Budget 2025 Expectations: Top 5 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. 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. This budget is most likely to prioritise 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.

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. 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. 

2. 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.

3. 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.

4. 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.

5. 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.

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. The budget should address systemic gaps between the acute shortage of medical specialists, escalating medical care costs, and inadequate hospital infrastructure to meet the demands of a growing population.

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

The real estate sector hopes for progressive reforms that benefit homebuyers and the industry. 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.

For a large section of the population, house affordability remains a big challenge. Hence, 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. The government should take measures to strengthen the regulations around the real estate sector, including RERA.

Experts suggest that reforms in stamp duty and simplified GST regulations for under-construction properties in the budget would also be a welcome change. They hope that the real estate sector will be granted ‘Infrastructure Status’, which could revolutionise the industry by giving access to affordable long-term financing at favourable interest rates and boosting investor confidence.

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 prioritise employee welfare. 

Incentives for reskilling programmes, talent acquisition and wellness initiatives can create a more productive and resilient workforce. Streamlined regulations and improved infrastructure will help attract global businesses and talent. 

Industry experts emphasise the need for skill development programmes aligning with the evolving job market, especially in technology-driven fields.

The Confederation of Indian Industry (CII) has highlighted the need to boost women’s workforce participation for India’s economic growth. It suggests initiatives such as formalising sectors like the care economy, constructing dormitories using CSR funds, and establishing government-supported creches in industrial areas to be included in the budget. 

CII has also called for introducing an ‘Integrated National Employment Policy’ to streamline and consolidate several employment-generating schemes under one umbrella. This unified framework can build on the National Career Service (NCS) portal, ensuring data flow from initiatives of the state and central government.

CII advocated for targeted support to employment-intensive sectors such as tourism, construction, textiles, tourism and low-skilled manufacturing to create jobs on a large scale. These sectors could benefit from enhanced PLI schemes, streamlined tariff structures and better alignment of Free Trade Agreements (FTAs) to generate employment and boost exports.

It also proposed the establishment of an International Mobility Authority under the Ministry of External Affairs. This authority would facilitate Government-to-Government (G2G) collaborations to create job opportunities overseas for Indian youth, develop skill development programmes aligned with global demands in partnership with the Ministry of Skill Development and Entrepreneurship and include foreign language skills and cultural training to prepare workers for international markets.

CII suggested launching an internship programme for college-educated youth in rural areas to work in government offices. Increased funding for vocational training programmes in future-focused areas such as robotics, artificial intelligence and green technologies is essential for addressing immediate employment needs. 

Related Articles:

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