From tax cuts to GST: Expectations from Union Budget 2025
What's the story
With the Union Budget 2025 just around the corner, middle-income households in India are hoping for some income tax revisions. These could go a long way in easing their financial burden. The hope is for measures that could boost disposable income and spur economic activity. The government's fiscal strategies are especially important for this segment, considering their role as India's economic engine.
Changes
Potential tax reforms could boost growth
The forthcoming budget has reignited conversations over the possibility of changes in personal income tax. These could be in the form of lowering tax slabs or raising exemption limits, steps that would lighten the burden on families. Dr. Suresh Ramanathan of the Great Lakes Institute of Management in Chennai, noted that such changes could offer great relief to these families and spur economic growth through consumption.
Investment incentives
Tax benefits could incentivize investments in emerging sectors
The budget could also bring in targeted tax benefits for sectors such as green energy, artificial intelligence (AI), and upskilling initiatives. Such measures would not only be in line with India's sustainable growth goals but also promote innovation and entrepreneurship in these emerging fields. Dr. Ramanathan stressed on the need for a simplified tax framework to improve compliance, enhance transparency, and make filing user-friendly.
Tax fairness
Need for a fair tax system
The upcoming budget also emphasizes the need for a fair tax system where everyone pays according to their income level. Policymakers have to find a balance between generating revenue and ensuring fairness, to instill trust among taxpayers. Dr. Ramanathan highlighted this point, saying that "Policymakers must also consider measures that enhance taxpayer compliance through transparency and ease of filing, thus broadening the tax base."
Sectors
GST and foreign investments
Experts believe reducing GST will lower financial burden on consumers, make insurance policies more affordable, and also drive retail consumption. A rationalisation of capital gain taxation is also expected. To lower production costs and boost exports, measures like duty exemptions, tariff rationalisation, and expanded remission schemes may be taken. Simplified compliance measures for foreign investments, and targeted incentives for high-value manufacturing sectors such as precision machinery and electronics, may also be announced.