A Prospective Outlook – Union Budget 2025!

February 1, 2025, is the day when the whole of India sits in anticipation for Mrs. Nirmala Sitharaman, the 39th finance minister of India to present the Union Budget 2025. People have high hopes as it has created a wave of relief in the masses anticipating some relief in the form of tax reforms. The scenario repeats itself every year, however, this perspective outlook is important to level up our expectations and align them with reality.

All eyes are on Budget 2025 whether you are an employee, business person, or an industrialist. The budget is expected to simplify the taxes, revamp tax reforms, and boost economic growth.

Expected Income Tax Reforms

Tax Breaks for the Middle-Class

The upcoming budget might offer tax breaks for middle-class individuals earning up to ₹15 lakh each year. This group is vital for India’s economy. By cutting taxes, the government hopes to increase the Take-Home Pay encouraging Savings and Investments. Having more money to spend can drive consumer spending, which benefits industries like retail, automotive, and housing. This plan could help families struggling with rising prices by providing financial relief.

Changes in Tax Brackets

Anticipation for adjustments in tax brackets to make them fairer and reduce the tax load across different income levels. The current tax system offers limited relief. Possible changes include:

Comprehensive Income Ranges, lowering top Tax Rates by cutting the 30% tax rate, or income threshold increase for the top bracket could help higher earners and boost economic activity.

Tax slabs and inflation alignment ensure people don’t pay more taxes on raised incomes.

Housing and Investment

On the first purchase of your home, you may be eligible for additional tax benefits under Section 80EE. This provision lets you deduct more on the interest from your home loan than the usual limit, aiming to make buying a first home more affordable.

Lower stamp duty rates, particularly in urban areas, to reduce the overall cost of property purchases. This will boost the purchase of houses, contributing to a rise in real estate investment.

Employee Expectations

Right now, taxpayers can deduct up to ₹1.5 lakh under Section 80C, a limit that hasn’t changed in years. Many people are hoping for an increase to ₹2.5 lakh. Hence, more saving and investment opportunities to reduce taxable income.

Currently, NPS contributors get an extra ₹50,000 deduction beyond Section 80C under Section 80CCD (1B). Employees highly anticipate additional tax benefits and expect that the government will raise this limit to encourage people to save more for retirement.

Simplifying Regulations

To simplify the taxation rules and regulations and make it easier to understand The Income Tax Act, the government plans to roll out the Direct Tax Code. It will be the problem solver of the current taxation system. Reduction in the burden of complex regulations on small businesses, the government may streamline paperwork requirements that may help businesses focus more on their growth.

Infrastructure Development

The government is set to significantly increase spending on infrastructure development in several key areas:

Transportation: There will be major investments aimed at enhancing the railway system. This includes the introduction of high-speed Vande Bharat trains and improvements in rail freight services to boost efficiency in travel and goods transport.

Urban Development: The budget will prioritize the development of sustainable and smart cities. With integrated transport systems and strong infrastructure to accommodate India’s rapidly expanding urban population.

Rural Connectivity: Upgrades in rural infrastructure are planned to improve access to markets, healthcare, and education, promoting growth that benefits everyone.

Collaboration with Private Companies

To fast-track infrastructure projects, the government aims to partner more with private companies, offering various incentives:

Financial Support Increment (VGF): Additional financial support is expected to be provided to make it more lucrative for investors.

Simplified Policies: Stating clear facts and suggestive guidelines is expected to persuade the private sector to invest in the development and management of infrastructure projects.

Increased Funding for Farming

Expanding the PM-Kisan Scheme: More funds will go to the Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) to provide financial help to more farmers across the country.

Enhancing Agri Stack Programs: More money will support digital farming projects like Agri Stack, creating a detailed digital database for farmers.  Supply Chain Infrastructure Investments.

Water management, cold storage facilities, and building transportation networks aim to strengthen the farming supply chain, improve market access for farmers, and raise rural incomes.

Healthcare and Education

Healthcare: As it is globally seen and talked upon by healthcare professionals to increase healthcare spending to 2.5-3% of the nation’s GDP. To help make healthcare more affordable, there are expectations for a reduction in GST on health insurance premiums, currently at 18%. There is also hope for an increase in the limit for a tax deduction on health insurance premiums under Section 80D, which would provide additional financial relief to those with policies.

Education: Anticipating a substantial budget increase to enhance both schools and higher education. This funding will focus on upgrading facilities, training teachers, and incorporating digital learning tools to improve education quality across the country. People in the education field are pressing for the GST on education services to be zero-rated.

Promotion of Clean Energy

The government is targeting 500 gigawatts (GW) of renewable energy by 2030 and plans to implement supportive policies to achieve this:

Incentivise Wind and Solar Energy: Reduction in GST on renewable energy types of equipment and custom duties is anticipated to encourage people to invest.

Green Hydrogen Support: Green hydrogen is seen as climacteric for the transition in energy and might offer financial support for its use and production. This could involve funding for research and development and subsidies to help lower costs.

Investment in Green Technologies

Solutions for Energy Storage: A storage facility for the energy generated is the need of the hour as it leads to stabilization and reliable power supply.

Electric Mobility: There might be a large allocation of funds by the government for the development of the EV industry. (development of charging sessions etc.)

Vehicle Replacement Policy

To encourage and build a sustainable environment that indirectly pushes towards an increase in the sale of new vehicles, the government may improve the vehicle scrappage policy by providing monetary incentives for the sale of old vehicles for new ones. Also, additional tax breaks for people who replace old vehicles with new ones, encourage the adoption of cleaner technologies.

Support for Small Businesses

The government plans to help Micro, Small, and Medium Enterprises (MSMEs) by making loans more accessible:

Initiative for Loan Guarantee: It will boost businessmen’s confidence and motivate them to get small loans which will then allow them to invest in the latest technology and grow.

Financial Incentives: Incentivising small businesses to adopt new and recent technologies to grow in the market is what the government may aim at.
Conclusion

As we analyze and anticipate the current economic needs, we wait for the budget to unfold and see whether our expectations are met, or if we will have to wait for the same scenario to repeat itself until the next Union Budget of India.

Disclaimer: This Article is Shared by CA Tushar Makkar. He can reached at this E-mail ID – Tushar@catusharmakkar.com