Budget 2025 Expectations: Key Changes and Reforms to Watch Out For

Key Changes and Reforms to Watch Out For

The upcoming Union Budget 2025 is expected to introduce significant reforms aimed at boosting economic growth, enhancing compliance, and simplifying taxation. Here are the key expectations for Budget 2025:

1. Income Tax Reforms

• Increased Basic Exemption Limit: The current basic exemption limit of ₹2.5 lakh under the old tax regime may be increased to ₹3 lakh or higher to provide relief to middle-class taxpayers.
• Revised Tax Slabs: The government may rationalize tax slabs under the new tax regime to encourage wider adoption.
• Standard Deduction Increase: There is speculation about a possible increase in the standard deduction limit from ₹50,000 to ₹75,000 to benefit salaried individuals.
• Higher 80C Limit: The ₹1.5 lakh limit for deductions under Section 80C may be increased to ₹2 lakh or more to boost savings and investments.

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2. GST Rate Rationalization

• Reduced Tax Slabs: The government is considering merging the 12% and 18% GST slabs into a single rate to simplify the structure.
• Lower GST on Essential Items: There are expectations that GST rates on commonly used products like packaged food items and personal care products may be reduced.
• Input Tax Credit (ITC) Simplification: To reduce disputes, a streamlined ITC process may be introduced to ease compliance for businesses.

3. Corporate Tax Reforms

• Incentives for Startups: Startups may receive extended tax holidays or relaxed compliance norms to support growth.
• Lower MSME Tax Rates: Small businesses may see reduced corporate tax rates or simplified reporting requirements.

4. Capital Gains Tax Changes

• Restoration of Indexation Benefit: For property sales and long-term capital gains, indexation benefits may be reinstated to reduce tax burdens on property investors.
• Unified Capital Gains Structure: The government may introduce a uniform tax rate for all types of capital assets to simplify calculations.

5. Boosting Consumption and Investment

• Increased Infrastructure Spending: The Budget is expected to prioritize higher capital expenditure (capex) to stimulate economic growth.
• Incentives for Real Estate: Additional tax benefits for home buyers or affordable housing schemes may be announced.
• Support for Manufacturing Sector: PLI (Production Linked Incentive) schemes may be expanded to more sectors to boost industrial growth.

6. Digital Economy & FinTech Support

• Digital Payment Incentives: To promote cashless transactions, incentives like cashback, tax rebates, or reduced GST rates for digital transactions may be announced.
• Crypto Tax Clarifications: Clearer regulations on crypto gains taxation are expected to provide clarity to investors and businesses.

7. Compliance and Procedural Improvements

• Simplified GST Portal: Improved user experience with faster processing and better reconciliation tools may be introduced.
• Easier ITR Filing Process: The Income Tax Department may enhance the filing portal to reduce errors and improve taxpayer convenience.

8. Social Welfare and Subsidy Enhancements

• Increased PMAY Benefits: Higher allocation to the Pradhan Mantri Awas Yojana (PMAY) may be introduced to boost affordable housing.
• Enhanced Healthcare Schemes: Schemes like Ayushman Bharat may receive higher funding to improve healthcare accessibility.

Conclusion

Budget 2025 is expected to strike a balance between encouraging growth and providing relief to taxpayers. The proposed reforms aim to simplify compliance, promote investment, and support various sectors of the economy. Stay tuned for detailed insights post-Budget announcement to understand how these changes impact you and your business.

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