Budget 2025-26: Income tax cuts, gold tariff hikes expected
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New Delhi: The upcoming Budget 2025-26 is anticipated to introduce mild reductions in personal income tax rates to stimulate consumption, alongside a concessional corporate tax scheme aimed at boosting manufacturing hubs and attracting foreign direct investment (FDI) as part of the ‘Make in India’ initiative. These measures, highlighted in a report by Emkay Global Financial Services, are expected to bolster economic growth.
The report also points to potential increases in customs duties on gold and streamlined FDI norms to encourage investments. Adjustments to personal income tax slabs may focus on increasing disposable income, particularly for the middle-income segment.
The budget follows a year of fiscal success, with the government surpassing its gross fiscal deficit target for FY25, achieving 4.7% of GDP compared to the revised estimate of 4.9%. For FY26, the fiscal deficit target is expected to align with the government’s fiscal consolidation roadmap, set at 4.5% of GDP.
Net government borrowing for FY26 is projected to decline to ₹11.15 lakh crore, compared to FY25, with small savings anticipated to cover about 24% of the fiscal deficit. The Reserve Bank of India’s dividend is expected to remain consistent with FY25 levels at ₹2.1 lakh crore. Gross tax revenues are estimated to grow by approximately 9%, bringing the gross tax-to-GDP ratio to 11.7%.
The report emphasizes asset monetization through infrastructure sales, disinvestment, and strategic divestitures as key strategies for revenue generation. It notes that these methods are among the least growth-impinging tools for deficit management.
Spending priorities for FY26 may see a shift, with a greater proportion allocated to human capital development, rural initiatives, and agriculture. This focus is expected to have a strong fiscal multiplier effect, while efforts to boost industrial growth under the ‘Make in India’ program will continue. Rural spending, in particular, is poised to play a critical role in driving economic activity.
Capital expenditure allocations are expected to remain robust, with a notable increase projected for defence. Capex loans to states are likely to remain at FY25 levels, while additional resources may be directed toward welfare schemes, affordable housing, MSMEs, and key sectors such as health and education.
The government’s policy approach will prioritize medium-term growth potential through enhanced investment dynamics, while maintaining fiscal discipline. By maximizing fiscal stimulus and supporting vulnerable segments of the economy, the Budget 2025-26 is set to balance growth ambitions with financial prudence.
With IANS inputs