Feb 12, 2022 ●15 min read
Union Budget 2022 Highlights: MSME Relief, Income Tax, Digital Rupee and Other Key Takeaways
Every year the sentiment of the Indian financial market is established with the announcement of the union budget. This year was no different.
Although a lot of people were expecting the Union budget 2022 to be a sigh of relief after India's steady recovery from the pandemic, our current finance minister Srimati Nirmala Sitharaman, arrived on stage with few and scattered interventions for the general public.
The second digital budget of its kind, there were a lot of issues the budget touched upon, and in this article, we will explore each of them in detail. Without further ado, let's get started.
The union budget 2022 was optimistic, to say the least. Right at the beginning of her speech, the Finance Minister estimated that in the current financial year, India would benefit from an estimated 9.2% growth across its geographies, and in her own words, this budget would set the precedent for the next 25 years of India's growth. At large the Union Budget focused on four core themes
● PM Gatishakti
● Inclusive Development, Productivity and Enhancement
● Sunrise Opportunities, Energy Transmission, Climate Action
● Financing of Fintech Investments
While each of these categories have several individual components, all of them aim to steer India's growth into the future.
Let us understand each of them in detail and what they individually mean for us.
The union budget 2022 was clearly aimed at business establishments, and the Finance Ministry made it abundantly clear that the growth of India's businesses were a crucial priority.
This is evident across the many initiatives the government outlined; for instance, Udhyam esharm, NCS and Asim portals will now be interlinked to offer live organic databases, credit facilities, skilling and recruitment for B2B, B2C and G2C, which will significantly give a boost to the ongoing professional relationship between the government and private establishments.
Additionally, keeping in mind the struggling state of MSMEs across the country post the pandemic, the finance ministry has decided that ESLGs will now be extended till March 2023 and the guaranteed cover will be extended to ₹50,000 crore, amounting to a total cover of ₹5 lakh crores.
Along with this, credit guarantee trust for micro and small enterprises will be revamped with more funds. An additional credit of ₹2 lakh crores for micro and small enterprises will be infused such that India's million-plus micro and small enterprises can effortlessly gain back their footing.
Last but not the least, the government is determined to expedite and accelerate the performance of MSMEs and has committed to invest more than ₹6000 crores over the next 5 years to nurture increased resilience and competitiveness.
If you have been following the trend of the fintech industry over the past couple of years, you are well aware of the fact that the technology behind popular digital assets such as Bitcoin and other cryptocurrencies are quickly gaining momentum.
Technologies such as blockchain, machine learning and artificial intelligence are increasingly being used such that equitable financial access can be transformed into reality from its current state of imagination.
As expected, the Indian government doesn't want to let go of this opportunity, and thus, the country's central banker, the Reserve Bank of India, has decided to launch the digital rupee. As per current information, the digital rupee will be equivalent to the paper currency and, moreover, it will be backed by the trust of prominent financial Institutions across the nation.
Although the exact details of this development are not yet publicly available, it is expected that the digital rupee will be available to the public by the end of this year. It is still early to say so, but this might well be India's entry into the future of finance.
Along the same lines, the government has finally come to a decision regarding the state of cryptocurrency and other digital assets. While it has not been explicitly stated, cryptocurrencies are now a legal asset in the country as they will be taxed under the 30% income tax bracket.
Going ahead, any profits made from the transfer of digital assets such as cryptocurrencies and NFTs will be taxed as per the laws of the nation, making them legal tender.
One of the major priorities of the union budget 2022 was to expand financial inclusion across the country.
For instance, the Finance Ministry announced that on the occasion of the 75th independence of the country, 5 major scheduled commercial banks would open 75 digital PSUs across different states.
While on the surface, this is a push towards financial inclusion, in reality, this is also the government's plan to promote digital payments. Over the past couple of years and especially during the pandemic, the government has made its plan of adopting digital payments clear, and it is our estimation that this is another impactful influence towards reaching that goal.
Last but not least, one aspect which every earning professional across the country looks forward to is Income Tax regimes put forward by the union budget. However, much to the disappointment of the working class, the Finance Minister did not introduce any new taxation slabs and as is evident the general public doesn't directly benefit from this.
However, as we stated earlier, this union budget was more focused towards companies and corporations, and this is evident in the tax regime as well.
Moving ahead, corporations will need to file 15% income tax along with a 7% surcharge at par with those currently filed by companies. While the larger impact of this is yet to be realised, experts predict that the rural areas of the country will significantly benefit from this move as the majority of corporations are located at those localities.
Well, the union budget 2022 cannot be wholly dismissed as a disappointment as it introduces a couple of key pointers we all need to ponder upon as well as sets the precedent for the upcoming 25 years of India's Independence.
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