As the Union Budget 2025 approaches, the NBFC sector looks forward to policy measures that will bolster its pivotal role in India’s economic growth. NBFCs play a crucial role in extending credit to underserved segments such as MSMEs, Housing, Agriculture, and Renewable Energy, contributing significantly to inclusive development.
Establishment of a dedicated liquidity facility through the Finance Industry Development Council (FIDC), aimed at ensuring affordable credit flow to priority sectors would be beneficial.
This initiative would support small and mid-sized NBFCs by providing competitive-rate funds, reducing dependency on high-cost borrowing. Empowered with steady capital, NBFCs can effectively meet the credit needs of sectors crucial for job creation, rural development, and sustainable economic growth.
Anticipated reforms like reducing the SARFAESI Act’s loan threshold to ₹1 lakh, could expedite asset resolution and bolster financial resilience. Additionally, a proposed market-making mechanism could streamline funding access, enhancing the ability to serve priority sectors effectively.
Such reforms if implemented, would further help NBFCs to contribute significantly to India’s economic aspirations, ensuring inclusive and sustainable progress.
As we gear up for Budget 2025, India’s rural heartland, Bharat, stands at the forefront of fostering equitable economic development. The journey towards a $7 trillion economy hinges on transforming these rural areas, driven by groundbreaking financial and digital solutions from leading fintech players.
At PayNearby, we remain committed to strengthening our infrastructure to ensure the last-mile delivery of essential financial and digital services, including banking, credit, assurance (insurance + assets), and e-commerce, making them accessible to Bharat.
However, for these services to reach citizens at the last mile, technology, security, trust, and Government support are crucial.
Towards this goal, in Budget 2025, we urge the consideration of:
• A waiver of GST on all financial services offered at BC outlets, which serve as the backbone of rural banking in India, would ease the financial burden on last-mile agents and encourage more retailers to participate in delivering seamless banking services to underserved communities.
• Additionally, we urge tax benefits on total expenditure for fintechs operating in rural regions, which can improve cash flow and ensure smooth operations. This includes a dedicated 5% GST rate for startups focused on last-mile empowerment, enabling essential financial and digital services for citizens. Simplified and supportive tax policies will boost sustainable growth and encourage more agents to deliver seamless services to everyone, everywhere.
There is a huge growth prospect of the P2P lending industry. We expect the government to develop a favourable environment that can further accelerate its growth. The sector can address the credit flow issues faced by the Individuals and MSMEs, which is the backbone of the economy and generates the maximum employment.
It has the potential to significantly benefit India’s missing middle class—a group that bears the highest tax burden while driving a substantial portion of the economy.
Introducing tax incentives for P2P investments in the upcoming budget could be transformative, increasing the flow of capital to small and marginal borrowers and addressing critical financial gaps. This step would encourage lenders to use lending platforms and boost access to credit for a large section of society that has been deprived of it.
Additionally, we expect the government to implement income tax cuts for the salaried class, which would drive spending and aid in the recovery of the economy during a slowdown.
In the last 10-12 years, the government has actively collaborated with the startup ecosystem and introduced new schemes and policy changes, such as the abolition of the angel tax in the previous budget. We expect this support to continue in the future as well. In the upcoming budget, we have two key requests for the government.
Firstly, employees who join early and take risks should be rewarded, not taxed when the ESOP is exercised, as opposed to when there is a sale of those equities. It would be fairer to tax ESOPs only when the shares are sold, aligning the tax obligation with the employee’s financial ability to pay.
Secondly, there is an urgent need for a sovereign fund, similar to those maintained by several governments around the world. In a milestone move, the government announced a Rs. 1000 cr VC fund for space startups in the previous budget. Similarly, we need to unlock more capital through various pools within the government.
Though India now has a fair amount of domestic capital available, the government must look for ways to unlock institutional capital and be available for startups. Institutionalizing risk capital, which can then flow through VC funds to startups, is crucial for the overall growth of the Indian economy and the startup ecosystem.
India’s economy slowed to a seven-quarter low of 5.4% between July-September 2024 with it witnessing a slowdown in consumer demand. Also, there is a slowness in street up investment as well as new technologies investment.
This presents an opportunity for the Government to address the challenges faced by individuals especially the middle-income group and startup ecosystem alike in the upcoming Union Budget.
This Budget should prioritize inflation as a critical factor and the Finance Ministry must consider increasing tax slabs. This will provide significant relief to salaried individuals, leaving them with increased disposable income and giving a boost to consumer spending.
Another key focus should be the treatment of ESOPs. Currently, the difference between the market price and the exercise price is considered to be a prerequisite, which is taxed as salary in the hands of the employees. Shifting taxation from perquisite to capital gains would reduce the tax burden for employees given that employees hold ESOPs for long-term wealth generation.
Overall, this reform would enhance the attractiveness of ESOPs as a key tool to attract and retain talent, thereby empowering startups to scale sustainably. In addition, given the evolution of new technologies in AI space and chips, India shall invest and provide fiscal impetus to startups working in that area.
As we prepare for the Union Budget 2025–26 and in light of the recent challenges faced by the sector, we hope the government will extend support through dedicated funding windows and a robust credit guarantee mechanism, particularly as borrowing costs continue to rise.
We also anticipate the introduction of more women entrepreneur-focused schemes to foster entrepreneurship among women, enabling them to establish and scale businesses that can drive economic stability and uplift rural communities.
To further strengthen financial inclusion at the grassroots, the government can enhance digital infrastructure to improve access to financial services in underserved areas, roll out nationwide financial literacy programs, and promote inclusive policies to ensure equitable opportunities for marginalized communities.
Sudhir Kaushik, Co-Founder and CEO of Taxspanner (Subsidiary of Zaggle)
For a change, no change. Retain the tax rules and slab structure of both tax regimes.
Every year, taxpayers are made to follow new rules set in the budget. This can sometimes upset the long-term planning that individuals might have done for their investments and financial goals.
My humble appeal to the Finance Minister is that please don’t make any change in the tax rules or the slab structure of the two tax regimes. This will spare taxpayers anxiety and uncertainty.
The New Tax Regime has already been made attractive for non-savers to boost consumption. Let the tax-savers also live their plans and not get into the trap of lower tax rates because future financial responsibilities aren’t getting shifted with simplified tax regimes.
Let the taxpayers and their advisors choose the regime that suits them best. This will truly be a more democratic approach instead of forcing the new tax regime on taxpayers.
For the upcoming budget, policymakers should consider the evolving dynamics of domestic and global trade, which are at a pivotal crossroads. As India’s infrastructure sector continues to grow, leading to a more efficient supply chain ecosystem, it becomes increasingly important to ensure that the costs of key inputs remain competitive.
Therefore, the budget should focus on rationalizing import duties on scrap metal, as rising input costs directly impact infrastructure development. Lowering these taxes will help reduce overall project costs and support the growth of critical infrastructure.
Furthermore, removing import taxes on essential solar components is crucial given India’s goal of producing 50% of its energy from renewable sources, with 80% expected to come from solar power.
While encouraging domestic production is vital, import duties need to be recalibrated to support both domestic capacity building and the immediate need for cost-effective solar components. By taking a balanced approach, we can achieve our renewable energy goals and maintain the pace of infrastructure development.
Overall, we expect the government to lower import taxes on goods that boost local manufacturing and help the economy grow.
As we approach Budget 2025, the government’s continued focus on the MSME sector is encouraging. This year, we expect an even stronger thrust on fostering MSME growth to achieve our $5 trillion economic vision.
To address the persistent credit gap for MSMEs, the budget should prioritize expanding the reach of collateral-free credit financing platform and reduce borrowing costs for small businesses.
Few enablers for this objective can be:
• Enabling seamless trade financing through policy support for trade credit insurance to boost working capital access for SMEs thereby enhance financial inclusion.
• Enable TReDS to integrate with GST portal for validation of genuinety of invoice uploaded on TReDS by MSMEs and ease the Factoring of receivables of SMEs with out dependence on Buyers for approval.
• Fasten the process of TReDS integration with GEM portal for expanding the reach of TReDS credit lines to MSMEs working for Government and Public sector companies.
The upcoming Union Budget presents a pivotal opportunity to address structural inefficiencies in working capital cycles for MSMEs.
Today, over 80% of small businesses face cash flow challenges due to delayed receivables and limited access to formal credit. While initiatives like TReDS and GST reforms have improved transparency, we need sharper incentives for digital adoption among lenders and corporates.
Policies that encourage deep-tier financing and integration of alternative credit data into underwriting frameworks can significantly bridge the $530 billion MSME credit gap. A targeted push towards tech-led digital lending for FIs here would not just unlock liquidity but also catalyze India’s vision of a $5 trillion economy.
As the government moves forwards towards achieving USD2 Trillion exports by 2030, Budget 2025 must address the persistent liquidity challenges faced by exporters, particularly in the wake of ongoing geopolitical trade disruptions.
Export credit has witnessed a decline over the past two years, making it imperative for targeted solutions like enhanced interest equalization schemes, simplified access to financing platforms, and broader support for trade credit insurance to mitigate risks.
With MSMEs contributing over 40% of India’s exports, we would expect policies that focus on increasing export credit growth, especially for this vital sector, are critical. Strengthening integration into global supply chains, addressing fragmentation, and promoting innovation within institutions like ECGC will not only improve credit accessibility but also boost India’s competitiveness in the global market.
Digital Public Infrastructure like International Trade Financing Services (ITFS) with participants like Exporters, FIs and Trade Credit Insurers, should be further augmented bActivating Insurers and Initiating Interest equalisation equivalent esp for MSMEs and encouraging Financiers like IBUs could be impactful innovative enablers.
Such measures, alongside a sustained push towards building seamless financial ecosystems, will ensure India’s export economy grows from USD 776 Billion to USD2 Trillion, unlocking significant opportunities for businesses across the country.
The government capital expenditure is a key driver and the ₹11 lakh crore Capex announced in 2024 has already set a strong foundation, and we anticipate an even more ambitious outlay in the 2025 budget.
Additionally, lower power supply rates would be a game-changer for the manufacturing sector, reducing production costs and boosting exports. Together, these measures could significantly strengthen India’s economic trajectory in the coming years.
As the Union Budget approaches, there’s growing anticipation that Finance Minister Nirmala Sitharaman will enact reforms to benefit the vast and diverse populace of taxpayers in India. The current tax system includes a wide array of sections, deductions, and exemptions, which poses significant challenges for taxpayers.
This forthcoming budget is anticipated to roll out several key reforms designed to streamline the tax experience in India.
Expected changes include establishing a straightforward residence rule that distinguishes between residents and non-residents more clearly, implementing a unified tax structure that levels the playing field for domestic and international companies alike, and clarifying the tax timeline by consolidating the financial and assessment years into a single, understandable term.
Moreover, the budget seeks to simplify the overall tax structure to make it more transparent and less cumbersome, facilitating easier compliance for both individuals and enterprises.
These reforms are expected to significantly ease the tax filing process, making it more straightforward than ever before.…Read more by The News Desk