Finance Minister Nirmala Sitharaman is set to present the Union Budget 2025 on February 1, 2025. The anticipation of budget creates excitement and a range of expectations every year. Whether you are a taxpayer, salaried employee, business person, or an industrialist, everyone’s eyes are on the Budget 2025 and the market it would impact. The budget is expected to focus on simplifying taxes, boosting economic growth and supporting key sectors.
In this brief guide, let’s take a detailed look at what the Budget 2025 expectations are and what it could bring for individuals and the economy.
Income Tax Relief: Big Expectations
Income tax changes are always a key highlight of the Union Budget. Taxpayers, especially middle-income earners, usually hope for relief that would ease their financial burden. So, the latest budget expectations for the Budget 2025 include:
1. Higher Tax-Free Income Limits: As of now, income up to ₹2.5 lakh is exempt from tax in both the old and new regimes. There are discussions that this exemption limit could be increased to ₹5 lakh or even ₹10 lakh, thereby, providing significant relief to taxpayers. This change would not only help individuals save more but also boost consumer spending.
2. Standard Deduction Hike:The current standard deduction is ₹50,000 under the old regime and ₹75,000 under the new regime. A further increase in this deduction is expected as it would benefit salaried individuals and pensioners by helping them save more.
3. Simplification of Tax Regime: The new tax regime, which offers lower income tax rates but fewer deductions, is expected to become more attractive if additional deductions (like those under Sections 80C and 80D) are introduced. A simplified tax structure can encourage more taxpayers to adopt the new regime.
| Old Tax Regime (Current) | New Tax Regime (Current) | Expected Changes |
|---|---|---|
| ₹2.5 lakh (tax-free limit) | ₹2.5 lakh (tax-free limit) | ₹10 lakh (tax-free limit) |
| ₹50,000 (standard deduction) | ₹75,000 (standard deduction) | Higher deductions expected |
What Salaried Employees Look For
There’s no denying that salaried employees constitute a significant portion of taxpayers, making them one of the key groups anticipating relief in Budget 2025. The main expectations among salaried employees include:
- Enhanced Tax-Saving Limits: The current Section 80C deduction limit of ₹1.5 lakh has remained unchanged for years. So, the employees are hoping for an increase to at least ₹2.5 lakh.
- Better Benefits for NPS: The National Pension System (NPS) offers an additional ₹50,000 deduction under Section 80CCD (1B). There are expectations for higher limits or additional tax benefits for NPS contributions.
- Housing Benefits: Many salaried individuals avail housing loans and hence, increasing the deduction for home loan interest under Section 24(b) from ₹2 lakh to ₹3 lakh or more would certainly make for a good change.
- Simplified Filing and Refunds:The government has been working towards making tax filing easier, and further steps like pre-filled returns could benefit salaried taxpayers.
Boosting Economic Growth
Economic growth is the priority of every government and therefore, the Budget 2025 is expected to focus on measures that can strengthen the economy. This includes:
- An increase in infrastructure spending, as an investment in roads, railways, ports and airports would see a significant economic boost by creating jobs and improving connectivity.
- Under the “Make in India” initiative, the government may announce schemes to support industries like electronics, automobiles and renewable energy. Tax holidays and subsidies for manufacturing units would further boost domestic production.
- Support for MSMEs as these Micro, Small, and Medium Enterprises (MSMEs) are vital for the economy. So, the government could possibly announce lower tax rates, easier access to credit, and skill development programs for MSMEs.
- Export-oriented industries like textiles, pharmaceuticals and electronics may receive special incentives to compete in the global market.
Simpler Tax Laws with Direct Tax Code
The government is considering the implementation of the Direct Tax Code (DTC) to simplify existing tax laws. The DTC aims to replace outdated and complex tax provisions with straightforward rules. This would make tax filing simpler for individuals and businesses. Currently, capital gains tax has different rates and holding periods for various asset classes. Hence, a unified structure under the DTC would make it easier for investors to plan their taxes. There will also be benefits for NRIs. The DTC might include provisions to simplify the tax compliance process for them.
Budget Market Predictions
A budget that supports investments and the stock market can attract both domestic and foreign investors. Here’s what is expected for this sector:
- 1. Stable policies for foreign investors to encourage more Foreign Direct Investment (FDI) in key sectors like technology, manufacturing and healthcare.
- 2. Tax benefits for businesses under the Production Linked Incentive (PLI) scheme to boost production and special incentives for startups to encourage innovation and job creation.
- 3. Goods and Services Tax (GST) rates may also be revised, especially for essential goods, to make them more affordable for consumers.
Expectations for the Education Sector
- The government may raise spending on education from 4% to 6% of GDP.
- Funds may be allocated to integrate technology in classrooms.
- Special incentives for research in emerging fields like artificial intelligence, robotics and biotechnology could be introduced.
- Scholarships for students pursuing higher education abroad may also receive attention.
Affordable Housing and Investments
The budget is expected to promote affordable housing and encourage investments. So, the following changes may be introduced:
- Increasing the deduction for home loan interest payments to provide relief to buyers.
- First-time homebuyers may also receive additional benefits under Section 80EE.
- Lower stamp duty rates to make property purchases more affordable, especially in urban areas.
- Mutual funds and debt funds may see simplified tax structures.
Final Word
While the expectations about Union Budget 2025 are anticipated, the government’s challenge would be to address the diverse needs of various sectors. Striking the right balance is important. If the policies announced address needs such as tax simplification, growth acceleration, and sectoral support, the nation could see huge gains.
