Finance Minister Nirmala Sitharaman presented the 2025 Budget, focusing on relief for the middle-class and strategic reforms aimed at economic growth. While hailed for tax relief, it faces opposition criticism over its long-term impact and missed opportunities. A report by CA Sumiti Gaba
Union Finance Minister Nirmala Sitharaman unveiled the progressive Budget 2025 on February 1, 2025, focusing on the middle class, showcasing the government’s strategic focus on fiscal consolidation, economic growth, and comprehensive structural reforms. However, the budget was criticized by the opposition parties. The 2025 Budget, introduced by the Modi 3.0 government, is an inclusive plan designed to unlock India’s full potential and propel the nation towards becoming a “Viksit Bharat.” It envisions a nation free from poverty, with 100 percent access to quality education, meaningful employment opportunities, high-quality healthcare, a women labour force participation rate reaching 70 percent, and the empowerment of farmers.
The Budget emphasizes accelerating economic growth, advancing infrastructure, fostering inclusive development, strengthening private sector investments, boosting household confidence, and enhancing the spending power of the middle class to drive consumption. The Budget strategically focuses on four key engines of growth—agriculture, MSMEs, investment and exports—while also enacting transformative reforms across six critical sectors, including taxation, the power sector, urban development, mining, the financial sector, and regulatory reforms.
The Finance Minister announced the introduction of a new Income Tax Bill under Budget 2025, aimed at simplifying the existing Income Tax Act. The proposed bill intends to reduce tax disputes and offer greater certainty to taxpayers, paving the way for a more transparent and predictable tax environment.
A significant focus of the Budget is on providing relief to middle-class taxpayers. The finance minister proposed a substantial enhancement in the tax rebate under the New Tax Regime. Taxpayers earning up to Rs 12 lakh (Rs 12.75 lakh for salaried individuals) will now be exempt from paying any income tax. This move is expected to increase disposable income, which will likely stimulate household consumption, savings, and investment, providing a boost to the economy. Additionally, the Budget brings in a rationalization of the tax slabs under the new tax regime. The basic tax slab has been raised from Rs 3 lakh to Rs 4 lakh, while the peak tax rate of 30% will now be applicable to incomes above Rs 24 lakh, up from the previous threshold of Rs 15 lakh. These revisions are expected to create more liquidity and promote economic activity. The budget also seeks to simplify the tax compliance process. A number of measures were proposed to rationalize the TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) regime, including an increase in the threshold limits for TDS applicability across various categories of transactions. Additionally, the decriminalization of TCS defaults and the omission of TCS on the sale of specified goods are set to streamline the tax system.
