5G.

Sunrise Opportunities:

Artificial Intelligence, Geospatial Systems and Drones, Semiconductor and its Ecosystem, Space Economy, Genomics and Pharmaceuticals, Green Energy, and Clean Mobility Systems will all receive government funding for R&D.

Digital Rupee:

The Reserve Bank of India will introduce the Digital Rupee in 2022-23.

Providing Greater Fiscal Spaces to States

'Scheme for Financial Assistance to States for Capital Investment' spending increased from Rs. 10,000 crores (US$ 1.33 billion) in Budget Estimates to Rs. 15,000 crores (US$ 2 billion) in Revised Estimates for the current fiscal year.
In 2022-23, Rs. 1 lakh crore (US$ 13.36 billion) would be allocated to help states catalyse total economic investment through fifty-year interest-free loans, in addition to standard borrowings.
States will be allowed a fiscal deficit of 4% of GDP in 2022-23, with 0.5% connected to power sector reforms.

Fiscal Management

Budget Estimates for the years 2021-22: Rs. 34.83 lakh crore (US$ 465.60 billion); Revised Estimates for the years 2021-22: Rs. 37.70 lakh crore (US$ 503.97 billion).
Total spending in 2022-23 is expected to be Rs. 39.45 lakh crore (US$ 527.36 billion).
Total receipts other than borrowings are expected to be Rs. 22.84 lakh crore (US$ 305.32 billion) in 2022-23.
In the current fiscal year, the fiscal deficit is 6.9% of GDP (against 6.8% in Budget Estimates).
The fiscal deficit is expected to be 6.4% of GDP in 2022-23.

Direct Taxes

To continue with the policy of a stable and predictable tax system:
- A vision for establishing a dependable tax system
- Simplify the tax system even more and reduce litigation.
'Updated return' is a new feature:
- Option to file an Updated Return if additional tax is paid.
- Allows the assessee to declare income that was previously unreported.
- Must be filed within two years after the relevant assessment year's end.
Cooperative societies:
- The Alternate Minimum Tax paid by cooperatives has been reduced from 18.5% to 15% to provide a level playing field between cooperative societies and companies.
- The surcharge on cooperative societies has been decreased from 12% to 7% for those with total revenue of more than Rs. 1 crore (US$ 133,733.64) but less than Rs. 10 crore (US$ 1.33 million).

Persons with disabilities are eligible for tax assistance:
- Payment of annuity and lump sum amount from insurance system to differently abled dependents during parents'/guardians' lifetimes, i.e., when parents/guardians reach the age of 60.
Uniformity in National Pension Scheme Contribution:
- The employer's contribution to a State Government employee's NPS account is now eligible for a tax deduction, which has been increased from 10% to 14%.
- Raises them to the same level as central government personnel.
- It would aid in the improvement of social security benefits.
Incentives for Startups:
- For qualifying startups to get a tax benefit, the period of incorporation has been extended by one year, until 31 March 2023.
- Previously, the incorporation term was valid through March 31, 2022.
Tax incentives are available under a concessionary tax policy:
- The deadline for starting manufacturing or production under section 115BAB has been extended by one year, from March 31, 2023 to March 31, 2024.
Virtual digital assets are subject to a taxation scheme:
- A new tax structure for virtual digital assets has been established.
- Any income derived from the transfer of a virtual digital asset will be taxed at a rate of 30%.
- Except for the cost of acquisition, no deductions or allowances will be allowed for computing such income.
- Any loss incurred due to the transfer of a virtual digital asset cannot be offset against any other revenue.
- To capture transaction details, a 1% TDS will be applied to each payment made in relation to the transfer of a virtual digital asset above a certain monetary threshold
- Gifts of virtual digital assets are also to be taxed in the hands of the recipient.
Management of Litigation:
- When a question of law is identical to one pending before the High Court or Supreme Court, the department's filing of an appeal is postponed until the court has resolved the question of law.
- To significantly reduce the number of times taxpayers and the department have to go to court.
Tax incentives to IFSC:
The following items are tax-free if certain conditions are met:
- Income from offshore derivative instruments earned by a non-resident.
- Over-the-counter derivatives income from an offshore banking unit.
- Income from royalties and interest on the ship's lease.
- In IFSC, income from portfolio management services.
Rationalisation of Surcharge:
- Surcharges on AOPs (contract execution consortiums) are set at 15%.
- Done to lessen the fee difference between individual businesses and AOPs.
- A 15% surcharge on long-term capital gains deriving from any form of asset transfer.
- To support the entrepreneurial community.
Health and Education Cess:
- Any surcharge or tax on earnings and profits that is not deductible as a business expense.
Deterrence against tax-evasion:
- No set-off of any loss against undeclared income discovered during search and survey operations will be allowed.
Rationalising TDS Provisions:
- Agent benefits are taxable in their hands because they are passed on to them as a company development plan.
- If the total value of the benefits supplied during the financial year exceeds Rs. 20,000 (US$ 267.31), the person providing the benefits is entitled to a tax deduction.

Indirect Taxes

Remarkable progress in GST:
- Despite the pandemic, GST receipts are increasing, and taxpayers should be applauded for this.
Special Economic Zones:
- SEZ Customs Administration should be IT-driven and operate on the Customs National Portal – to be implemented by September 30, 2022.
Customs reforms and duty rate changes:
- Faceless Customs is now fully operational. Customs formations have done outstanding frontline work despite all odds during the Covid-19 pandemic, demonstrating agility and purpose.
Project imports and capital goods:
- Gradually phase down concessional rates on capital goods and project imports, and implement a reasonable tariff of 7.5%, which is favourable to domestic sector growth and 'Make in India.'
- Specific exclusions for modern machinery that is not made in the country will be maintained.
- A few exclusions were introduced for inputs such as specialised castings, ball screws, and linear motion guides to encourage domestic manufacturing.
Review of customs exemptions and tariff simplification:
- Exemptions on some agricultural commodities, chemicals, fabrics, medical devices, and medications and medicines for which sufficient domestic capacity exists are among the more than 350 exemption entries scheduled to be phased away progressively.
- The customs rate and tariff structure should be simplified to reduce disputes, particularly for sectors such as chemicals, textiles, and metals. In line with the goals of 'Make in India' and 'Atmanirbhar Bharat,' exemptions on commodities that are or can be manufactured in India are being removed. At the same time, concessional duties on raw materials used in the creation of intermediate products are being offered.

Sector Specific Proposals

Electronics:
- To support local manufacturing of wearable gadgets, hearing devices, and electronic smart metres, customs duty rates will be calibrated to create a graded rate structure.
- Duty exemptions for portions of transformers in mobile phone chargers, camera lenses in mobile camera modules, and a few other items will be provided to encourage domestic production of high-growth electronic products.
Gems and Jewelery:
- To encourage the Gems and Jewellery sector, customs duty on cut and polished diamonds and gemstones would be decreased to 5%; customs duty on simply sawn diamonds will be nil.
- To facilitate the export of jewellery via e-commerce, a simplified regulatory framework will be adopted by June of this year.
- Import of fake jewellery will be subject to a customs duty of at least Rs. 400 per kg, in order to discourage the import of low-value imitation jewellery.
Chemicals:
- Duty on certain vital chemicals, such as methanol, acetic acid, and heavy feed stocks for petroleum refining, is being decreased; duty on sodium cyanide, for which ample domestic capacity exists, is being raised - this will help boost domestic value addition.
MSME:
- The customs tax on umbrellas has been hiked to 20%. Parts of umbrellas that are being discontinued are exempt.
- Exemptions for agri-sector implements and instruments manufactured in India are being rationalised.
- Last year's customs duty exemption for steel scrap was extended for another year to help MSME secondary steel makers.
- Certain anti-dumping and countervailing duties on stainless steel and coated steel flat items, alloy steel bars, and high-speed steel are being cancelled in order to address the current high metal prices in the public interest.
Exports:
- Exemptions are being offered on embellishment, trimming, fasteners, buttons, zipper, lining material, selected leather, furniture fittings, and packaging boxes to encourage exports.
- To increase shrimp aquaculture exports, duties on certain inputs are being cut.
Tariff measures to encourage blending of fuel:
- Unblended petrol would be subject to an additional differential excise levy of Rs. 2/ litre beginning October 1, 2022, in order to incentivise fuel blending.

Highlights

Ms. Nirmala Sitharaman, Union Minister for Finance presented the Union Budget 2022-23 in the Parliament on February 1, 2022. The key highlights of the Union Budget 2022-23 are as follows:

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