Union Budget 2025 Expectations: Everything We Know So Far

As Budget 2025 approaches, the air is thick with anticipation, excitement, and expectations. For the middle class, investors, and industries, this annual financial event has become a beacon of hope for economic relief, growth measures, and policy clarity.

The stakes feel particularly high this year as the government faces the challenge of balancing fiscal discipline with the need to stimulate demand and drive economic growth. Let’s have a look at what are the expectations taxpayers, professionals, and experts have in this Union Budget 2025

1. Tax Simplification and Relief for Individuals

Tax simplification remains a top priority, with several stakeholders advocating for reforms that benefit both individuals and businesses.

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Expectations:

• Revised Tax Slabs: Expanding income tax slabs and reducing rates for individuals earning up to Rs. 20 lakh annually to increase disposable income and spur consumption.
• Addressing Tax Disputes: Recommendations include resolving legacy tax disputes and increasing the appeal limit to Rs. 50 crores for cases escalated to the Supreme Court, and refraining from raising new tax disputes for a year to encourage a business-friendly environment.
• Capital Gains Tax Reforms: Rolling back increased Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG) rates, coupled with the reintroduction of indexation benefits could encourage long-term investments.

2. Customs Duty Revamp

The Union Budget 2025 is expected to introduce a major overhaul of basic customs duty (BCD) on over 100 items. This move aims to align duty rates with global trade practices and resolve the issue of inverted duty structures, where raw materials face higher tariffs than finished goods.

• Inverted Duty Corrections: Lower duties for raw materials and intermediates to reduce manufacturing costs.
• Sectoral Impact: Expected benefits for IT hardware, automobile components, textiles, telecommunications, and toys.
• Proposed Duty Ranges: 0–2.5% for raw materials, 2.5–5% for intermediates, 7.5–10% for finished goods.

Rationale and Benefits: Boost domestic manufacturing by lowering input costs. Enhance the global competitiveness of Indian products. Reduce import dependency and support export growth.

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CBIC Chairman Sanjay Kumar Agarwal cautioned about complexities in implementation, as adjustments must account for the share of raw materials in the final product’s value. Know More.

3. Boosting Capital Expenditure and Infrastructure

The Confederation of Indian Industry (CII) has emphasized the importance of maintaining and increasing infrastructure spending to drive growth.

Proposals and Expectations:

• Increase in Budget Allocations: A 25% increase in infrastructure spending is recommended to sustain momentum in rural and urban development.
• Focus Areas: Roads, railways, ports, and urban housing projects, with an emphasis on green infrastructure and renewable energy integration.
• Job Creation: Large-scale infrastructure projects are expected to create employment opportunities, addressing unemployment concerns.

4. Green Energy and Sustainability Initiatives

India’s commitment to a green economy is reflected in industry calls for policies that promote renewable energy, biofuels, and electric vehicles (EVs).

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Proposals:

• Biofuel and Green Energy Policies: Companies like Buyofuel have urged the government to support waste-to-energy technologies, green fuel infrastructure, and carbon credit markets.
• Incentives for EV Adoption: Subsidies for EV buyers and investments in charging infrastructure to accelerate the transition to clean transportation.
• Renewable Energy Investments: Increased funding for solar, wind, and hydrogen projects to support India’s climate goals.

5. Real Estate and Affordable Housing

The real estate sector is advocating for measures that address the growing demand for affordable housing and ease challenges faced by developers.

Key Recommendations:

• Tax on Affordable Housing Projects: Reducing the tax rate on affordable housing projects to 15% to enhance supply.
• Home Loan Benefits: Increasing the deduction limits for principal and interest payments to make homeownership more accessible.
• Redefining Affordable Housing: Revisiting the definition to reflect current market realities and cater to urban buyers.

6. Healthcare and Insurance Sector Expectations

The healthcare and insurance sectors are looking for policy measures to boost accessibility, affordability, and penetration.

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Healthcare Proposals: Reducing GST on medical equipment, medicines, and health insurance premiums to improve affordability. Supporting health-tech startups with grants to expand digital healthcare solutions.

Insurance Sector Demands:

• Incentivizing Insurance Penetration: Tax benefits for policyholders and industry incentives to attract uninsured populations.
• Recapitalization of PSU Insurers: Addressing the solvency challenges of public sector insurance companies through budgetary support.

7. Ease of Doing Business

Simplifying regulations and reducing bureaucratic hurdles are critical to enhancing India’s global business competitiveness.

Suggestions:

• A one-year pause on new regulations by authorities like RBI, SEBI, and IRDAI to stabilize liquidity and ease market operations.
• Streamlining GST processes and reducing corporate tax burdens to attract investments.
• Encouraging the use of technology for faster resolution of tax issues and improving transparency in tax administration.

8. Education and Digital Transformation

The education sector has emphasized the need for digital transformation to make India a global hub for learning.

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Proposals:

• Digital Education Infrastructure: Investments in online platforms, AI-powered learning tools, and digital classrooms to reach global students.
• Support for EdTech Startups: Funding and policy support for innovative learning solutions.

9. Promoting Exports and MSMEs

Exporters and MSMEs have highlighted the need for targeted measures to enhance competitiveness and resilience.

Key Demands:

• Export Incentives: A marketing scheme to promote exports to the United States and other key markets.
• Shipping Infrastructure: Encouraging private investment in shipping to reduce dependency on foreign carriers.
• MSME Support: Expanding credit facilities and incentives for small businesses to recover and grow.

10. Addressing Rupee Depreciation

With the rupee hitting a historic low of Rs. 86.70 against the US dollar, the government is under pressure to address this challenge.

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Proposed Measures:

• Higher Import Tariffs: Curbing demand for dollars by increasing tariffs on non-essential imports.
• Promoting Domestic Manufacturing: Incentives to reduce import dependency and boost local production.

11. Sector-Specific Policies

• Agriculture: Increased funding for rural development and minimum support prices for crops to support farmers.
• Tourism: Promoting India as a global destination through improved infrastructure and marketing campaigns.
• Mutual Fund Industry Proposals: The mutual fund industry has proposed key changes to attract investors and promote financial market participation: LTCG tax (12.55%) and STCG tax (20%) introduced in 2024 are seen as deterrents. Reverting to previous rates could incentivize long-term investments. Reinstating the earlier tax treatment of LTCG (20% with indexation after 3 years) could support the emerging debt market. Raise the threshold for tax deduction at source (TDS) on income distribution from Rs. 5,000 to Rs. 50,000 to ease administrative burdens for small investors.

12. Artificial Intelligence (AI):

India’s AI ecosystem is set to receive a significant boost with a specialized policy package.

• Increased Budget Allocation: Complementing the Rs. 10,000 crore outlay for the India AI Mission, more funds are likely to support AI hubs, research, and innovation.
• Employment Focus: Policies will aim to balance technological progress with job preservation, addressing concerns over AI’s impact on employment.
• Sector Expansion: Focus on AI applications in healthcare, education, agriculture, and governance to drive innovation.

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