The Budget is almost here, with Finance Minister Nirmala Sitharaman set to present it on February 1. As always, various industries and social groups have put forth their expectations, hoping the government will deliver on their demands. However, past budgets have often failed to meet public expectations fully and, at times, have even complicated things instead of simplifying them.
A recent example is the capital gains tax changes effected in the July 2024 Budget. While the government claimed it was done to simplify taxation, it removed provisions related to indexation on some asset classes that caused widespread concern among investors. Following the backlash, indexation benefits were partially restored for the real estate sector. However, that adjustment led to demands for similar treatment across many other sectors.
In this write-up, we highlight seven key areas where the government cannot afford to go wrong. While there are many important issues to address, these seven require Finance Minister Sitharaman’s urgent attention and any wrong step could make this budget a disappointment for the people who have high expectations from the Modi government.
Here are 7 things that can go wrong in Budget 2025:
1. Failing to reduce the tax burden on the middle class
One of the biggest mistakes in Budget 2025 would be not providing tax relief to the middle class, which is burdened by both high-income taxes and high indirect taxes like GST.
The last significant tax relief for small and middle-class taxpayers came in 2014 when then Finance Minister Arun Jaitley increased the Section 80C deduction limit from Rs 1.1 lakh to Rs 1.5 lakh. That budget also raised the basic exemption limit from Rs 2 lakh to Rs 2.5 lakh for individuals and to Rs 3 lakh for senior citizens aged 60 to 80 years. Also, a key middle-class demand was met by increasing the deduction on home loan interest under Section 24 from Rs 1.5 lakh to Rs 2 lakh.
However, more than 10 years have passed since these basic exemptions were last revised for individuals below 60 and senior citizens. There have also been no major changes in deduction benefits for taxpayers. A meaningful revision is now necessary, not just from the taxpayers’ perspective but also for the economy.
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