The Union Budget 2025 is highly anticipated, especially by middle-class households struggling with rising living costs due to inflation, housing affordability issues, and increasing expenses for essential services like education, healthcare, and transportation.
Proposals under consideration include raising the basic exemption limit under the new tax regime from Rs 3 lakh to Rs 5 lakh, increasing the standard deduction, and simplifying the new tax framework. These measures aim to alleviate the financial burdens the middle-class faces, which often bears the brunt of economic challenges.
As inflation continues to impact household budgets, particularly through rising prices of essential goods, there are significant calls for tax relief and other initiatives to provide much-needed support.
Alternative measures that might ease the burden on the middle class could involve enhanced deductions for health insurance, home mortgage interest, and investments, along with initiatives aimed at managing inflation and stabilising the prices of essential goods.
Key Expectations from Budget 2025
Relief on Income Tax
Reports suggest that the government is contemplating a reduction in income tax rates for individuals earning up to Rs 15 lakh per year. This initiative is intended to offer relief to millions of taxpayers, particularly those in urban areas facing high living expenses. Experts recommend that broadening the tax brackets and raising the basic exemption limit by at least Rs 50,000 could significantly boost disposable income for taxpayers.
Streamlining GST Rates Across Different Sectors
The Goods and Services Tax (GST) significantly affects household expenses, and adjustments to it in Budget 2025 could be crucial for alleviating the burden on the middle class. With the increasing cost of living, there are high hopes that the government will make revisions to GST rates on essential goods and services to help ease financial pressures.
Capital Expenditure (Capex) for Infrastructure Projects
The infrastructure sector in India is anticipated to be a major priority in Budget 2025, with the government planning to propose a substantial rise in capital expenditure allocation—projected at ₹11 lakh crore—to stimulate economic growth through large-scale developments. Every rupee invested in infrastructure is projected to yield a threefold return on GDP, indicating that this increased capital expenditure could significantly enhance overall economic growth.
Emphasis on Consumption
The budget is expected to prioritize increasing consumption, a key factor for economic growth. Given that private consumption makes up approximately 60% of India's GDP, revitalizing consumer spending is vital, especially considering the recent economic downturns.
Measures to Address Inflation
Increasing prices for food and other essential items have significantly strained household budgets. To address these inflationary challenges more effectively, the budget may require adjustments, possibly by altering import duties on vital products such as edible oils.
Assistance for Middle-Class Households
Finance Minister Nirmala Sitharaman has been called upon to take into account the particular challenges confronting middle-class families, such as elevated EMIs and rising school fees. There is a considerable desire for the budget to offer concrete benefits that enhance the "ease of living" for this group.
Sector-Specific Incentives
The Production-Linked Incentive (PLI) scheme is poised for expansion to include additional sectors such as electronics, textiles, and furniture manufacturing. This initiative aims to boost domestic production and reduce reliance on imports. Industry experts are advocating for incentives in eco-tourism and policies that foster the development of regional tourism hubs.
By simplifying GST regulations for international tourists, India could enhance its appeal as a global travel destination. Moreover, raising the deduction limit for home loan interest payments would not only make housing more accessible but also stimulate demand in the real estate market.
Furthermore, providing budgetary support for renewable energy initiatives, such as solar panel manufacturing and the development of EV infrastructure, will expedite India’s transition towards sustainable energy solutions.
Challenges in Implementation
Although these measures would certainly provide advantages for the middle class, governments need to find a balance between delivering relief and upholding fiscal responsibility. Excessive spending may lead to increased fiscal deficits, while insufficient measures might fail to effectively tackle the issues at hand.
With Budget 2025 on the horizon, the middle class is tentatively hopeful for possible tax relief and initiatives designed to ease the financial burden stemming from escalating living costs. Various stakeholders are pushing for substantial reforms that could boost disposable income and drive economic growth through higher consumption.
FAQs
Q. How might the proposed tax slab expansions impact individual taxpayers?
A. The proposed expansions in tax slabs under the new tax regime are set to significantly impact individual taxpayers in various ways like increased income thresholds, reduced tax rates, simplification of tax structure, shift in investment behaviour etc.
Q. How might the new tax regime changes affect the overall tax burden on middle-class individuals?
A. The changes in the new tax regime are poised to significantly affect the overall tax burden on middle-class individuals in India like increased basic exemption limit, revised tax slabs, increase in standard deduction, tax rebates for lower incomes etc.
Q. Are luxury goods and services likely to see GST changes?
A. Luxury goods are unlikely to experience rate reductions, as the elevated GST on these items helps generate revenue and discourages discretionary spending. The emphasis is expected to be on reducing taxes on essential items.
Q. Will education and healthcare services see GST relief?
A. Although core education and healthcare services are currently exempt from GST, there is a possibility that Budget 2025 could lower or completely remove GST on associated services such as coaching classes, online educational resources, diagnostic services, and hospital consumables, in an effort to ease the financial strain on households
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