Union Budget 2025-26: Boosting the Economy through Tax Reforms and Infrastructure Development
The Union Budget 2025-26, set to be announced by Finance Minister Nirmala Sitharaman, is expected to drive economic growth through tax reforms, infrastructure development, and initiatives to boost employment and sustainability. Key measures include revisi
Budget 2025Tax ReformsInfrastructureEmploymentSustainabilityReal EstateJan 26, 2025
With an anticipated nominal GDP growth rate of 10.5 per cent for FY26, up from 9.7 per cent in the current fiscal year, the Budget aims to sustain economic momentum through increased government capital expenditure, advancements in agriculture, and export growth.
Tax Reforms Relief for Middle-Class TaxpayersTax relief is among the most anticipated aspects of the upcoming Budget.
Key proposals under consideration include - Raising the basic exemption limit under the new tax regime from Rs 3 lakh to Rs 5 lakh, offering relief to middle-class taxpayers.- Reducing personal income tax rates for individuals earning up to Rs 15 lakh annually to stimulate consumption.- Enhancing standard deductions from Rs 75,000 to provide immediate relief to salaried individuals and pensioners, thereby increasing disposable income.- Revising tax slabs under the new regime, particularly for the 20 per cent and 30 per cent brackets, enabling taxpayers to retain more earnings.
The government is also expected to simplify tax compliance and introduce a new income tax bill for a more transparent and user-friendly system.
Capital Expenditure and Infrastructure A Key Driver of GrowthContinuing its focus on infrastructure development, the government is likely to set a capital expenditure target of Rs 11 lakh crore for FY26.
Indian Railways is expected to receive a 15-20 per cent increase in allocation, potentially exceeding Rs 3 lakh crore.
The Budget may also prioritize - Expanding road networks and establishing multi-modal logistics parks.- Enhancing the logistics framework to support efficient economic operations.- Strengthening urban infrastructure to improve quality of life and support industrial growth.
With infrastructure investment rising from 1.63 per cent of GDP in FY19 to 3.4 per cent in FY25, this momentum is essential for achieving the government’s long-term vision of Viksit Bharat by 2047.
Boosting Employment and Job CreationJob creation is expected to feature prominently, with initiatives focusing on skill development and boosting employment in emerging sectors such as artificial intelligence, renewable energy, and green technologies.
These sectors are poised to offer significant opportunities for India’s young workforce while aligning with global sustainability goals.
Real Estate Addressing Affordability and TaxesThe real estate sector hopes for reforms to enhance housing affordability, including - Increasing the deduction limit for home loan interest from Rs 2 lakh to Rs 2.5 lakh.- Simplifying state-imposed taxes and duties, which currently exceed 12 per cent in many states.- Revisiting long-term capital gains (LTCG) taxes to provide relief to property buyers.
Such measures could stimulate demand in the real estate sector and make home ownership more accessible to the middle class.
Boosting Consumption and Rural GrowthWith urban consumption growth slowing and rural economies showing resilience, the Budget may prioritize policies that boost household incomes.
Support for the construction sector and special incentives for renewables, infrastructure, and manufacturing could further enhance market sentiment.
Electric Vehicles (EVs) and Sustainability Driving the Green RevolutionThe Budget is expected to prioritize the adoption of electric vehicles (EVs) and green technologies by - Expanding charging infrastructure in Tier-2 and Tier-3 cities.- Offering Viability Gap Funding (VGF) to incentivize private investment in EV ecosystems.- Extending the FAME scheme into its third phase (FAME III), providing subsidies for manufacturers and consumers.- Rationalizing GST rates to 5 per cent across EV components to address the inverted duty structure.
The Budget may also reduce GST on hybrid vehicles, which currently face a high rate of 28 per cent, to encourage their adoption as a transitional step toward full electrification.
Nuclear Energy and Advanced TechnologiesInvestment in nuclear technology is likely to increase, focusing on - Research and development of small modular reactors (SMRs).- Next-generation reactors with enhanced safety and efficiency.- Accelerated funding for nuclear waste management research.- Enhanced funding for regulatory bodies to streamline the approval process for nuclear projects, paving the way for India’s energy independence.
The Union Budget 2025-26 holds the promise of addressing tax reforms, infrastructure growth, job creation, and sustainability.
With a strong focus on balancing fiscal priorities and long-term goals, it aims to lay the foundation for a self-reliant and globally competitive India.
Frequently Asked Questions
What are the key tax relief measures proposed in the budget for middle-class taxpayers?
The key tax relief measures include raising the basic exemption limit from Rs 3 lakh to Rs 5 lakh, reducing personal income tax rates for individuals earning up to Rs 15 lakh, enhancing standard deductions, and revising tax slabs to help taxpayers retain more earnings.
How much is the government planning to invest in infrastructure development in the 2025-26 budget?
The government is likely to set a capital expenditure target of Rs 11 lakh crore for FY26, with a focus on expanding road networks, establishing multi-modal logistics parks, and enhancing urban infrastructure.
What initiatives are being considered to boost employment in emerging sectors?
The budget aims to focus on skill development and boost employment in sectors like artificial intelligence, renewable energy, and green technologies, providing significant opportunities for India’s young workforce.
How will the budget address housing affordability in the real estate sector?
The budget plans to increase the deduction limit for home loan interest, simplify state-imposed taxes and duties, and revisit long-term capital gains (LTCG) taxes to provide relief to property buyers and make home ownership more accessible.
What steps will the budget take to promote the adoption of electric vehicles (EVs)?
The budget will prioritize expanding charging infrastructure, offering Viability Gap Funding (VGF), extending the FAME scheme, and rationalizing GST rates to 5 per cent across EV components to encourage widespread adoption.
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