Union Budget 2025 Explained: Key Highlights to Look Out For

Indian Finance Minister Nirmala Sitharaman will present the Union Budget 2025 on February 1. With economic growth slowing and global uncertainties increasing, this Budget is expected to play an important role in driving growth and addressing key policy challenges. This article highlights the key updates expected across various sectors in the Union Budget 2025.

1. Economic Reforms

The government may introduce changes to simplify the tax system and encourage consumer spending. These changes could make it easier for taxpayers to switch to the new income tax system, which has fewer exemptions.

There may also be efforts to reduce the compliance burden on businesses and increase financial support for small businesses, farmers, and MSMEs. The government could also focus on improving the labor market and creating more job opportunities. 

2. Focus on the Auto Sector

Another sector that could receive solid support in the Union Budget 2025 is the auto sector. India's automotive industry has evolved rapidly, transitioning from vehicle manufacturing to offering mobility solutions. In the upcoming Budget, the government is expected to continue supporting the electric vehicle sector through-

- Increased funding for the PM E-Drive and Auto PLI schemes to boost local production of EV parts.

- Tax benefits for rural areas, which could help the sector grow in these regions.

- Extra support for housing projects, which could lead to higher demand for vehicles.

3. Support to Semiconductor Industry

In Budget 2024, the government allocated Rs. 6903 crore to the semiconductor sector. Experts expect a similar or even larger allocation in 2025. There are also discussions around expanding the production-linked incentive (PLI) scheme to include newer technologies such as IoT devices, wearables, and AI gadgets. This move would help India strengthen its position in the global tech market.

4. Investment in Renewable Energy

During India’s 76th Republic Day parade, the Ministry of New and Renewable Energy showcased a tableau with the theme "Clean Energy for a Global Future." This reflects the government's focus on promoting clean energy. In Budget 2025, plans to expand solar, wind, and green hydrogen projects are expected. Key steps may include:

- Creating special zones for renewable energy projects.

- Attracting private investment to meet the target of 500 GW of renewable energy by 2030.

- Introducing new financial tools, such as green bonds and green banks, to further support the sector.

5. Tax Relief for Individuals

The government is expected to offer tax relief to individuals in the new income tax regime. Some key expectations are-

- The basic exemption limit may increase from Rs. 3 lakhs to Rs. 5 lakhs, which will allow individuals to keep more of their income.

- A new 25% tax slab may be introduced for those earning between Rs. 15 lakhs and Rs. 20 lakhs.

- The 30% tax slab, currently set at Rs. 15 lakhs, may be raised to Rs. 18 lakhs or even Rs. 20 lakhs.

Final thoughts

The Union Budget 2025 is expected to bring major changes in technology, electric mobility, clean energy, and taxation. With industries seeking more incentives and individuals hoping for better tax relief, this is the perfect time to consider strategic investments. To start your investment journey, visit the Tata Capital Money website or download the app today!