Budget 2025 Expectations: Nomura Expects Tweak For Personal Income Tax Slab

The budget could raise the customs duty on gold imports, since rising gold imports are weighing on the current account. Additionally, to encourage foreign capital inflows, it could increase the FDI limit in the insurance sector to 100% from the current 74%, according to Nomura.

"Allowing public sector companies to tap more overseas funding could also be announced," the brokerage reported.

To boost domestic manufacturing and attract global value chains to India, we expect a concessional corporate tax scheme for firms that use India as a hub for manufacturing, lower custom duties on intermediate inputs and higher import duties on products to counter China dumping, according to Nomura.

According to HSBC Global research, the PLI scheme succeeded in attracting investment in some high-tech sectors. "The budget should also focus on investment in mid-tech sectors, which are more labour intensive, and where FDI inflows have been week thus far," HSBC Global Research said.

"We expect the government to tweak the personal income tax slabs and focus on increasing disposable income for the middle class. The marginal propensity to consume tends to be higher for lower-income households and this can provide a fillip to consumption in the near term," said Nomura.

Nomura expects fiscal consolidation (4.8% of GDP in fiscal 2024-25, 4.4% in fiscal 2025-26), as well as more targetted measures to support growth.

"For the fiscal 2024-25, we believe the government is on track to achieve a deficit target of 4.8% of GDP, better than the budget estimate of 4.9% of GDP, aided by a sharp underspend in capex," the Brokerage said.

"For FY26, we expect the target to be set at 4.4% of GDP, in line with the medium-term commitment," Nomura said.