Indian Budget 2025: Date, Expectations, Income Tax Changes, and Focus Areas

The Union Budget for the fiscal year 2025-26 is scheduled to be presented by Finance Minister Nirmala Sitharaman on February 1, 2025. This budget comes at a critical time as India aims to bolster economic growth amidst global uncertainties and domestic challenges.

Economic Growth Projections

The government plans to project a nominal economic growth rate of 10.3% to 10.5% for the upcoming fiscal year, an increase from the 9.7% forecast for the current year ending in March. This growth is expected to be driven by government capital spending, agriculture, and an increase in exports. [citation_attribution:5‡Reuters](https://www.reuters.com/world/india/india-forecast-stronger-growth-next-year-while-sticking-fiscal-deficit-goals-2025-01-14)

Fiscal Deficit Reduction

Aiming to reduce the fiscal deficit to below 4.5% of GDP for the next financial year, down from the anticipated 4.9% in the current year. This indicates a commitment to fiscal consolidation while promoting economic growth. [citation_attribution:4‡Reuters](https://www.reuters.com/world/india/india-forecast-stronger-growth-next-year-while-sticking-fiscal-deficit-goals-2025-01-14/)

Income Tax Reforms

The budget is expected to introduce personal income tax cuts to boost demand among salary earners affected by weak wage growth and inflation. Proposals include increasing the basic exemption limit under the new tax regime from ₹3 lakh to ₹5 lakh and raising the Section 80C deduction limit from ₹1.5 lakh to ₹2 lakh. [citation_attribution:3‡ClearTax](https://cleartax.in/s/budget-2025-expectations-income-tax)

Industry Incentives

The Confederation of Indian Industry (CII) recommends reducing fuel and income taxes, increasing benefits under state-backed schemes, raising farmer cash handouts, and offering consumption vouchers to low-income groups. Additionally, the Indian Cellular and Electronics Association (ICEA) advocates for cutting duties on electronic components and supporting domestic manufacturing with financial aid. [citation_attribution:2‡Reuters](https://www.reuters.com/world/india/what-does-indian-industry-want-februarys-budget-2025-01-14)

Healthcare Sector

Industry leaders have urged the government to exempt cancer and rare-disease drugs from taxes to reduce the financial burden on patients. There is also a call for reducing import duties on advanced medical equipment and materials necessary for developing precision medicines. [citation_attribution:1‡Reuters](https://www.reuters.com/world/india/indias-biocon-urges-government-exempt-cancer-rare-disease-drugs-tax-budget-2025-01-20/)

Infrastructure and Manufacturing

The budget is likely to focus on policies that attract foreign direct investment (FDI) into India's rapidly expanding green energy sector, including tax breaks for foreign investors in solar, wind, and electric mobility sectors. Enhanced incentives, tax benefits, and infrastructure support for foreign investors could significantly boost companies operating in sectors such as semiconductors, electronics, and advanced manufacturing.

Job Creation

The government plans to announce a $24 billion expenditure plan to create jobs over the next five years and to increase rural spending. This includes support for women, the MSME sector, and agriculture initiatives.

Infrastructure Development

A record ₹11.11 trillion capital investment is planned to sustain economic growth, with significant allocations to develop infrastructure and technology in various states, aiming to boost rural development and job creation.

Tax Simplification

The government is working on simplifying income tax laws and is expected to follow a consultative approach, inviting public comments on draft proposals. Reducing the pendency of disputes and avoiding new disputes are priorities, with suggestions to make safe harbor margins more attractive and to remove revenue thresholds so that larger companies can benefit. [citation_attribution:0‡EY India](https://www.ey.com/en_in/services/tax/union-budget-2025)