Budget 2025 Expectations| Reduce tax on bank deposits to help provide level playing field with equity markets, says Bank of Baroda's Madan Sabnavis

Finance Minister Nirmala Sitharaman will present the 8th consecutive Union Budget on February 1, 2025. Reports suggest that the government is mulling over cutting income tax for those who are earning up to Rs 15 lakh a year in February's budget, in turn providing relief to the middle class.

Tax payers have pinned high hopes on the Union Budget FY 2025-26 documents and are keeping their fingers crossed regarding their expectations from the government's most important financial document of the year.

Here's what Madan Sabnavis, Chief Economist at Bank of Baroda has to say--

"We do believe that the starting point of the budget will be the fiscal deficit and efforts will be made to lower the ratio by 0.5% to probably close to 4.3-4.4% of GDP for FY26.

Within this framework, the budget would work to maintain, if not increase capex, in the range of Rs 11 lakh crore that will provide a fillip to investment (the revised estimate for FY25 could be lower than what was projected).

Benefits for MSMEs and industry are also expected through the PLI scheme with probably a special dispensation for the former. There could be some minor rationalisation in subsidy outgo through better targeting of beneficiaries.

It would, however, be interesting to see if there are any special rebates offered on income tax given that consumption has been affected due to high inflation this year.

From the perspective of banks a more favourable tax slab for interest on bank deposits will help to provide a level field with equity markets and also provide incentive to deposit holders.

Union Budget 2025 | Nirmala Sitharaman, who continues to be Finance Minister, will present her record 8th Union Budget this time. While inflation has burnt a hole in the pockets of 'aam janata', reports suggest there might be a tax relief for those making up to Rs 15 lakh per year. Track the latest coverage, live news, in-depth opinions, and analysis only on Deccan Herald. Also follow us on WhatsApp, LinkedIn, X, Facebook, YouTube, and Instagram.