The Indian government has introduced major tax reforms in the Union Budget 2025, aimed at boosting the economy and providing relief to the middle class.
1. Income Tax Exemption Increased
- The income tax exemption limit has been raised from ₹7 lakh to ₹12 lakh per year.
- This means individuals earning up to ₹12 lakh annually will not have to pay income tax.
- No Income payable on income of up to Rs 12,00,000 in the new tax regime
Here is how the new (proposed) tax regime will now look like:
Zero to Rs 4,00,000- No Tax
Rs 4,00,000 to Rs 8,00,000—5%
Rs 8,00,0001 to Rs 12,00,000—10%
Rs 12,00,001 to Rs16 lakh–15%
Rs 16,00,001 to Rs 20 lakh–20%
Rs 20,00,001 to Rs 24 lakh– 25%
Above 24 lakh—30% - The government aims to increase disposable income, encouraging consumer spending in sectors like real estate, automobiles, and FMCG.
2. Economic Growth and Investments
- A new high-yield crop program will benefit 1.7 crore farmers to enhance agricultural output.
- The government plans to formalize gig economy workers, providing them with better healthcare and social benefits.
- Major investments are planned in startups, infrastructure, tourism, and energy, including a 100 GW Nuclear Energy Mission by 2047.
3. Market & Growth Expectations
- Analysts predict the tax cuts could increase demand in key sectors, leading to overall economic growth.
- However, some experts believe capital investment in infrastructure may have a longer-term impact compared to tax relief.
4. Fiscal Deficit & GDP Projections
- The government aims to reduce the fiscal deficit to 4.4% of GDP.
- Economic growth is projected between 6.3% and 6.8%, but youth unemployment remains a challenge.
This budget aims to balance economic stimulus with fiscal responsibility, focusing on tax relief, infrastructure growth, and job creation.