Finance Minister Nirmala Sitharaman presented her fifth Union Budget in the parliament with a renewed focus on the self-employed population of the country.
The self-employed workforce is a vital driver of India's economic growth. According to a 2019 International Labour Organisation (ILO) estimate, the self-employed population constitutes almost 75.1% of the country's total employment.
This sector was one of the worst hit during the COVID-19 pandemic. However, experts are of the view that it will rise over previous losses in this financial year.
The announcements made in the Budget 2023 are expected to provide a new impetus for the development of MSMEs, start-ups and self-employed professionals. Read on to find out more.
Union Budget 2023 Announcements for the Self-employed
Increased Tax Limit
Making the new tax regime the default regime, the FM gave many reasons for taxpayers to cheer. Those having an annual income of up to ₹3 Lakhs will now have to pay no income tax.
Moreover, taxpayers with a yearly income of up to ₹7 Lakhs can now avail of tax rebates under the new regime. The earlier limit for the tax rebate was ₹5 Lakhs.
The tax reforms under the Union Budget 2023 will benefit the salaried class and self-employed alike. Earlier under the old regime, the self-employed with an income ₹5 Lakhs or higher were required to pay 20% income tax.
Improved Access to Credit
The MSME sector is one of the most dynamic sectors of the Indian economy. In order to boost its growth, FM Nirmala Sitharaman announced the revamping of the credit guarantee scheme in her Budget speech.
The minister announced the infusion of ₹9,000 Crores in the scheme, which was first introduced in last year’s Budget. Moreover, MSMEs can opt for an additional guaranteed credit facility of up to ₹2 Lakh Crores under the scheme.
This scheme is meant to be a collateral-free facility. It aims to make credit more affordable and bring down its cost for MSMEs by 1%.
In addition, the Union Budget also proposed the creation of a National Financial Information Registry to promote financial inclusion.
The Registry would serve as a central repository that would improve access to credit information and foster financial stability. This will help the self-employed population gain easy credit.
Timely Payments for MSMEs
To solve one of the biggest issues faced by MSMEs, that of delayed payments, the Finance Minister also proposed amending Section 43B of the IT Act.
She announced that any amount paid outside the 45-day window would be allowed as a deduction only after the payment had been made to MSMEs. A new clause (h) will be added in the section mentioned above.
This could serve to end the crisis of delayed invoice clearance for MSMEs as it puts the responsibility squarely on the shoulders of buyers. In order to not face reversal of GST input credit, buyers are expected to be more likely to clear dues on time.
Boosting Presumptive Tax Cap to Empower Micro Entrepreneurs
Enterprises with a revenue of up to ₹2 Crores and self-employed professionals earning up to ₹50 Lakhs annually could utilise the presumptive tax scheme. This simplified tax filing for a large segment of the population engaged in entrepreneurship.
Now, the Union Budget 2023 brings more good news by increasing the limit to ₹3 Crores and ₹75 Lakhs respectively. By eliminating the need to maintain books of accounts, the self-employed can focus on growth without the burden of compliance.
PM-VIKAS for Self-employed Craftspeople
According to estimates, India is home to almost 200 million people directly or indirectly linked to the artisan economy.
Most of these are self-employed craftspeople who stand to gain from the Union Budget's newly conceptualised PM-Vishwakarma Kaushal Samman (PM-VIKAS). The scheme aims to reinvigorate India’s traditional crafts and artisanal economy.
The scheme seeks to provide the craftsmen with the following for their integration into the larger consumer economy:
Financial assistance
Knowledge of modern and green technology
Skill enhancement
Integration into MSME value chain
Reach to global economy through branding and marketing initiatives
'Dekho Apna Desh' to Benefit the Self-employed in the Tourism Sector
The repeated lockdowns due to the global outbreak of the pandemic jeopardised the tourism sector's growth. In fact, it witnessed a slump that was never seen before by the industry.
The self-employed engaged in the industry were the worst hit, as their number fell by an emphatic 42.8 percent.
The Union Budget's push for domestic tourism in terms of 'Dekho Apna Desh' was a much-needed catalyst for the industry. This new initiative will likely boost job creation and the country's economic growth.
As domestic tourism rises, self-employed people engaged in the industry will also see an uptick in revenue.
Proposal for Unity Mall
The Finance Minister also proposed setting up Unity Malls across the country. She mentioned in her Budget speech that these Unity Malls will operate in the capitals of every State. The focus of these malls will be on the sale and promotion of:
One district, one product (ODOP)
Products that have earned geographical indicator (GI) tag
Handicraft materials
ODOPs and GI tag products are region-specific agricultural or manufactured products. These malls are expected to help micro industries and the self-employed population galvanise value chain development.
The support infrastructure will also lead them to match global standards in time.
The Union Budget 2023 has not announced any direct or proactive schemes for the self-employed. Instead, the Finance Minister has taken the common issues of self-employed people into consideration. She addressed them through a multitude of measures relating to different industries.
Be it easy access to credit, setting up Unity malls, or promoting domestic tourism, all these aspects will positively affect India’s growing self-employed segment.
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