Sops for Small Business Houses, Farmers, Tax Relief for Middle-Class Likely in Union Budget

New Delhi: The government is likely to announce some sops for small business houses and farmers in the upcoming budget as Union finance minister Nirmala Sitharaman on Thursday hinted in a pre-budgetary meeting with the stakeholders and experts from export, trade and industry sectors in the national capital here. Besides, there may be some announcements to boost consumers’ demand as well as tax relief for middleclass to rev up India’s slowing economy, according to the sources.

This is Ms Sitharaman’s fourth pre-budget consultation, bringing together all the key stakeholders involved in the country’s economy. The discussions were part of the preparations for the upcoming Union Budget 2025-26, focusing on key inputs to shape economic policies and priorities. The Union Budget 2025-26, which will be the eighth consecutive budget to be presented by Ms Sitharaman, will be tabled in Parliament on February 1.

The sources, however, said that keeping slow growth in micro, small and medium enterprises (MSMEs) in mind, the finance minister will announce some corrective steps like a new financing model for MSMEs, launching new products to boost business in small businesses along with some tax relief for them. “The government may introduce a conditional 25 per cent income tax slab for MSMEs manufacturing units structured as partnerships, LLPs, or sole proprietorships,” the sources said.

During the meeting, apex engineering exports promotion body EEPC India urged the government to introduce several tax sops for MSME manufacturing units to support their transitioning to sustainable energy practices. It also suggested introducing a policy permitting 100 percent depreciation on investments in solar power generation, which would mirror previous benefits offered for wind power generation.

“On the exports front, the government may consider some relief to the small and medium exporters in the country as they urged the government to provide some sops for the sector. Like the Federation of Indian Export Organisations (FIEO), EEPC India also advocated for increasing the cap under the interest equalization scheme to Rs 10 crore, providing more substantial financial support to MSME exporters. EEPC also noted that for MSMEs, steel constitutes 60 percent of their production costs, making them vulnerable to global competition and potential job losses,” the sources said.

“On the tax front, the government is expected to give a big relief, not only for the small business houses, but also for the common man. The forthcoming budget may see a tweak in personal tax to give more money in the hands of the middleclass, which might help rev up the world’s fifth-biggest economy, though it grew at its slowest pace in seven quarters between July and September,” the sources said.

During the meeting the finance minister also discussed major concerns that the country is facing, like high food inflation and slump in exports, which are also biting into demand for daily-used consumer items, ranging from soaps, shampoos and hair oils to cars and two-wheelers, particularly in urban and semi-urban areas. The government has also been facing political heat from the middleclass over high taxes, and as growth in wages is unable to catch up with the pace of inflation.

Earlier this week on Tuesday, Prime Minister Narendra Modi interacted with a group of eminent economists and thought leaders in preparation for the Union Budget 2025-26 at the NITI Aayog premises. Prior to this in Jaisalmer on December 20, Sitharaman also chaired a pre-budget meeting with finance ministers of States and Union Territories.

The FM’s meeting saw the participation of prominent officials in her ministry, including her deputy Pankaj Chaudhary, finance secretary, secretary of economic affairs, secretary of department of investment and public asset management, and the chief economic adviser to the government of India among others. On 20th December, Ms Sitharaman chaired a pre-budget meeting with finance ministers from states and Union Territories in Jaisalmer. The finance ministry has held multiple pre-budget consultations with various stakeholders, including MSMEs, farmers’ associations, and economists.