Union Budget 2025: A Mixed Bag

The Union Budget 2025 has brought a major boost for taxpayers. In a move aimed at providing relief to the middle class, the nil tax slab has been increased from ₹7 lakh to ₹12 lakh excluding income liable for special rates of income tax such as capital gains, significantly reducing the tax burden.

It was a long-awaited step towards easing financial pressure on individuals. For years, the middle class has been waiting to see whether they get real relief. The 30% slab applies only above ₹24 lakhs, it’s a serious relief.

The rationalisation of TDS and TCS rates and various compliance glitches are welcome. 5-year tax relief extension for start-ups and special tax benefits for IFSC Global units are praiseworthy. With the rise in subsidized credit to farmers, the agricultural sector is set to benefit greatly from the Budget provisions.

The focus on MSME, consumption, big boosts for innovation, sustainability, green transition, ease of doing business, healthcare, real estate, digital transformation, asset monetisation, education and addressing the Gig economy issues are positive for economic growth.

The ugly side of the Budget is the Section 87A rebate was removed for special rate taxation which implies capital gains will now be truly charged at flat rates irrespective of your tax bracket.

Moreover, import duties on luxury goods and electronics have been increased. Unfortunately, the Budget did not talk about around 10 crore investors. They will keep paying STT, LTCG, STCG and other fees. Moreover, they have to bear higher compliance costs.

The Budget has no vision for jobs or increasing the wages of 90% of Indians who earn less than ₹25,000 monthly. The capex allocation stands at ₹11.21 lakh crore, aligning with market expectations as it increases from ₹10.2 lakh crore.

However, the government’s modest increase in capex is below expectations. The government’s focus had been on infrastructure and capex, but political compulsions and freebie politics seem to have taken priority. With such a modest increase, railways, defence, and engineering sectors are likely to take a hit. The focus on the railway, defence and finance sectors is not exciting. This may permit the rupee to go down more. Moreover, excessive emphasis on the State of Bihar, especially with elections looming is not welcome.

Overall, the Budget smells good; the taste is to be tested.