A consumption driven push to the economy is set to benefit the hotels and tourism industry. Reposing faith on middle class in nation building, the Union Budget 2025-26 proposes new direct tax slabs and rates under the new income tax regime so that no income tax is needed to be paid for total income upto Rs 12 Lakh per annum, i.e. average income of Rs 1 Lakh per month, other than special rate income such as Capital Gain. Salaried individuals earning upto Rs 12.75 Lakh per annum will pay NIL tax, due to standard deduction of Rs 75,000. This has come at a right time for the sector as overall scenario is slightly cautious following slowdown in economic growth. The consumer confidence has declined marginally as Reserve Bank of India’s (RBI) November 2024 round of its bi-monthly consumer confidence survey (CCS). However, post the budget, the hoteling segment will likely see an immediate positive impact.
Key Budget Proposals and their impact:
Top 50 tourism destination sites will be developed in partnership with states to boost tourism across India. States will provide land for the development of tourist sites, with a focus on enhancing infrastructure.
To further boost tourism, hotels in the key destinations will be included in the harmonised infrastructure list, ensuring better access to financing and development support.
Mudra loans will be made available for homestay businesses to encourage local tourism. A focus will be placed on promoting medical tourism and "Heal-in-India" initiatives to attract international patients.
A deeptech fund-of-funds will be explored to support technological innovation and startups in the sector. A National Geospatial Mission will be launched to enhance spatial data and mapping capabilities for better planning and development.
Finance Minister Nirmala Sitharaman said that to rationalize TDS/TCS, TDS threshold on rent has been increased to Rs 6 Lakh from Rs 2.4 Lakh per annum. This will likely open up opportunities to put up more properties on rent as holiday homes in major tourist destinations.
Outlook:
Overall macroeconomic undertone remains firm for India as economic growth is expected to remain steady for the next two fiscal years, starting from April 2025, according to a World Bank report. The long term outlook for the tourism and hospitality industry will shape up in tune with economic trends and rising incomes and sustained infrastructure development augurs well for this sector Finance Minister Nirmala Sitharaman announced plans to focus on promoting medical tourism in India which currently is estimated to be around $ 9 billion sector. Recent weakness in Indian Rupee and a tech enabled services delivery in this highly potential space offers tremendous potential.