FM Pre-Budget Meeting: Financial Sector, Capital Markets Call for Tax Sops, Consumption Boost

Finance Minister Nirmala Sitharaman will present the Union Budget for 2025-26 on February 1, 2025. In preparation, she chaired the seventh Pre-Budget Consultation meeting with key stakeholders from the financial sector and capital markets.

The discussions highlighted significant demands, including tax sops to encourage savings, measures to deepen financial markets, and fiscal interventions aimed at boosting consumption.

Let’s take a closer look at the key industry demands and suggestions that emerged during the discussions

Tax Sops for Savings and Fixed Deposits

The financial sector, including banks, made a case for tax sops in the upcoming budget, particularly for fixed deposits. These sops aim to stimulate savings, which have seen a decline in recent years, and address concerns about reduced interest in long-term savings products.

Improving Capital Market Efficiency

During the meeting, The financial sector, especially banks made suggestions for enhancing the efficiency of capital markets, particularly in increasing participation and inclusion. The focus was on incentivising long-term saving, both in debt and equity, to ensure steady growth and greater accessibility for all investors.

Fiscal Interventions to Boost Consumption

As the economy faces challenges in demand, there has been a strong call for fiscal interventions to stimulate consumption. Economists and stakeholders suggested that although such measures might deviate slightly from fiscal targets, they are necessary to ensure continued economic momentum and growth.

Personal Income Tax Rate Adjustments

In a bid to address inflationary pressures and improve the purchasing power of lower- and middle-income earners, the Confederation of Indian Industry (CII) proposed reducing marginal tax rates for personal income up to ₹20 lakh per annum. The move aims to create a positive cycle of consumption, growth, and higher tax revenue.

ICEA Seeks Simplification of Duty Structure 

The India Cellular and Electronics Association (ICEA) has called on the Finance Ministry to simplify the existing complex duty structure in advance of the Union Budget. Describing it as the most complicated globally, ICEA proposes a more streamlined system with just 4 slabs. The association highlights that the current framework, especially for sub-assemblies and components, impacts the export potential of the sector.

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