What's on the cards in Budget 2025: Income tax relief, farmer credit, insurance push

The Budget 2025, set to be presented on Saturday, will be keenly watched. Union Finance Minister Nirmala Sitharaman may announce income tax relief, take steps to enhance insurance coverage, and offer credit support to farmers, among other measures.

Gliding path

India’s fiscal deficit for 2024-25 is expected to be 4.7-4.8% of gross domestic product (GDP), lower than the budgeted estimate of 4.9%, Mint reported. This is expected to be driven by lower spending on planned capital investments and higher-than-anticipated dividends from the Reserve Bank of India (RBI). The Centre’s fiscal deficit has steadily declined each year since 2020-21, surpassing the targets in the past two fiscal years.

Also read: Budget 2025: India’s fiscal consolidation is well on track despite hurdles

For 2025-26, the government may peg the fiscal deficit at 4.5% of GDP, in line with the aim set in 2021-22.

Steady spending

Even as the government has struggled to maintain the pace of capital expenditure in the current fiscal year, the Budget 2025 may peg capital expenditure at 3.4% of GDP, keeping it the same as the Budget 2024, Mint reported. This would likely result in about a ₹12 trillion capex target for 2025-26, up from ₹11.11 trillion budgeted for the current fiscal year. The move is likely against the backdrop of a slowdown in economic growth and lacklustre capex by states and the private sector.

Insurance boost

₹5 lakh: That is likely to be the new proposed limit for life cover under the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), up from ₹2 lakh currently, Mint reported. Similar measures are also expected for Pradhan Mantri Suraksha Bima Yojana (PMSBY). The push for higher insurance coverage will be in line with the government’s vision of insurance for all by 2047. The PMJJBY is a one-year renewable life insurance scheme covering death from any cause, while the PMSBY is a one-year renewable accident insurance scheme covering death and disability.

Also Read: Budget 2025: Insurers seek support for tax incentives, health cover, higher FDI limit

Tax relief

The finance minister may offer income tax relief in the Budget 2025 to boost household spending and stimulate economic growth, Mint reported. There were discussions over increasing the standard deduction, which is ₹75,000 currently, and restructuring taxes for the income group of ₹12-15 lakh. Income tax relief is expected as the government has managed to keep income tax mop-up healthy even as goods and services tax (GST) collection growth, a proxy for consumption, has flattened.

Credit push

The Budget 2025 is expected to increase agriculture loan limits under the Kisan Credit Card (KCC) to ₹4-5 lakh from the current limit of up to ₹3 lakh and ease the repayment terms to improve farm productivity amid weather challenges, Mint reported. The proposed changes aim to address rising input costs and provide flexible credit options to farmers to keep up with costs. The plan may also consider including extended repayment periods during natural calamities. The agriculture sector has faced the effects of climate change in recent years.

Price control

₹10,300 crore: That is the expected budget allocation for the Price Stabilization Fund, which was established to manage the sudden rise in prices of essential commodities, Mint reported. With adverse weather conditions leading to sharp volatility in food prices, the government increased the funding to ₹10,000 crore in Budget 2024 after negligible allocation in the past two years. While the hike for 2025-26 will be just 3%, it may be adequate considering the sharp rise in 2024-25. This increase is aimed at supporting the procurement of pulses, onions, and potatoes.

Also Read: In numbers and charts: A history of India’s Budgets since 1947

Continued funding

The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), which guarantees 100 days of paid work in rural areas, may see a slightly higher outlay for 2025-26 to provide a safety net against potential economic challenges, Mint reported. The allocation was ₹86,000 crore for 2024-25, which is unlikely to be changed. Over the years, the government has spent more money on the scheme than budgeted due to the stress in the rural. The situation, however, seems to have improved this fiscal due to adequate rainfall and healthy agricultural activity.

Speech saga

Apart from policy changes, the length of Sitharaman’s speeches will also be keenly watched. Her budget speeches have ranged from 85 to 160 minutes, with the previous speech being the shortest. The longest speech was in 2020, lasting 160 minutes.

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