Budget 2025 Expectations - Tax Reforms, Railway Modernization, Economic Growth

With the Union Budget 2025 just around the corner, anticipation is building among experts and citizens alike about the potential changes and initiatives it may bring. As one of the most awaited financial events of the year, the budget will set the tone for India's economic direction and priorities.

It is expected to address key challenges such as slowing economic growth, increasing investments, and modernizing infrastructure while keeping the needs of taxpayers and industries in mind. Here are six key expectations from Budget 2025:

1. Simplified Tax Structure with the New Income Tax Law

The government is expected to introduce a new income tax law aimed at simplifying the outdated and complex tax system. The revamped Direct Tax Code (DTC) seeks to make tax regulations more user-friendly and comprehensible. The overhaul will include:

• Reduction in the number of sections and chapters, cutting the Act’s length by 60%.
• Elimination of obsolete provisions to reduce compliance burdens.

This comprehensive revision, led by the Central Board of Direct Taxes (CBDT), comes after the Income Tax Department received over 6,500 stakeholder suggestions. Finance Minister Nirmala Sitharaman’s initiative to modernize the Income Tax Act, 1961, underscores the government’s commitment to ease of compliance for taxpayers.

2. Enhanced Focus on the Railway Sector

Railways are expected to receive significant attention in Budget 2025, with a focus on decongestion and modernization of the network. Key initiatives could include:

• Laying new tracks and upgrading existing ones,
• Launching new routes for Vande Bharat and Amrit Bharat Express trains, with reports suggesting 10 Vande Bharat sleeper trains and 100 Amrit Bharat Express trains may be announced, etc. 

Another report states that the railway sector’s share in infrastructure spending is expected to surpass that of highways for the first time. This shift highlights the sector’s logistical and environmental advantages, including reducing greenhouse gas emissions by up to 75% through increased freight train usage.

3. Lower Corporate Tax Rates to Boost Investments

To attract investments and stimulate economic growth, the government may offer a concessional corporate tax rate for companies establishing new manufacturing facilities.

• The proposed tax rates could range between 15% and 18% for both Greenfield and brownfield projects, compared to the current 22% rate for domestic companies.
• This initiative aims to position India as a competitive manufacturing hub while boosting private investments and addressing slowing economic growth.

4. New Income Tax Slabs and Increased Exemptions

Middle-income groups and salaried employees are hopeful for tax relief in the upcoming budget. Potential changes include:

• Making income up to ₹10 lakh tax-free.
• Introducing a 25% tax slab for incomes between ₹15 lakh and ₹20 lakh.
• These measures could significantly reduce the tax burden, providing individuals with higher disposable income and stimulating consumer spending.

5. Phasing Out the Old Tax Regime

The government may take a decisive step toward discontinuing the Old Tax Regime in favor of the New Tax Regime introduced in Budget 2020.

The New Tax Regime, offering lower tax rates under simplified slabs but without exemptions, has been made the default option since Budget 2023.

While the Old Regime allows deductions for investments and expenses, its complexity has led to calls for its removal. A complete shift to the New Regime would further streamline compliance for taxpayers. As of now, citizens have the option to choose among the two tax regimes and no official announcement of the discontinuation has been made.

6. Discussions Around Joint Taxation for Married Couples

The concept of joint taxation for married couples, suggested by the Institute of Chartered Accountants of India (ICAI), is another area of focus. Joint taxation, common in countries like the USA and the UK, treats a married couple as a single taxable unit, potentially reducing their overall tax burden.

However, experts believe this change may take longer to implement due to the need for a new framework with revised slabs, deductions, and exemptions.

Conclusion

Budget 2025 promises transformative changes aimed at simplifying tax compliance, boosting infrastructure, and fostering economic growth. While some proposals like joint taxation may take time, others, such as the overhaul of the tax structure and railway modernization, could have immediate and far-reaching impacts.

With the Finance Minister’s focus on addressing stakeholder concerns, the budget is expected to balance growth, inclusivity, and fiscal responsibility.