Union Budget 2025 Highlights…
The Finance Minister has forecasted increased tax revenues despite reducing personal tax rates, while India’s budget size has surpassed Rs 50 lakh crore.
The total projected expenditure for the budget estimates of 2025-26 is set at Rs 50,65,345 crore, which includes a total capital expenditure of Rs 11,21,090 crore and an effective capital expenditure of Rs 15,48,282 crore. The increase in capital infrastructure, along with enhanced savings for taxpayers, is expected to create a favorable environment for boosting domestic consumption.
The maximum tax rate has been lowered from 35 percent to 30 percent, which now applies to incomes exceeding Rs 25 lakhs instead of the previous threshold of Rs 15 lakhs, while no tax is levied on incomes up to Rs 12 lakhs. Additionally, market borrowing is projected at Rs 11.53 lakh crores, a decrease from Rs 11.62 lakh crores for the fiscal year 2024-25, indicating a prudent approach in light of the reduced fiscal deficit. The Government expresses strong confidence in achieving tax revenue targets for FY25.
Tax revenues are anticipated to reach Rs 28.37 lakh crore, an increase from Rs 25.56 lakh crore, reflecting an 11 percent rise despite challenging conditions. This growth dispels misconceptions regarding the potential for an economic slowdown.
It is important to note that an 11 percent increase in revenue is contingent upon a 14 percent growth in corporate earnings, suggesting that market apprehensions were unfounded. With a projected 14 percent earnings growth, and at the current price-to-earnings ratio of 22, the Nifty index is expected to reach 30,000 by FY 25-26.
The trend in deficit financing has shifted from -1.2 percent to 0.7 percent, which is a positive sign for the economy. While corporate tax is estimated to rise to Rs 10.82 lakh crore from Rs 9.8 lakh crore, marking an 11 percent increase, the more significant development lies in the rise of individual taxes, projected at Rs 14.38 lakh crore, reflecting a 14.38 percent increase. This substantial figure is noteworthy, especially considering the major tax concessions provided to taxpayers, with the Finance Minister indicating that revenue foregone exceeds Rs 1 lakh crore. This underscores the resilience of the economy, and historical performance over the past 14 years suggests that these targets are achievable.
This reform, characterized by substantial tax exemptions up to Rs 12 lakh (tax-free), is significant and will be a notable milestone in the annals of the Indian economy.
While the government projects a modest increase in Goods and Services Tax (GST) revenue of 11 percent, amounting to Rs 21.88 lakh crore compared to Rs 19.69 lakh crore previously, historical trends indicate that India is likely to surpass these estimates with ease. It is plausible that we may exceed Rs 24 lakh crore based on the aforementioned factors.
In addition to raising the dividend from Rs 1.70 lakh crore to Rs 2.90 lakh crore, the revised estimate has further increased to Rs 3.25 lakh crore, indicating that public sector unit (PSU) stocks are currently undervalued. With a market capitalization of Rs 60 lakh crore, the yield stands at 5.42 percent, significantly outperforming other sectors at this time. Furthermore, allocations for centrally sponsored schemes have surged from Rs 4.15 lakh crore to Rs 5.41 lakh crore, reflecting a 30.36 percent increase, which will promote inclusive growth and enhance consumption.
The defense budget has also seen an increase from Rs 4.56 lakh crore to Rs 4.91 lakh crore, which is expected to positively impact defense stocks. Additionally, a substantial rise in funding for water management initiatives, from Rs 22,000 crore to Rs 67,000 crore, will benefit companies involved in water management and support major road construction firms.
