• Notification Date: 23-01-2025
• Notification No: N/A

The private sector needs to take the initiative: Bold tax reforms in India's budget 2025

The budget for 2025 will have the nation gearing up. High taxation, growing deficit, and slow economic growth have dominated most of the discussion. Yet one issue has not seen much of the limelight: the private investment sector is in terrible shape. Even though Indian companies are making record profits, private investors are withdrawing more capital from the country than they are investing. Contrarily, Foreign Direct Investment has grown 55% in 2024. The point here is that available capital does not reflect the potential of India.

The Confederation of Indian Industry continues to promote government-led investment as the only catalyst for the revival of the economy. Though the corporate tax rates have been brought down drastically, the private sector is yet to be seen to have matched the commitment. Business leaders demanded 72-90 hours a week as working hours to increase productivity, but the private sector has been very chary of fully plunging into driving the growth of the economy. This can be broken with the Finance Minister boldly announcing tax reforms in Budget 2025.

Personal income tax rates may have to go lower but at the cost of raising corporate taxes. Then the private sector would be challenged to reinvest in India and not seek their options elsewhere. The government failing to do this would face nationalization.

For instance, Budget 2025 could suggest simplification of tax compliance; MSMEs tax reforms, and incentives for targeted start-ups. Credits for R&D and green technology tax incentives will encourage innovation and jobs, thus making growth sustainable. Reform in capital gains tax and Direct Tax Code 2025 will further modernize the tax policy in India, and ease of doing business will increase.

What is actually needed is propositions that will advance GDP growth towards the goal for a $5 trillion economy; the private sector needs to have an active part in India's economic future that will share growth, both between governments and businesses.