The middle class continues to bear a significant tax burden, high-net-worth individuals exploring overseas options for better financial planning and job creation remains a constant concern. A large portion of the reason can be attributed to the tax system being complex, high GST rates in certain sectors, and regulatory hurdles discouraging entrepreneurship and investment. Addressing these issues effectively will be the key to ensuring India remains an attractive destination for businesses and talent.
If India is to strengthen its position as a global economic leader, Budget 2025 must focus on structural reforms rather than incremental changes. Bold measures that simplify taxation, incentivising investment, and streamlining regulations will play a critical role in shaping India's economic trajectory for the next decade.
India stands at a crossroads. Budget 2025 isn't just another economic exercise - it's the final real shot for Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman to secure 2029. The last decade brought impressive GDP growth, digital transformation, and global recognition, but economic cracks are widening.
The middle class is over-taxed, the rich are moving to Dubai, and job creation is a joke. The tax system is a nightmare, GST rates are very high, and the dream of a merit-based society is vanishing faster than a government laptop scheme before elections.
The message is clear: If Prime Minister Narendra Modi wants a third term, the budget must address A+ challenges. No distractions, no token reforms - just bold action that will make India the global economic magnet.
1. The middle class: India's
reliable revenue source
India's middle class isn't just working hard - they're working alongside the government. Taxed like the rich, ignored like the poor, and squeezed for every rupee, the Indian middle class is clearly a reliable source of income and economic growth.
Does this hard working class deserve some relief?
.The personal income tax burden in India is among the highest in the world for salaried individuals.
.Individuals are paying more taxes than all the companies combined in India.
.India's highest tax rate (42.74%) is higher than the US (37%) and Singapore (22%)!
.80% of direct tax collections come from just 60 million taxpayers - less than 5% of the population!
.Over 35 different TDS provisions create compliance burdens.
This leaves middle class people travelling abroad (with their leftover savings), with an unclear answer about:
“What am I getting vs. what am I paying in India?”
Because let's face it:
.The conditions of roads despite toll taxes.
.Fuel is taxed heavily, while public transport struggles.
.Healthcare is expensive, but only for masses.
Solution
Increase exemption limits - given the inflation any individual earning below Rs1 million should not be taxed by an exemption in slabs or through rebates.
Introduce a flat, reasonable tax rate - simplifying the tax system is the need. Simplify TDS structure – Reducing the number of TDS rates to 3-4 categories for clarity and ease.
2. Tax certainty & business-friendly reforms
A predictable and transparent tax system fosters confidence among businesses and investors. While significant improvements have been made in recent years, concerns remain around tax unpredictability and compliance hurdles. Business owners and salaried individuals live in fear of arbitrary tax demands, harassment, and retrospective taxation.
.Corporate tax rates, while reduced, still remain higher than in competing investment destinations like Vietnam and Thailand.
.GST officers can freeze bank accounts over disputes faster than being blocked over WhatsApp.
.While faceless assessments improve transparency, room to be created to enhance efficiency and reducing litigation.
Solution
Capping personal and corporate tax rates –Setting the cap at 25 per cent.
End tax uncertainty - no more random changes, hidden cesses, or retrospective surprises.
Enhance dispute resolution – Expanding Dispute Resolution Committees (DRC) and introduce a mediation framework for early settlements. Stop treating business owners like criminals.
3. Judicial reform
India's legal infrastructure plays a crucial role in economic growth and investor confidence. However, delays in dispute resolution affects businesses and individuals alike.
.Over 45.51 million cases are pending in Indian courts.
.A simple civil dispute can drag on for 20-30 years.
.Many business owners fear legal cases more than tax enquiries because of the functioning speed of the courts.
Solution
Fast-track commercial cases. Business dispute should ideally not take more than 2 years.
Use AI & digital courts.
Increase judges' strength. India has only 21 judges per million people, when compared to economies like US, the count is100+.
4. Manufacturing & investment
With China's manufacturing dominance shifting, India has a strategic window of opportunity to emerge as a global manufacturing powerhouse. However, to attract large-scale investments, India must strengthen its policy framework and ease of doing business.
While India deliberates on taxation policies for startups, China is proactively offering substantial incentives to attract businesses. If India does not act swiftly, countries like Vietnam and Mexico may gain a competitive edge in the global market.
Solution
Sheetal Soni, Partner - MI Capital Services (MICS)
Dramatically cutting red tape for foreign investments.
Giving tax-free status to new manufacturing hubs.
Focusing on high-end tech and semiconductor industries.
5. Balancing welfare & development priorities
Social welfare is crucial for economic inclusivity, but unregulated expansion of subsidies and freebies can strain public finances and shift focus away from long-term growth initiatives.
Freebies vs development: The real election battle
Every election cycle, India turns into a freebie bazaar. Loan waivers, free electricity, free ration, free laptops - the list is endless.
If freebie culture continues unchecked, soon taxpayers will get a message:
“You're working hard so that someone else can live for free.”
Solution
Linking welfare to productivity.
Putting a stop to waiving off loans.
Investing in infrastructure, not freebies.
Conclusion
Budget 2025 must be bold, forward-looking & growth-oriented
The Union Budget 2025 presents a defining moment for India's economic future. With strong global positioning, digital progress, and a growing workforce, India has immense potential-but unlocking it requires decisive action.
Key priorities:
Lower & simplify taxes - Reducing compliance burdens for businesses & individuals.
Streamline GST & TDS – Making tax collection more predictable & efficient.
Resolve tax disputes faster - Expanding alternative dispute resolution mechanisms.
Strengthen judicial efficiency - Ensuring timely resolution of business & tax cases.
Boost manufacturing & FDI – Leveraging global shifts to attract investments.
Balance welfare & economic growth – Prioritising sustainable development over short-term benefits.
With decisive reforms, Budget 2025 can lay the foundation for a thriving, investment-friendly, and globally competitive India.
The writer is Partner - MI Capital Services (MICS)