Budget 2025 Expectations: Tax relief, capex boost, consumption push, while maintaining fiscal prudence- Will FM Sitharaman deliver?

The Budget is expected to remain focused on boosting consumption, infrastructure spending and job creation, said Amar Deo Singh, Senior Vice President, Research, Angel One. Also, he added, the middle class and the income tax payees are hopeful of some form of tax rebate which could ease their financial situation. Agriculture too is likely to be a key focus area, per Amar Deo Singh, who highlighted the significance of the sector which accounts less than 20 per cent of GDP, but still accounts for almost 55-60 per cent livelihood.

He further added, “Given the current domestic economic slowdown, record FII outflow, Rupee hitting record lows along with global macros & the Trump factor, makes it all the more an interesting budget to watch out for.”

Beas Dev Ralhan, CEO, Next Education said, “The ed-tech segment has been a crucial enabler in bridging the skill gap and enabling employment creation, as reflected in initiatives contained in the budget for last year. The push toward digital infrastructure development along with the introduction of technology in education was a foundational driver. For the 2025 budget, we have optimism that more reforms for GST will be in place and possibly reduce the steep 18% slab on online education services, making quality education achievable for all.”

MSMEs contribute significantly to various macro parameters of an economy and hence, incentivizing them is key to overall economic growth. Abhishek Jain, National Head – Indirect Tax, KPMG in India, said, “With larger enterprises generally also being beneficiaries to economies of scale, incentivizing MSMEs is critical. Typically, to ensure level playing field for both, the Government could consider separate budget allocations for MSMEs and large enterprises, with companies in each category being evaluated separately, akin to that launched in telecom PLI.”

Closing in on the Budget presentation date, it is imperative to prioritize policies that accelerate growth, innovation, catalyze digital transformation, and attract robust investments in the IT/ITeS sector. The IT sector contributes nearly 8% to India’s GDP and employs over 5 million professionals.

In this context, Sameer L Kanodia, Managing Director & CEO, Lumina Datamatics, said, “A forward-looking budget must address key enablers: simplifying regulatory frameworks, improving access to affordable capital, and advancing skill development in high-impact domains such as artificial intelligence, content enrichment, and e-commerce. These measures will empower organizations like ours to scale, innovate, and contribute meaningfully to India’s standing as a global technology powerhouse. A progressive and inclusive budget will pave the way for a digitally empowered future, fostering sustainable growth, job creation, and long-term economic resilience for generations to come.”

Harish Krishnan, Co-CIO & Head Equity, Aditya Birla Sun Life AMC Ltd, said, “The shift towards supply-side reforms—through PLI schemes, corporate tax cuts, and logistics upgrade, has been the defining feature of recent budgets, laying the foundation for long-term growth. While direct demand-side interventions may be limited, targeted relief for the lower-income segments is expected. More importantly, the fiscal glide path and the RBI’s inflation credibility remain key to India’s macroeconomic standing, with S&P closely watching these markers for a potential rating upgrade. Encouraging India Inc to re-leverage and drive fresh capex cycles will be critical in sustaining growth momentum.”

During its December 2024 meeting, the Reserve Bank of India (RBI)’s Monetary Policy Committee (MPC) kept key rates unchanged with the repo rate at 6.50%. The central bank announced that the MPC cut the CRR by 50 bps to 4%.

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In January, India’s services sector posted its slowest growth in 14 months with services PMI at 57.9 against 59.2 in December.

In December, India’s manufacturing activity was at a 12-month low, with the Purchasing Managers’ Index (PMI) dropping to 56.4, S&P Global said. The December data remained above its long-run average of 54.1. In November, it was at 56.5.

The Ministry of Statistics, on January 7, said that the first advance real GDP growth estimate for FY25 has been maintained at 6.4 per cent. This is significantly lower than 8.2 per cent growth in FY24 and marginally below the RBI’s projection of 6.6 per cent. The nominal GDP is projected to grow at 9.7 per cent.

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December wholesale price index (WPI)-based inflation went up to 2.37 per cent from 1.89 per cent in November 2024, on increase in prices of food articles, manufacture of food products, other manufacturing, manufacture of textiles and non-food articles, etc.

December retail inflation, based on the Consumer Price Index (CPI) stood at 5.22 per cent, slightly lower than 5.48 per cent recorded in November. In October, CPI inflation was at 6.21 per cent and it was at 5.69 per cent in December 2023.

While we are looking at expectations from Budget 2025 coming from across sectors, its imperative that we look at some of the key economic data, which may or may not affect the announcements by the finance minister on February 1.

Due to implementations of GST, TDS provisions and digitisation in the payment system, tax coverage has widened over the last few years. In view of swift economic growth coupled with lower corporate tax rate ranging from 15% to 25%, as applicable, corporates are thriving. However, still a large number of business entities are operating as a partnership firm/proprietorship firm and paying tax at 30% to 35%.

Chintan Ghelani, Associate Partner, Direct Tax, NA Shah Associates, said, “For further widening the tax coverage and to provide them fuel for future growth, time is ripe to reduce taxation rate for such businesses by at least 5% in case of entities earning income upto Rs 1 crore. This measure will go a long way in expanding the tax coverage and growth of businesses in India.”

He further added that TDS provisions should be simplified and rates should be made uniform to reduce the compliance burden.

Indian Micro, Small, and Medium Enterprises (MSMEs) play a pivotal role in driving the nation’s economic growth, contributing significantly to GDP and employment generation.

As the Union Budget 2025 approaches, Saahil Goel, MD & CEO, Shiprocket, said, “Indian MSMEs are anticipating reforms and incentives to bolster their growth and global competitiveness. Key expectations include increased access to affordable credit through enhanced schemes and reduced compliance burdens to streamline operations.”

MSMEs are also seeking further digitization support to integrate technology and e-commerce, besides tax relief measures such as increased turnover limits for GST exemptions.

Further, Saahil Goel said that introducing simplified regulations for cross-border trade, improving payment gateways, and supporting international logistics will open up new opportunities for MSMEs to tap into global markets.

With Indian businesses showing immense potential of growing exponentially over the next few years, the country needs to equip them with adequate capital. While banking systems are unable to address all the business finance requirements of these new age corporates, Girish Lakhotiya, Founder and CEO, Prachay Group, said, “We need to take effective steps to develop the corporate bond market in India. If we can channelise investments directly into businesses, it can create a lot of wealth for the entire ecosystem in the process.” He further maintained that in order to incentivize more mobilisation of investment towards corporate bonds, the rate of taxation on the interest received from listed corporate bonds should be reduced to 12.50 per cent, same as the capital gain tax on equity.

Finance Minister Nirmala Sitharaman, on January 24, participated in a traditional ‘halwa’ ceremony. This marks the final stage for the preparation of Union Budget 2025-26 and the tradition acknowledges the hard work and dedication of the finance ministry officials and staff.

Here is all you need to know about the ‘halwa’ ceremony.

Earlier, in a post on X (formerly, Twitter), Parliamentary Affairs Minister Kiren Rijiju said that Parliament’s Budget Session will be held from January 31 to April 4, and Finance Minister Nirmala Sitharaman will table the Budget on February 1. He also said that President Droupadi Murmu has approved summoning both Houses of Parliament for the Budget Session 2025 from 31 January to April 4 and she will address the joint sitting of both Houses on January 31 at 11 am.

Greetings! With the Budget presentation date just a day away, we, at FinancialExpress.com, are continuously bringing to you updates on all the developments around the Budget preparation, key expectations across industries, Parliament’s Budget Session dates, among other key movements. Stay tuned!