Rome, Dec 30 (IANS): Italy's Senate, the upper house of Parliament, gave its final approval to the government's 2023 budget worth 35 billion euros ($37 billion).

The budget package allocates 21 billion euros in tax breaks and bonuses to soften the impact of the energy crisis on companies and families, reports Xinhua news agency.

Other key measures include the lifting of the ceiling on annual income of self-employed people taxed with a flat 15 per cent rate from 65,000 euros to 85,000 euros.

The budget also allocates 4.2 billion euros to reducing the so-called "tax wedge" -- the difference between what an employer pays as salary and the actual amount a worker gets after tax -- to benefit low-income workers, in favour of people earning up to 20,000 euros (by three points) and up to 35,000 euros (by two points).

From January 2023, the limit on cash payments will be raised from 2,000 euros to 5,000 euros.

This measure was criticized by the European Commission, which earlier this month noted that it could aid tax evasion.

Prime Minister Giorgia Meloni's cabinet originally planned to raise this limit to 10,000 euros.

The budget also introduces changes to the pension system, which is now scheduled to be completely overhauled in 2024.

The new system will enable people to retire after paying social security contributions for 41 years regardless of their age.

A previous draft bill set the earliest possible retirement age at 62.

The budget increases next year's deficit to 4.5 percent of gross domestic product (GDP) from a previous forecast of 3.4 per cent.

The Economy and Finance Ministry expects the deficit in 2024 to reach 3.7 per cent of the GDP.

Financial markets remained stable following Thursday's budget approval.

The yield on Italy's benchmark ten-year bonds inched lower in trading, finishing the day at around 4.5 per cent, while the blue-chip index on the Italian Stock Exchange rose 1.2 per cent.