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Strengthening Household Spending and Small Business Growth: A Closer Look at 2025 Budget Reforms

The budget also places considerable emphasis on labor-intensive industries such as toy manufacturing, footwear and leather, and food processing.

A New Tax Regime for Middle-Class Incomes

A central feature of the budget is the revision in the personal income tax structure. With the tax exemption threshold raised to Rs. 12 lakhs, individuals earning up to this limit now retain a larger share of their earnings. For example, a taxpayer with an income of Rs. 12 lakh will enjoy a reduction in tax liability by approximately Rs. 80,000, while someone earning Rs. 50 lakh can expect savings of about Rs. 1,10,000. This adjustment is expected to translate into higher disposable incomes, which in turn may drive an uptick in consumer loans—especially among prime and super prime borrowers who often channel additional funds into asset creation, notably in housing. Moreover, even as some households may allocate part of the benefit to savings, the overall effect should alleviate the deposit shortage that has long challenged the banking sector.