What Union Budget 2025 means for individuals and businesses

As India steps into 2025, all eyes are on the Union Budget, a pivotal policy instrument that shapes the nation’s economic landscape. Beyond being an annual fiscal exercise, the budget is a strategic blueprint that reflects the government’s priorities for growth, fiscal management and investment stimulation. Taxation policies, particularly, are expected to take centre stage, given their critical role in driving economic momentum. Below are the potential tax reforms and their implications for individuals and businesses:

2. Direct Taxes: Relief or Redistribution?

• Increase in the basic exemption limit for personal income tax from ₹5 lakh to ₹3 lakh or ₹3.5 lakh.

  • Potential impact: Increasing the exemption limit could result in an additional ₹10,000-20,000 disposable income annually for taxpayers in lower brackets, potentially injecting ₹30,000-50,000 crore into consumer markets.

• Possible tweaks to tax slabs or reduction in the highest tax rate of 30 per cent currently to 25 per cent

  • Potential Impact: A reduction in the highest tax rate could save high-income earners ₹50,000-1,00,000 annually, incentivizing investment and consumption among affluent households.

• Expansion of incentives for new manufacturing units to other sectors like services or MSMEs (Margin Money subsidy ranges from 15 per cent to 35 per cent of project cost for projects up to Rs50 lakh in manufacturing sector and Rs20 lakh in the service sector)

  • Potential impact: Incentives could lead to a 10-15 per cent growth in MSME output, translating to an increase in employment by 5-8 million jobs over 3-5 years.

2. Indirect taxes: GST reforms ahead

• Simplification of GST slabs could reduce compliance costs for businesses by 15-20 per cent while boosting annual GST collections by Rs20,000-30,000 crore. The current GST structure comprises four slabs: 5 per cent, 12 per cent, 18 per cent and 28 per cent. The government is considering consolidating these into three slabs—possibly 8 per cent or 10%, 18%, and 28%. This simplification aims to streamline compliance processes, reduce classification disputes, and improve business efficiency. Additionally, merging the lower slabs could enhance tax revenues while reducing costs for businesses in sectors such as retail, FMCG and logistics.

  • Potential impact: Streamlined rates could reduce compliance costs for businesses by 15-20 per cent and improve Centre’s GST collections by Rs20,000-30,000 crore annually.

• Benefits from lower corporate tax rates and sector-specific incentives, enabling reinvestment and competitiveness.

  • Potential impact: Lower rates could free up Rs30,000-40,000 crore annually for reinvestment, potentially driving GDP growth by 0.5-1 per cent.

2. Capital gains tax: A paradigm shift?

• As of now, the government is not considering any structural changes to the capital gains tax regime in the upcoming 2025 Union Budget. Reports indicate that the existing tax rates for both long-term and short-term capital gains are expected to remain unchanged.

3. In the previous budget, the government had increased the tax rates on capital gains. Specifically, the tax rate on short-term capital gains was raised from 15% to 20%, and the rate on long-term capital gains was increased from 10 per cent to 12.5 per cent.

4. Given these recent adjustments, it is anticipated that the government will maintain the current capital gains tax structure in the 2025 budget.

• Potential impact: The government’s decision to maintain the current capital gains tax rates reflects an effort to provide stability to the financial markets. Stability in tax rates could also encourage long-term investments, as investors gain confidence in a predictable taxation regime.

The author is Founder and MD, Equentis Wealth Advisory Services. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.

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