Budget 2025: Growth, Tax Reforms, Fiscal Strategy Explained

Aakhir Tak – In Shorts

1. Finance Minister Nirmala Sitharaman to present Budget 2025 with a focus on tax reforms and fiscal balance.
2. India’s fiscal deficit is pegged at 4.9% of GDP, amounting to ₹16.1 trillion.
3. Overhaul of the Income Tax Act 1961 will simplify taxation and reduce disputes.
4. Capital expenditure is set at 3.4% of GDP to bolster infrastructure growth.
5. The budget faces challenges like slow growth and inflation while maintaining fiscal discipline.

Aakhir Tak – In Depth

Balancing Fiscal Challenges

Budget 2025 must navigate slow economic growth, sticky inflation, and constrained fiscal space. The fiscal deficit is estimated at ₹16.1 trillion or 4.9% of GDP. The fiscal consolidation roadmap targets reducing the deficit to 4.5% of GDP by FY27.

Income Tax Overhaul: A Key Focus

A significant reform involves overhauling the Income Tax Act 1961. Announced in the previous budget, the revised law aims to simplify tax processes and improve taxpayer clarity, reducing disputes and enhancing compliance.

Capital Expenditure: Driving Growth

Capital expenditure is projected at 3.4% of GDP, focusing on sectors like Railways, Defence, and Road Transport. However, project spending dropped 12.3% in the year’s initial eight months. Achieving the annual goal requires a robust 64.7% increase in the remaining months.

Direct vs Indirect Taxes

Direct taxes, which include income tax, accounted for 57.5% of gross revenue in FY25, up from 52% in FY22. Indirect taxes, primarily under the GST Council, see limited Union Budget involvement.

Aakhir Tak – Key Takeaways to Remember

1. Budget 2025 aims to achieve balanced growth amid economic challenges.
2. Focus areas include tax reforms, capital spending, and fiscal discipline.
3. A successful fiscal strategy can bolster long-term economic health.

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