The Union Budget 2025, presented on February 1st, introduces significant changes in tax structures, infrastructure development, and sector-specific reforms. This article explores the budget's implications for various sectors, including real estate, stock markets, personal finance, and income tax, providing a balanced critique of its potential benefits and challenges.
What are the key Tax Reforms Introduced in the Union Budget 2025?
The Union Budget 2025 has ushered in a series of tax reforms aimed at alleviating the tax burden on individuals and stimulating economic growth. The revised tax slabs under the new regime are as follows:
- Income up to ₹4 lakh: No tax
- ₹4 lakh to ₹8 lakh: 5%
- ₹8 lakh to ₹12 lakh: 10%
- ₹12 lakh to ₹16 lakh: 15%
- ₹16 lakh to ₹20 lakh: 20%
- ₹20 lakh to ₹24 lakh: 25%
- Above ₹24 lakh: 30%
Notably, the government has increased the tax rebate threshold for incomes up to ₹12 lakh (₹12.75 lakh with standard deduction), up from the previous ₹7 lakh. This means individuals earning up to ₹12.75 lakh will not be liable to pay any income tax. Additionally, the basic exemption limit has been raised from ₹3 lakh to ₹4 lakh, providing further relief to taxpayers.
How Does the Budget Impact the Real Estate Sector?
The real estate sector stands to gain from several provisions in the Union Budget 2025. The reclassification of Micro, Small, and Medium Enterprises (MSMEs) is particularly noteworthy:
- Micro Enterprises: Investment limit increased to ₹2.5 crore (previously ₹1 crore)
- Small Enterprises: Investment limit raised to ₹25 crore (previously ₹10 crore)
- Medium Enterprises: Investment limit elevated to ₹125 crore (previously ₹50 crore)
This reclassification is anticipated to bolster the construction and ancillary industries, as many real estate developers and contractors fall under the MSME category. The enhanced investment limits could lead to increased project capacities and improved access to credit.
Furthermore, the government's proposal to allocate ₹1.5 lakh crore for capital expenditure through 50-year interest-free loans to states is expected to stimulate infrastructure development. This move could have a cascading effect on the real estate market, leading to the development of new residential and commercial projects, thereby boosting the sector.
Robin Arya, smallcase manager and Founder at GoalFi
“The Union Budget 2025-26 introduces several structural and fiscal measures aimed at economic growth, financial inclusion, and tax simplification. The rationalization of income tax slabs, with zero tax liability up to ₹12 lakh under the new regime, directly enhances disposable income and investor participation in financial markets. The proposed reduction in TDS complexities, increased deduction limits for senior citizens (₹1 lakh) and rent (₹6 lakh), and the removal of TCS on education loans further streamline tax compliance.
The focus on MSMEs, capital markets, and fintech is expected to improve capital allocation efficiency, while the government’s fiscal consolidation efforts, targeting a 4.4% fiscal deficit for FY26, signal macroeconomic stability.
In the financial sector, the increase in FDI limits for insurance from 74% to 100%, along with the planned rollout of a revamped Central KYC Registry, will facilitate deeper financial penetration. Additionally, ₹1 lakh crore Urban Challenge Fund and ₹20,000 crore Nuclear Energy Mission highlight the push for infrastructure and energy transition.
The government’s emphasis on enhancing digital public infrastructure, expanding fintech capabilities, and improving capital market efficiency aligns with the broader goal of fostering a transparent, investor-friendly ecosystem.
At GoalFi, we recognize these policy measures as critical to strengthening India’s investment landscape. The budget reflects a clear direction toward financial sector modernization, and we remain committed to leveraging these changes to enhance investor access to structured, data-driven investment opportunities.”
What is the anticipated Effect on the Stock Markets?
The Union Budget 2025 has elicited mixed reactions from the stock markets. The introduction of personal tax cuts is expected to enhance disposable incomes, potentially increasing consumer spending. This development has been positively received by Fast-Moving Consumer Goods (FMCG) companies, with shares in this sector experiencing gains.
Conversely, the budget's focus on capital expenditure and infrastructure development has led to a modest increase in spending in these areas. However, some infrastructure firms have faced declines, possibly due to concerns about the execution of these projects and the associated fiscal implications.
The stock market's response underscores the importance of effective implementation of the budget's proposals to instill investor confidence and ensure sustainable economic growth.
Arvind Kothari, smallcase Manager and Founder of Niveshaay
Overall, Budget 2025 presents a growth-friendly framework that complements our growth across key sectors like infrastructure, and consumer-driven businesses, fostering long-term value creation in a stable macroeconomic environment.”
How does the budget influence personal finance and income tax?
The revised tax slabs and increased rebate thresholds are poised to have a significant impact on personal finance. Individuals earning up to ₹12.75 lakh annually will benefit from zero tax liability, resulting in substantial savings. For instance, a person with an annual income of ₹18 lakh is expected to save ₹70,000 in taxes, while someone earning ₹25 lakh could save ₹1,10,000.
These tax savings are likely to boost household consumption, encourage savings, and promote investments in various financial instruments. The increased disposable income may also lead to higher demand in sectors such as real estate, automobiles, and consumer goods, thereby stimulating economic activity.
Karthick jonagadla, smallcase manager and Founder & CEO of Quantace Research
What are the potential challenges and criticisms of the budget?
While the Union Budget 2025 introduces several progressive measures, it is not without criticisms. Some industry leaders have expressed concerns about constrained revenue growth despite the emphasis on capital expenditure. The lack of a clear roadmap for fiscal consolidation has also been a point of contention.
Additionally, the real estate sector has voiced disappointment over the absence of industry status and a national rental housing policy. These omissions are seen as missed opportunities to address long-standing challenges in the sector.
Moreover, while the increase in the Foreign Direct Investment (FDI) limit for the insurance sector from 74% to 100% is a welcome move, it raises concerns about potential overexposure to foreign entities and the need for robust regulatory frameworks to safeguard domestic interests.
The Union Budget 2025 presents a balanced approach to stimulating economic growth through tax reforms, infrastructure development, and support for key sectors. While it offers significant benefits, particularly in terms of tax relief and investment in infrastructure, it also faces criticisms regarding revenue generation and sector-specific policies. The true impact of the budget will hinge on effective implementation and the government's ability to address the concerns raised by various stakeholders.
Dhiren Jatakia, Head Accounts & Finance Covestro (India)Frequently asked Questions (FAQs)
- How will the revised tax slabs benefit the middle class?The revised tax slabs offer significant relief to the middle class, particularly with the increased rebate threshold for incomes up to ₹12.75 lakh. This means a larger proportion of the salaried class will pay little to no tax, leading to increased disposable income and higher savings.
- What impact will the budget have on the real estate sector?The budget’s focus on capital expenditure and infrastructure development will boost real estate growth. However, the absence of industry status for real estate and rental housing policies has disappointed some stakeholders.
- Will the stock market react positively to this budget?Stock markets have responded with mixed reactions. While sectors such as FMCG and consumer goods have gained due to increased disposable income, infrastructure firms have seen some declines due to concerns over project execution.
- How does the budget support MSMEs and startups?The reclassification of MSMEs allows businesses to access more credit and grow their operations. The new ₹10,000 crore Fund of Funds for startups will further boost innovation and entrepreneurship.
- Is the fiscal deficit a cause for concern?The fiscal deficit is projected at 4.4% of GDP, which is a reduction from the previous year. While this is a positive step toward fiscal consolidation, some experts argue that revenue growth might still be constrained.
The Union Budget 2025 presents a mixed bag of opportunities and challenges. While tax reforms and infrastructure spending will spur economic growth, certain sectors feel overlooked. As the government moves forward with implementation, its effectiveness will determine the budget’s true success.
Amisha Vora, Chairperson and Managing Director, PL Capital
“The Budget was a bold and decisive one to spur economic growth by reviving consumption. With no income tax on income up to 12 lakh, the Budget has ensured that the middle class has more disposable income in its hands. This is positive for sectors like consumer durables, travel, tourism, auto, jewellery, delivery, and ecommerce. The moderate growth in capital expenditure over revised estimates is still good. Increasing capex in data centers, PLI-led capex, PSU capex, and state-level capex will collectively drive robust growth in the manufacturing sector. At a macro level, India remains one of the world's fastest growing economies. In 2025, investors will make money, albeit at a slower pace. Right stock picking will be key to creating wealth. While other factors like Trump's policy moves, Fed's interest rate decisions and ensuing currency outlook will be important determinant of market moves, I believe Union Budget 2025 has done its job well.”
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