During the presentation of the Budget 2023 in the parliament, Finance Minister (FM) Nirmala Sitharaman suggested using the Permanent Account Number (PAN) card as a standard identity for all digital systems at government organisations. The modification is expected to simplify the Know Your Customer (KYC) process and make it simpler for the Income Tax Department and other governmental agencies to handle the documentation of PAN cards.

Besides, the regulators in the financial sector will also be encouraged to have a KYC system fully amenable to meet the needs of digital India.

Mandar Agashe, founder, managing director and vice chairman of Sarvatra Technologies highlighted that the simplification of the KYC process will be instrumental in the proliferation of digital payments in the country. The announcement of adopting a ‘risk-based’ KYC procedure, instead of a ‘one size fits all’ approach, addresses the underlying issue pertaining to the customer verification process faced by banks, non banking finance companies (NBFCs) and fintech. 

The FM also asserted that a one-stop solution for identity and address updating of individuals maintained by various government agencies, regulators, and regulated entities will be established using the DigiLocker service and Aadhaar as foundational identity.

Krishnan Iyer, chief executive officer (CEO) and co-founder of Finezza believed that the two announcements by the FM; making PAN the primary identifier for businesses, and extending Digilocker Services to them, will give a fillip to the business environment. In accessing financial services, especially credit, establishing identity through KYC is a major step. 

“With the Digilocker initiative, the FM has tried to solve this problem for businesses in Digital India. For individuals, Digilocker access is orchestrated through Aadhaar. By making PAN the primary identifier for businesses, they will be able to access the services through their PAN, and provide access to their important KYC documents digitally,” he asserted. 

Something For Everyone

The FM also made some big announcements for the middle class during her Budget announcement.

“Currently, those with income up to Rs 5 lakh do not pay any income tax in both old and new tax regimes. I propose to increase the rebate limit to Rs 7 lakh in the new tax regime. Thus, persons in the new tax regime, with income up to Rs 7 lakh will not have to pay any tax,” she said.

The minister also proposed to extend the benefit of 34 standard deductions for the salaried class and the pensioners. “Each salaried person with an income of Rs 15.5 lakh or more will thus stand to benefit by Rs 52,500,” she added. 

For the highest tax rate of 42.74 per cent, the highest surcharge rate has been reduced from 37 per cent to 25 per cent. This would result in the reduction of the maximum tax rate to 39 per cent.

Varun Sridhar, chief executive officer (CEO) of Paytm Money welcomed the move saying that the Union Budget 2023 reflected the government's focus on inclusive growth and digitisation. “The stability of reforms will contribute to India's growth story and will positively boost the morale of capital markets. From the simplification of KYC, the cap on the maximum tax rate, to increasing the rebate on income tax and strengthening our infrastructural power — there are many welcome moves that will benefit Indians.”

Announcements such as the extension of the date of incorporation for income tax benefits to start-ups from March 31, 2023, to March 31, 2024, and the provision of providing the benefit of carry forward of losses on change of shareholding of start-ups from seven years of incorporation to ten years, are truly great moves. 

“Moreover, the government has also deducted a whopping 39,000 compliances that micro, small and medium enterprises (MSMEs) needed to abide by and decriminalised over 3,400 legal provisions. Such steps will play an instrumental role in ensuring the ease of doing business in the country," added Nitya Sharma, co-founder and CEO of Simpl

"The government delivers a growth-oriented budget focused on consumption and capital expenditure to drive the inclusive development agenda, without deviating from the path of fiscal prudence The Budget 2023 provides the much-needed fillip to the start-up ecosystem by extending the date of incorporation to avail tax benefits and carry forward of losses by another three years. With the ‘completion of recovery’ as indicated in the Economic survey, it is time for India to shift gears and catapult toward the next phase of its growth trajectory," said Naveen Aggarwal, Partner, Tax, KPMG in India.