Union Budget 2025: Will Nirmala Sitharaman give tax relief to middle class?

Union Budget 20025: Finance Minister Nirmala Sitharaman will present the first full Budget of Modi 3.0 government. It comes at a time of significant global challenges and hopes of tax relief

Finance Minister Nirmala Sitharaman is set to present the Union Budget 2025 today, marking a historic moment as she delivers her eighth consecutive Budget — the highest number by any finance minister in India. This Budget comes at a time of significant global challenges and hopes of tax relief.

 

The Union Budget 2025 is set against the backdrop of geopolitical tensions and a domestic economy grappling with its slowest growth rate in four years. Adding to the uncertainty is a tariff threat from newly inaugurated US President Donald Trump.

 

Despite these challenges, Prime Minister Narendra Modi struck an optimistic tone, invoking Goddess Lakshmi — who represents wealth, prosperity, and good fortune — and expressing hopes that the Budget would bring prosperity to the nation’s poor and middle class. 

 

What to expect from Budget 2025: Tax relief, infra growth, AI

Anticipation is high among the middle class for potential tax cuts. Observers are hopeful for a reduction in income-tax rates and an increase in the standard deduction. Currently, under the old tax regime, the basic income tax exemption limit is set at ₹2.5 lakh, while it stands at ₹3 lakh for those under the new regime.

 

The Economic Survey 2024-25, tabled in Parliament on Friday, highlighted the need for financial inclusion, especially for rural households and small businesses. In line with this, Sitharaman could announce measures to enhance access to credit through microfinance institutions, self-help groups, and other intermediaries.

 

With India’s development goals requiring substantial investment in infrastructure over the next decade, analysts expect major announcements in this domain.

 

The current financial year's infrastructure outlay of ₹11.1 trillion is likely to fall short by about 20 per cent, indicating the need for increased spending.

 

The Budget is also likely to touch upon advancing artificial intelligence (AI). Discussions at the recent World Economic Forum in Davos highlighted the global AI race sparked by China’s efficient and affordable AI model, DeepSeek. The Economic Survey also highlighted the role of AI, leading analysts to predict Sitharaman might outline policies to accelerate AI development in India, positioning the country to compete on the global stage.  ALSO READ: From new slabs to crypto tax: 10 key tax reforms in recent Union Budgets

 

According to a report by Reuters, economists expect to see a a continuation of fiscal consolidation efforts, with the fiscal deficit projected to narrow to 4.5 per cent of GDP by financial year 2025-26 (FY26), down from an expected 4.8 per cent by the end of FY25. While tariff reforms and lower corporation taxes could boost investment in manufacturing, they might also strain protected industries and reduce funding for consumption-boosting programmes.

 

Budget 2025: When and where to watch

Sitharaman’s Budget speech will commence in the Lok Sabha at 11:00 am on Saturday, February 1. The Budget session will unfold in two phases, with the first running from January 31 to February 13 and the second from March 10 to April 4.  Last year, Sitharaman presented an interim Budget on February 1 and the full Union Budget 2024 on July 23 followng the Lok Sabha elections.

 

You can catch live coverage of Sitharaman's Budget 2025 speech on the Business Standard website and Business Standard's official YouTube channel.