Budget 2025 Expectations: Top 7 Expectations from Union Budget

The upcoming Union Budget for 2025, which is to be unveiled by Finance Minister Nirmala Sitharaman on February 1, 2025, is much awaited with taxpayers eagerly as they expect some relief in the form of tax reforms. In the recent times, the economy is facing inflation without proportionate rise in the salaries of employees. This has led to decreased consumer spending in the economy. As a result, the upcoming budget is likely to focus on measures aimed at increasing disposable income, consequently increasing public spending across the economy. The expectations are high that the budget will introduce revised tax slabs aimed at reducing the burden on individuals, especially the middle class while encouraging greater consumer spending and investment. Also, this budget is most likely to prioritize economic growth, which is in line with the vision of ‘Viksit Bharat’ by 2047. 

This article focuses on the 2025 budget expectations that are to be announced.

Budget 2025 Live Telecast

Expected Date of Budget 2025

The Budget 2025 session of the parliament will be likely on February 1, 2025. It will be presented by Nirmala Sitharaman for the eighth consecutive time, making her the first Finance Minister in India's history to achieve this milestone. 

A. Income Tax:

It is expected that Budget 2025 will have some tax reliefs for individual taxpayers. Here are our top expectations:

1. Presentation of Direct Tax Bill:

2. Increase in Basic Exemption Limit

The basic exemption limit under the new regime is expected to increase from Rs. 3 lakhs to Rs. 5 lakhs, giving relief to individual taxpayers and boosting consumption and disposable income. 

3. Increase in 80C Deduction Limit

It is expected that the government will increase the limit under Section 80C from Rs. 1.5 lakhs to 2 lakhs, which has remained unchanged since 2014.

4. Increase Deduction for Interest on Home Loan

The government may increase the deduction limit under section 24(b) on interest on home loans from Rs. 2 lakhs to Rs. 3 lakhs to promote homeownership and help the growth of the real estate sector.

5. Reduction in Surcharges:

Maximum surcharge that can be levied on individuals has been reduced from 37% to 25% on budget 2024. This is expected to be reduced further in the upcoming budget.

6. Reduced Corporate Taxes for New Manufacturing Companies

The 15% concessional tax rate under Section 115BAB for new domestic manufacturing companies has been key in attracting investments to India. It expired in March 2024; extending this rate for companies starting from operations after April 1, 2024, would continue to drive growth. Additionally, with the rise of Global Capability Centers (GCCs), now at 1,700 and growing, there is a proposal to offer a similar 15% tax rate to GCCs to foster their expansion and job creation.

7. Production Linked Incentives for R&D

To foster innovation, the government might introduce new production-linked incentives for Research and Development (R&D) activities. These could include additional deductions for specified R&D expenditures based on specific criteria, such as increased turnover, employment generation, or capital investment.

B. Indirect Tax

1. Automobile Sector

In the 55th GST Council meeting, the finance minister only addressed the confusion regarding the GST rate on new and refurbished Electrical Vehicles (EVs). However, many of the asks from the automobile industry leaders, such as a reduction in GST on hybrid vehicles or a simplified refund procedure for EV manufacturers, were not considered. Hence, one can expect the government to consider these and provide a resolution in the 2025 Budget.

2. TCS Obligation on e-Commerce Operators

Currently, as per section 52 of the CGST Act, every e-commerce operator is required to collect tax @0.5% of the net value of taxable supplies made through it by other suppliers where the consideration concerning such supplies is to be collected by the operator. 

However, under GST, taxable supplies included zero-rated supplies as well. This means if a GST-registered supplier is exporting goods using the services of an e-commerce operator under LUT, it will block working capital. This is because the e-commerce operators still need to collect TCS even though no GST is payable by the suppliers on zero-rated supplies. In the upcoming budget, the government can consider exempting TCS obligations on e-commerce operators on the facilitation of zero-rated supplies.

3. Retrospective applicability of non-taxability of extra neutral alcohol or rectified spirit

In the 52nd meeting, the GST Council recommended the non-taxability of un-denatured Extra Neutral Alcohol (ENA) or rectified spirit used to manufacture alcoholic liquor. Many manufacturers of ENA stopped paying GST and started remitting VAT for the said period to the state authorities, anticipating that there would be a retrospective amendment in section 9 of the CGST Act. However, via Notification no 17/2024, section 114 of the Finance Act, 2024 enforced the recommendation with prospective application from 1.11.2024. This created difficulties for the taxpayers who stopped paying GST, and one can expect a resolution in the upcoming budget.

4. Facilitators or delivery service providers: the debate needs to end

In its 55th meeting, the GST Council pushed its deliberation on the GST rates applicable to food and the delivery charges for food delivered by a quick commerce or any food delivery app. The ongoing debate of food aggregators considering themselves mere facilitators while the tax authorities allege them to be delivery service providers and demand tax on the same is expected to end in the 2025 budget. A decision is required because this will directly impact the prices being charged to the end consumers.

5. Affordable Housing:

As of now, the definition of affordable housing is (i) - the house has a carpet area within 60 Sq.m. (ii) - Value of property within RS.45 lakhs. This monetary limit is expected to be raised to reflect the market realities. This will help the affordable housing buyers to take the benefit of concessional tax rate @ 1% without ITC.

C. Budget Expectations From Industry

Here are the brief expectations of various industry sectors from Budget 2025.

1. Automotive Sector

The key expectations in the automotive industry are funding and incentives for EV infrastructure, service centres and tax credits for green technology. Experts suggest that classifying charging infrastructure as part of the infrastructure industry will provide access to cheaper financing options, thus reducing the overall setting-up costs of these facilities. 

Experts provide that including charge point operators under priority sector lending will result in lower financing costs for charging infrastructure. A new scheme to upskill technicians to handle EVs and strengthen digital integration with AI-driven solutions will boost efficiency. It could also help enhance job creation and growth of the automotive industry. 

2. Manufacturing Sector

Experts hope that the Budget will include measures to promote domestic manufacturing, such as subsidies on raw materials and machinery, tax breaks for MSMEs and startups, financial support for e-commerce platforms and digital infrastructure, and enhanced export incentives to help Indian brands compete and showcase designs globally. 

Provisions to support the Production Linked Incentive (PLI) scheme are also required to drive domestic manufacturing. PLI schemes in sectors like furniture, railway manufacturing, toys and white goods will reduce import dependence and build a robust manufacturing ecosystem.

3. Infrastructure Sector

Infrastructure development is a critical area for which significant budget allocation is expected. The focus should be on enhancing connectivity by improving highways, roads, and public transport systems. There should be a push for the acceleration of smart city projects and the development of green infrastructure.

4. Startups and MSMEs 

The budget should address key legal and financial challenges businesses face to improve the ease of doing business. Experts suggest aligning legal and financial policies to foster innovation and sustain investor trust. Policies supporting IoT, AI and quantum computing will accelerate startup innovation and growth.

5. Logistics 

Experts suggest measures to drive logistics technology by integrating it with emerging technologies like IoT, AI, automation, robotics and 5G. The government can prioritise the development of the National Technology Strategy for Logistics to enable the seamless integration of cutting-edge technologies in this sector. There should be measures to focus on building technology-driven infrastructure, such as IoT-enabled transport systems, smart logistics parks, and advanced port and highway technologies. 

6. Medical Field 

Experts hope that the budget will take measures to reduce customs duties on essential medicines, targeted therapy drugs and advanced cancer treatment equipment, such as robotics and radiotherapy machines. Support should be given to the infra-linked PLI sector to increase the number of beds per patient as per population requirement. 

There should be measures to expand rural healthcare facilities and increase funding for telemedicine services. Experts also call for policies to support pharmaceutical production and medical equipment within the country to reduce import dependency.

7. Real Estate Sector

In line with rising property prices, experts propose increasing the tax exemption limit on interest payments on home loans to Rs. 5 lakh from the existing Rs. 2 lakh. Reduced stamp duty charges can also drive home ownership for the residential segment. The definition of affordable housing should be expanded to benefit homebuyers and boost end-user demand. 

There is demand for single window clearances for all approvals and swift resolution of stuck projects to accelerate the sector’s growth. Experts also hope that the real estate sector will be granted ‘Infrastructure Status’, which could revolutionize the industry by giving access to affordable long-term financing at favorable interest rates and boosting investor confidence.

Processes pertaining to land acquisition is expected to be simplified. 

Real Estate Investment Trusts investments (REIT) allows the investors to invest in real estates without much capital requirement. Providing tax incentives to REIT securities and removing the double taxation in REIT dividends could boost REIT investments, consequently attracting more funds, and development in real estate sector. 

As there is an increased demand of luxury housing, a push in this sector will lead to acceleration of green real estate, addressing environmental challenges faced in contemporary times. 

8. Employment 

There are expectations that support would be extended to startups and MSMEs to create jobs, enhance skilling initiatives for an AI-driven economy, simplify compliance through digital solutions, promote hybrid work models, and prioritize employee welfare. 

The Confederation of Indian Industry (CII) has suggested initiatives to be included in the budget to boost women participation in the economy. It also suggested the launching of internship programs for college-educated youth in rural areas, increased funding for vocational training programs in future-focused areas such as robotics, artificial intelligence and support to employment-intensive sectors such as tourism, construction, textiles, tourism to create jobs on a large scale.

Related Articles:

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2. Budget 2025 Expectations on Income Tax
3. Budget 2025 - Date, Time, When & Where to Watch to Live?
4. Income Tax Slabs FY 2024-25 & AY 2025-26 (New & Old Regime Tax Rates)
5.  Old vs New Tax Regime: Which Is Better?