Budget 2025: A Game-Changer for the Middle Class and a Bold Leap Toward India’s Empowered Future – Key Wins and Challenges Ahead
Budget 2025 invokes mixed reactions. It delivers a big win for the middle class with tax relief along with driving growth through infrastructure, manufacturing, and inclusive development. Key sectors like agriculture, fisheries, healthcare, and renewable energy get a strong push.
However, the insufficient allocation for capital expenditure could strain industrial, infrastructure, capital goods, and engineering sectors, while the absence of any corporate tax reforms raises concerns about future business competitiveness.
The key pillars of Budget 2025 are:
1. Empowering the Middle Class
2. Infrastructure Development
3. Boosting Domestic Manufacturing
4. Inclusive Growth
From a corporate India perspective, below are some key observations made:
Tax Rate: The significant jump for NIL tax to Rs.12,00,000 (under New Regime) is a bold and welcome move.
Silence on corporate taxes: Budget 2025-26 offers significant relief in personal income taxes and investment incentives, aiming to boost disposable income and economic growth. However, the absence of any corporate tax changes could signal stability but may miss an opportunity to stimulate corporate investment and strengthen India’s global competitiveness in the long run.
Cess and Surcharge: It is time the various cess and surcharges must be discontinued else the benefit of 30% (as the maximum tax rate) in a real sense is lost since the actual tax can go up to 35% to 40%.
Parity in rates of long-term capital gain on transfer of securities by non-resident: The government has proposed raising the tax rate on long-term capital gains for non-residents from 10% to 12.5%. This amendment aims to standardize the taxation on all securities, excluding those covered under Section 112A, ensuring consistency across the board. As a result, FIIs and other foreign investors may face a slight increase in their tax liabilities.
Amendment of definition of ‘capital asset’: In order to bring clarity on the chargeability of income arising out of the transfer of capital assets being securities held by an investment fund as referred to in section 115UB of the Act, the definition of capital asset is proposed to be amended.
Litigation: The expansion of safe harbor rules will provide greater certainty in international transactions and reduce tax litigation. Based on a deeper review of the fine print of the rules, businesses can expect relief through the possibility of minimizing disputes, particularly MNCs. This would be especially important for businesses within sectors like IT, ITeS, KPO, software development, R&D services, financial transactions (corporate guarantees, loans), and manufacturing. These measures can will play a pivotal role in expanding India’s footprint in globally.
Ease of doing business through Financial Reforms: Budget 2025 tackles corporate hurdles with streamlined regulations, faster merger approvals, and a revamped KYC registry. Key reforms include an Investment Friendliness Index of states, a Financial Stability and Development Council (FSDC) review of financial rules, and the Jan Vishwas Bill 2.0 to ease compliance. These measures boost transparency, reduce red tape, and enhance business competitiveness.
Start-ups: Budget 2025 provides a significant boost to the Indian startup ecosystem with an INR 10,000 crore fund of funds, an INR 1,000 crore space VC fund, and an INR 20,000 crore deep-tech fund of funds to accelerate innovation and job creation. These initiatives can help tackle funding gaps, fuel innovation, and strengthen India’s startup ecosystem. We can expect growth in space, deep tech, renewable energy, aerospace, women-led, and export-focused startups.
MSMEs: MSMEs face challenges such as limited credit access, technological gaps, and scaling issues. The government has addressed these by increasing credit cover, offering term loans for women and SC/ST entrepreneurs, launching a Make in India Manufacturing Mission, and supporting deep-tech startups with a Fund of Funds. These initiatives will enhance credit access, foster tech upgrades, improve competitiveness, and ensure sustainable growth, driving job creation and long-term MSME development.
Manufacturing: Duty exemptions on critical minerals, lithium-ion battery components, and electronic goods can see a strengthening of domestic production. The Manufacturing Mission can help in ease of business, skilling, MSME expansion, and technology adoption, while a presumptive tax regime for foreign investors will ensure stability in electronics manufacturing. Cleantech initiatives for EV batteries, solar PV cells, and wind turbines will accelerate sustainable manufacturing. These policies can support in positioning India as a global manufacturing hub, fostering industrial growth, job creation, and technological innovation.
Conclusion:
With a strong focus on prosperity and progress, Budget 2025 aims to lay the foundation for a vibrant, self-reliant India. Its long-term impact will depend on how effectively the government implements these measures and addresses the concerns raised by various stakeholders. It would be prudent to delve deeper into the budget’s fine print for a more nuanced understanding of its potential implications.
– 
Prem Rajani, Managing Partner, Rajani Associates
