GR Budget 2025 Poll: Big Cuts Likely In Tax Rates For Common Man; Experts Seek CAPEX Boost For Viksit Bharat

GR Exclusive Budget 2025 Poll: Finance Minister Nirmala Sitharaman is expected to announce pivotal changes in the new tax regime during her Budget speech on February 1, 2025, to drive lower to middle-class income group, according to a majority of market experts polled by GoodReturns.In. From an additional tax slab of 25% on Rs 15 lakh to Rs 20 lakh income group, to proposal of tax exemption on up to Rs 10 lakh income is on the cards. A hike in the standard deduction limit, coupled with an increase in tax exemption limit on home loan interest rates is further eyed. For the fiscal 2025-26, the government is expected to boost CAPEX to curb the slowdown in the economy.

Sachin Gupta, Chief Rating Officer, CareEdge Ratings, "The budget is likely to focus on Supporting consumption, Boost manufacturing competitiveness to support job creation and tap the demographic potential, Emphasis on agriculture via higher allocation for agri R&D, farmers' welfare and policy reforms, Continued capex emphasis to close India's infrastructure gap in areas like power, and transportation, and Fiscal discipline with focus on reducing the debt-to-GDP ratio".

Along these lines, Shripal Shah, MD & CEO, of Kotak Securities believes that the government should reduce tax rates to increase the purchasing power of the common man.

Shah said, "The upcoming budget holds promise for retail investors, particularly with expectations of tax relief in the lower income slabs. If the government reduces tax rates for smaller taxpayers, it could lead to higher disposable income in the hands of the common man."

As per a poll of 54 market experts conducted by GoodReturns between January 10-25, a total of 27 of them believe that FM's policies and measures likely focus on offering relief to lower-t0-middle class citizens. While a staggering 30 of them voted in expectations of tax cuts in the new tax regime.

"As the economy is gradually shifting towards the new tax regime in a discretionary manner, it becomes imperative to rationalize tax slabs in the absence of major deductions and other incentives. The proposal to introduce an additional tax slab of 25% for income levels between INR 15 lakhs to 20 lakhs will surely provide significant tax relief and increase disposable income. Increased liquidity in the hands of individuals will hold higher potential to spur consumption," said Vimal Nadar, Senior Director of research, Colliers India.

Additionally, Nadar added, that the proposal to exempt income tax up to INR 10 lakhs will surely scale up liquidity in the hands of middle-class salaried individuals.

Currently, the tax rates under the new regime are as follows:

Rs 0 - Rs 3,00,000: 0%,
Rs 3,00,001 and Rs 7,00,000: 5%,
Rs 7,00,001 and Rs 10,00,000: 10%,
Rs 10,00,001 and Rs 12,00,000: 15%,
Rs 12,00,001 and Rs 15,00,000: 20%, and
Rs 15,00,001 and above: 30%.

Moreover, rationalisation of tax deducted at source was also expected. Rony Antony, Partner & Leader, Corporate Tax (South), Tax & Regulatory Services, BDO India said, It appears that the thought process currently is to fix the issues within the current enactment rather than bring up a new one. There are several areas in the current enactments that need a fix. But a few quick fixes that can help taxpayers is the rationalization of TDS obligations. Currently, there are multiple provisions in the TDS sections that are creating issues for taxpayers. Rationalization of rates is one area that can help. Additionally, rationalization of provisions to take care of litigious issues that have emerged could help taxpayers with certainty.

However, when asked whether the government may abolish the old tax regime, the majority of them refused to give an opinion on it. Nonetheless, 4 experts believe that abolishing the old regime will most likely not be a key focus area during Budget 2025. However, one expert pointed out that there is no need to abolish the old tax regime, their popularity has already diminished significantly with a major shift in the new regime.

At present, Indian salaried individuals have the option to pay taxes and seek benefits under the old and new regimes. The new tax regime is a default to consider when filing ITR. However, as per the latest ClearTax data, in the ITR filing for Assessment Year FY24-25, a total of 7.28 crore taxpayers filed their income tax returns under the new regime. This data indicated about 72% of the taxpayers opted for the new tax regime compared to 28% who were still on the old tax regime.

Going ahead, 23 experts believe the government could hike the tax exemption limit to Rs 5 lakh to Rs 7 lakh from the current Rs 2 lakh on home loan interest rates.

Pranay Kumar, Executive Director, Rudrabhishek Enterprises Limited (REPL) said, "The Union Budget 2025 must prioritize sustainable and inclusive housing to address India's growing urban and rural needs. Increased allocations for PMAY and infrastructure projects, particularly in Tier II and III cities, are essential to support affordable and mid-income housing."

Additionally, Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd said, "As we approach the upcoming budget, the real estate sector is optimistic about reforms that can act as growth catalysts and enhance operational efficiency. Revising the current tax exemption limit on housing loans to ₹5 lakhs, in line with rising property prices and construction costs, could provide significant relief to homebuyers. This step would directly support millions of aspiring homeowners and boost demand across the sector.

Kumar added the real estate sector seeks the home loan interest tax rebate to increase from Rs 2 lakhs to Rs 5 lakhs, the house value cap for PMAY benefits to rise to Rs 50 lakh in urban areas from Rs 35 lakhs, and rental income tax exemptions to be enhanced to Rs 3 lakhs for properties priced up to ₹50 lakhs. Extending the timeline for capital gains exemption from 3 years to 5 years is also considered critical for driving investments.

Furthermore, 11 experts predict a hike in the standard deduction limit to Rs 1 lakh from the current Rs 75,000. Rahul Bajoria, India & ASEAN Economist at BofAS India said" To strike a balance between simplicity and tax saving benefits, the government could look for tweaking the standard deduction or the slab rates to improve disposable income, but we believe the implementation of these new rules could be pushed for the next fiscal year."

Lastly, about 12 of the total experts polled, predict the government to push the CAPEX target for FY26 higher by 10-12%. However, out of this, two economists predict higher than 12% CAPEX.

BofA's expert said, "The upcoming budget may see another push to rekindle capital spending by setting FY26 target at Rs 12trn, which historically has had a higher development multiplier, while the government pushes the states and its bureaucracy for the execution of higher capital expenditure limits."

Also, Sonal Badhan, Economist, Bank of Baroda said, "To move closer to realising the dream of 'Viksit Bharat', Union Government will continue to prioritize capex to push investments and improve the quality of expenditure."

Thus, the Bank of Baroda's economist predicts a ~11% jump (Rs 10.0 lakh crore revised estimated in FY25) in capex to Rs 11.1 lakh crore in FY26. Revenue expenditure on the other hand is estimated to increase less substantially to Rs 38.7 lakh crore from an estimated Rs 36.7 lakh crore in FY25. The increase will be driven by higher allocations for PM-Awas Yojna and MGNREGA.

The upcoming Budget will be the eighth budget by Finance Minister Nirmala Sitharaman. This time, the Budget will be announced on Saturday, February 1, 2025.