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Budget 2025 Expectations: Tax relief, capex push, and key announcements await FM Sitharaman’s speech on Feb 1

| @indiablooms | Jan 31, 2025, at 12:30 pm

New Delhi: Finance Minister Nirmala Sitharaman will present Union Budget 2025, which will be the second full budget of Narendra Modi-led NDA government after assuming power in June 2024.

Sitharaman is expected to present the Budget at 11 am on Saturday, February 1, 2025, marking her eighth consecutive presentation of a Union Budget.

This also makes her the first Finance Minister to present eight consecutive Union Budgets.  The previous record was held by Morarji Desai, who presented six Union Budgets in a row.

In her eighth Budget speech on 1 February 2025, Finance Minister Nirmala Sitharaman is expected to unveil key measures for industries and taxpayers, including income tax relief, increased capital expenditure, and GST rationalisation, all aimed at driving economic growth. 

The Budget is also expected to prioritise the agriculture sector, with potential tax reforms under consideration, such as phasing out the old tax regime and exempting individuals earning up to Rs10 lakh per annum from income tax, though these changes remain unconfirmed. 

Striking a balance between fiscal consolidation and economic growth is likely to be a central focus, especially amid rising inflation.
Meanwhile, the country’s stock exchanges announced they will remain open on Saturday, February 1, 2025 due to the Union Budget 2025-26. Usually, the Indian stock market is closed on Saturdays and Sundays.

In a circular, the exchanges said: “On account of the presentation of the Union Budget, Exchange shall be conducting a live trading session on February 1, 2025."

Budget 2025 expectations

DSP Mutual Fund

We do not expect govt to change its fiscal policy stance next year. The elections are too far away, and while the GDP has slowed it has not crashed. Also, the recent GDP upticks and slowdown have been largely due to govt. spending. We think govt will avoid supporting GDP growth by govt spending.

This is also evidenced by govt intentionally spending less, despite its impact on GDP.

If so, government cash drawdown would not be significant in FY26 budget (govt does not usually go in WMA at year end).
In FY25 govt received a bumper dividend from RBI.

The govt could have used this cash surplus to lower G-sec borrowing. But govt lowered (rightly so) T-bill borrowing and bought back FY26 redeeming bonds.

This ensured that the cash surplus of this year was used to lower redemptions in next year – thus improving FY26 fiscal position.
We expect zero cash drawdown in FY26, and this would mean a fiscal deficit of 4.8% in FY25.

Dhruv Chopra, Managing Partner, Dewan P.N. Chopra & Co.

Income Tax

The upcoming Budget is expected to provide tax relief while balancing the government’s need to maintain revenue.

Taxpayers are hoping for an enhanced rebate for lower-income individuals and an increase in the basic exemption limit under both tax regimes to help offset inflation.

To help conserve taxpayers' resources, the turnover limit for taxation on a presumptive basis under Sections 44AD (for businesses) and 44ADA (for professionals) should be increased.

Homebuyers may also benefit from higher interest deduction limits on housing loans under Section 24(b). The deduction should be allowed for the full interest paid, at least for one house, or the current limit of Rs. 2 lakh should be increased to Rs. 3 lakh.

Faceless assessments and appeals are highly appreciated. However, there is a significant backlog in the completion of faceless appeal disposals, which now needs to be expedited in a time-bound manner.

The TDS process for non-resident property sellers, which is currently cumbersome, is also expected to be simplified.

Capital Gains Tax

A key expectation is that the exemption limit for LTCG on equities, currently capped at ₹1.25 lakh, may be increased to ₹2 lakh or higher, allowing investors to retain more of their returns.

The new grandfathering rule in capital gains, which allows indexation benefits to resident individuals/HUF on the sale of residential property, needs to be rationalized.

It should also be extended to other categories of assessments, such as non-residents, corporates, and other types of assets.

There is growing anticipation for a review of Sections 54 and 54F, which provide exemptions for reinvestment of capital gains in residential properties, potentially expanding eligibility and increasing the ceiling for investment.

To address the significant housing shortage in the country, the restriction on investing the sale proceeds in acquiring two residential houses should be removed, and the scope should be broadened to exempt capital gains tax if the sale proceeds are invested in creating housing stock, without any limitation on the number of units for individuals and HUF.

Additionally, for claiming deductions under Section 54, the minimum holding period of the new asset should be reduced from 3 years to 2 years, in line with the minimum period for an asset to be treated as a long-term capital asset under Section 2(42A).

Currently, exemptions under Sections 54 and 54F are limited to residential properties. These should be extended to business properties, as selling and reinvesting in business assets aims to support business growth, not generate capital gains. Expanding these exemptions would boost economic activity.

Additionally, the threshold limit of Rs. 50 lakh under Section 54EC should be substantially enhanced to Rs. 2 crore, considering the limit was fixed in 2007. These funds are used for infrastructure development and contribute to societal welfare.

These changes, along with a possible reduction in Short-Term Capital Gains (STCG) tax, could create a more investor-friendly environment, encouraging both retail and foreign investments and making India’s tax regime more competitive on the global stage.

Niranjan Govindekar, Partner, Corporate Tax, Tax & Regulatory Services, BDO India

Budget 2024 made big changes to the capital gains tax framework, offering both challenges and benefits for investors.

Some provisions need a relook. For instance, to streamline the capital gains tax structure by aligning tax rates/ period of holding across various sub-asset classes, for instance, treating international equities the same as domestic equities, debt funds the same as gold funds, and gold funds the same as gold ETFs.

The hike in short-term rates from 15% to 20% and in long-term rates from 10% to 12.5% has raised investor tax liabilities significantly.

Since the LTCG tax on securities is now on par with other assets, the Securities Transaction Tax (STT) should be abolished.

Budget 2024 unexpectedly removed the indexation benefit for all long-term investments in debt funds. It is expected that all investments in debt funds made up to 31 March 2023, would qualify for the indexation benefit as per earlier provisions.

Tax implications on the buyback of shares - under the amended provisions, the entire consideration received is treated as dividends and taxed in the hands of the shareholders. It is recommended that the government amend the law to allow the cost of the acquisition of shares as a reduction and tax only the net amount as a dividend.

Captain Nikunj Parashar, founder of Sagar Defence Engineering

"We anticipate a key focus on enhancing military modernization and boosting Aatmanirbharta (self-reliance) in defence, a critical area for national security. As the nation continues to invest in its defence sector, there is anticipation for increased allocations for innovation and research to support advanced technologies, fostering a robust defense manufacturing ecosystem and new initiatives contributing to the sector. We look forward to the 2025 Budget aligning with the nation’s goals of strengthening its defence capabilities while fostering economic growth and innovation."

Dr Kapil Garg, MD, Asian Energy Services Ltd

The oil and gas sector has gained significant momentum in recent months, and sustaining this growth requires targeted policymaking in the Union Budget 2025. A key step would be passing the Oilfield (Regulation and Development) Amendment Bill in the Lok Sabha, which could streamline approvals, simplify arbitration, and boost investment, particularly in unconventional hydrocarbons like shale and coalbed methane.

Strengthening public-private collaboration is also crucial. Expanding initiatives like OLAP, DSF, and PEC can enhance domestic production and reduce import dependency, with the ONGC-BP partnership in Mumbai High serving as a model for technological innovation and efficiency.

Rationalizing gas pricing formulas to reduce distortions and linking prices to crude oil benchmarks would improve access to cleaner fuel. Additionally, including oil and gas—especially natural gas—under GST would simplify taxation and enhance competitiveness.

Investment in midstream infrastructure, particularly pipelines and gas terminals, is vital. With India’s pipeline network at around 20,000 km, expansion is necessary to meet future demand, ease supply bottlenecks, and unlock production in newly explored basins.

Amit Sharma - MD & CEO, TATA Consulting Engineers

Tata Consulting Engineers (TCE) views the FY 2026 Budget as a key opportunity to advance India's infrastructure, energy transition, and technological innovation. We expect continued capital investment in water supply, metro systems, and climate-resilient infrastructure, along with support for Smart Cities, Transit-Oriented Development, and affordable housing.

A stronger push for renewable energy, including offshore wind, green hydrogen, and small modular reactors (SMRs), coupled with grid expansion, viability gap funding, and single-window approvals, will accelerate the energy transition. Strengthening nuclear energy through Bharat Small Reactors (BSR) and a contingency reserve for disaster management will bolster long-term energy security.

Modernising ports, promoting shipbuilding, and developing industrial clusters for semiconductors, EV batteries, and clean technologies will boost self-reliance and export competitiveness. Coastal industrialisation and inland logistics hubs will further drive efficiency and reduce costs. Smart infrastructure, digital twins, AI-driven mining, and integrated water management will be crucial for sustainability.

Skill development, gender diversity in engineering, and incentives for public-private partnerships will help bridge workforce gaps. Enhanced climate finance, including green bonds, R&D funding for energy storage, and low-interest loans for critical projects, will support India's journey towards decarbonisation, innovation, and global leadership in engineering and consultancy.

Piyush Arora, MD & CEO of Skoda Auto Volkswagen India  

A long-term vision for favorable tax structure catering to different automotive technologies would certainly benefit the industry.

The product development cycles are quite lengthy and require substantial investment which needs to be considered. Simplifying the GST structure for the different classes of vehicles & components is another ask.

The Government‘s PLI scheme facilitates in boosting investments in domestic manufacturing. Budget allocation on facilitating the EV ecosystem like charging infrastructure will give further lift to sustainable mobility.  

Allocating a budget for better and safe road infrastructure will facilitate the growth of the auto industry.

There are early signs of auto industry growth slowing down. Therefore, budgetary initiatives to boost disposable income of consumers is necessary to support robust growth.

Jindal Stainless, MD, Abhyuday Jindal

To boost stainless steel demand, we encourage the government to continue prioritising infrastructure spending, with a strong focus on developing mobility infrastructure like inland waterways, rail infrastructure, and coastal shipping.

Securing access to key raw materials is another pressing need.

We recommend reducing import duties to zero on critical raw materials unavailable in India, such as molybdenum ore, and continuing with zero duties on pure nickel, ferro-nickel, stainless steel scrap, and mild steel scrap.

To promote sustainability, we propose making life cycle costing a mandatory criterion for material selection in public procurement.

To safeguard the domestic industry from the distortion caused by low-priced imports, we urge the government to raise the basic customs duty on stainless steel products to 15% for all non-Free Trade Agreement countries.

These steps will further strengthen the domestic stainless steel sector and position it as a vital driver of India’s Viksit Bharat@2047 vision.

Arun Kumar Nayyar, MD & CEO of NeoGrowth

The MSME sector plays a crucial role in India’s economy, and with the Union Budget 2025 approaching, targeted policies are needed to improve access to capital, simplify operations, and drive technology adoption.

Tax incentives for technology upgrades and expanded credit access for underserved enterprises will be key to strengthening the MSME ecosystem. Increased allocations for digital infrastructure and innovation can further enhance credit accessibility and support sustainable growth.

With over 50 million businesses contributing nearly one-third of India’s GVA and employing over 216 million people, the sector is poised for expansion—77% of MSMEs are actively planning to grow, according to the NeoInsights report.

To facilitate this growth, strengthening Skill India initiatives can equip the workforce with essential expertise, helping MSMEs navigate challenges and drive substantial economic progress.

Pulkit Khurana, Co-Founder Battery Smart

In 2024 EV sales in India crossed 14.08 lakh units achieving a market penetration rate of 5.59%, up from 4.44% in the previous year. As we look ahead to the upcoming budget, it’s important to address the GST disparity that’s limiting the full potential of EV adoption.

Currently, EVs with lithium-ion batteries attract a GST of 5%, while standalone batteries face a much higher rate of 18%. This disparity places a significant financial burden on commercial EV drivers, particularly electric three wheelers, and gig workers, who are at the heart of India’s EV ecosystem.

We hope policymakers will take steps to align the GST on standalone batteries with that of EVs at 5%.

This adjustment would not only reduce costs for commercial drivers but also make EVs more accessible and financially viable, ensuring the benefits of clean mobility reach the grassroots and drive widespread adoption.

Umesh Revankar, Executive Vice Chairman, Shriram Finance Ltd

We expect the Union Budget to prioritise infrastructure spending, benefiting our lending segments, including small businesses, contractors, and transporters. This focus will drive demand for steel, cement, and bulk materials, boosting vehicle finance and related sectors. Increased infrastructure investment will also spur economic activity and job creation, particularly in semi-urban and rural areas. With higher government spending, we anticipate double-digit year-on-year growth in new vehicle sales in Q4.

Sanjay Choudhari, Chairman, SBL Energy

The industrial explosives sector is crucial to India’s mining and infrastructure growth. Ahead of Union Budget 2025, we hope for strong investments in railways, highways, and mining, which directly drive demand.

Rising raw material costs, especially ammonium nitrate, remain a challenge. Rationalising import duties or introducing tax incentives on key inputs would enhance competitiveness.

To align with India’s sustainability goals, targeted R&D incentives for eco-friendly explosives are essential. Additionally, simplifying regulatory frameworks around licensing and safety will create a more conducive business environment, enabling the sector to drive industrial and infrastructure growth.

Suresh Kumar R, MD, Allcargo Terminals Ltd

We anticipate a continued focus on capital expenditure for physical and digital infrastructure, along with port development to achieve 10,000 MTPA capacity by 2047.

Investments in transport connectivity, rail corridors, EV truck adoption incentives, and fiscal support for EV infrastructure will drive sustainable multimodal connectivity.

To boost EXIM trade, the budget should leverage existing port assets, allow air cargo handling by CFS-ICDs, and exempt containerized agri-product storage from GST.

Sustaining export promotion incentives and developing export hubs will enhance India's manufacturing competitiveness and attract investments, strengthening exports.

Saahil Goel, MD & CEO, Shiprocket

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

Strengthened export incentives and skill development programs are also to help MSMEs penetrate international markets and address workforce challenges.

With focused measures, the budget is expected to create a conducive ecosystem for MSMEs to thrive and sustain their role in India's economic trajectory.

The eCommerce market is projected to grow from US$ 123 billion in 2024 to US$ 292.3 billion in 2028. Future growth for both (MSME and eCommerce) closely depends on government support. 

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.

To ensure superior service delivery to consumers by eCommerce platforms the government should encourage investment in last-mile delivery solutions, particularly in rural and underserved areas.

Vivek Lohia, MD, Jupiter Wagons Ltd

As the Union Budget 2025-26 approaches, a multi-pronged strategy is essential to strengthen freight operations. Expanding Dedicated Freight Corridors (DFCs), including the 'Central India to Coast via DFC,' will enhance efficiency and global competitiveness. Increasing freight train speeds to 50 KMPH, deploying 12,000 HP electric locomotives, and extending train lengths will be key to boosting freight loading.

Capital expenditure should focus on modernizing infrastructure, urban rail projects, RTIS deployment, and separating parcel traffic from passenger operations. Dedicated Kisan Rails will further strengthen agricultural supply chains.

Incentivizing domestic manufacturing under 'Make in India' by expanding PLI schemes for rail components and providing export incentives will drive innovation. Encouraging public-private partnerships, financing capacity expansion, and investing in skill development will support long-term growth.

With Indian Railways advancing toward Net Zero Carbon status, this budget can be a transformative step toward economic growth and sustainability.

The upcoming budget is expected to accelerate India's self-reliance in defence and aerospace through increased allocations for innovation, MSME support, and streamlined procurement.

Amey Belorkar, Fund Manager - Defence and Aerospace Venture Fund, IDBI Capital Markets & Securities Ltd

Key focus areas may include unmanned aerial systems, cyber defence, advanced materials, and space technology, fostering private sector participation.

A projected 15-20% growth in the defence sector is anticipated, driven by incentives for indigenous manufacturing, Defence Industrial Corridors, and PLIs.

A new R&D scheme for deep-tech areas like AI, robotics, and advanced weapon systems is also expected.

The budget may prioritise modernising the armed forces, enhancing defence infrastructure, and boosting investment in space tech.

Strategic support will be crucial in achieving technological advancements and defence autonomy.

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