Key Highlights of Union Budget 2025

The Union Budget 2025-26 was presented by the Finance Minister, Nirmala Sitharaman, in the Lok Sabha on Saturday, February 1, 2025. This Budget aims to drive India further into development and growth through a robust economy, middle-class support, and investment encouragement.

Important tax relief was provided to the middle class, as it increased the exemption limit on personal income tax to ₹12 lakh, and initiatives were also taken for MSMEs, startups, and employment schemes. The Budget also carries reforms in taxation, power, mining, and urban development, meant for inclusive growth in India to rise as a developed nation.

The vision of the government is of a Viksit Bharat that forms the crux of this budget, with a definite roadmap for long-term prosperity. With all this, the government desires to build a strong and sustainable economy that would benefit the entire society.    

Union Budget Theme 2025  

The Union Budget announced strategies to achieve the mission of “Viksit Bharat,” a developed India with inclusive, balanced growth. The government aims for “Sabka Vikas” (Development for All) over the next five years, focusing on poverty elimination, quality education and healthcare, skilled jobs, increased women’s participation in the economy, and making India a global food leader.   

The ten areas of focus set out in the Budget are agriculture, MSMEs, manufacturing, employment generation, innovation, energy security, exports, and rural prosperity. There will be four major growth engines: Agriculture, MSMEs, Investment, and Export, supported by reforms. To that end, the Budget proposes extensive reforms in six sectors: taxation, electricity, urban development, mining, financial sector, and regulatory systems, all aimed at enhancing India’s competitiveness in the world and making it a prosperous nation.  

1^st Engine: Agriculture

The Union budget 2025-26 heavily relies on agriculture as a key engine for growth. A few new schemes have come up to boost productivity, support farmers, and uplift the rural economy as their target.

Prime Minister Dhan-Dhaanya Krishi Yojana: The program aims to address irrigation, storage, and credit facilities for farmers and encourage them to adopt sustainable agricultural practices. Its target is around 1.7 crore farmers.

Building Rural Prosperity and Resilience: New Rural Prosperity and Resilience will help create jobs in rural areas by introducing skills, technology, and investment. It will focus on women, young farmers, and small landowners to enable rural migration to be optional rather than mandatory.

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Aatmanirbharta in Pulses: The government is launching a 6-year Mission-Aatmanirbharta in Pulses. This aims at making India self-sufficient in pulses, Tur, Urad, and Masoor in particular. The schemes will provide procurement support to farmers so that they will get fair prices.

Program for Vegetables & Fruits: Under this program, there will be a comprehensive program for vegetables and fruits to promote the cultivation and processing of healthy foods and the provision of fair prices for farmers. It will involve possible cooperation from and through farmer organizations as well as cooperatives.

Makhana Board in Bihar: A Makhana Board will be formed in Bihar to enhance the production and marketing of Makhana. This thus improves the livelihoods of people engaged in the sector. 

National Mission on High-Yielding Seeds: The National Mission on High-Yielding Seeds will promote research and development of climate-resilient, high-yielding seeds and contribute to enhancing farm productivity.

Fisheries: The government’s attention in the sphere of fisheries will continue towards harnessing the potential of the Marine sector, particularly in the Andaman & Nicobar and Lakshadweep Islands.

Mission for Cotton Productivity: To boost the productivity of cotton, the Mission will generate floral cotton growing activities, enhance farmers’ income, and bolster the textile industry.

Enhanced Credit through KCC: Lending limits of the Kisan Credit Card (KCC) scheme for the farmer will be raised so that they can avail of more financial help and assistance.

Urea Plant in Assam: To raise urea production, a new plant will be established in Assam, thereby adding one more unit to the fertilizer supply of the country.

The Catalyst for the Rural Economy: India Post could play a significant role in the rural economy through its wide network to support rural enterprises, entrepreneurs, and self-help groups.

Support to NCDC: Greater support will be provided to the National Cooperative Development Corporation (NCDC) for its operations in the realm of strengthening the cooperative sector.

Together, these initiatives aim to put agriculture on a transformative trajectory to improve farmer livelihoods and spur rural development.

2^nd Engine: MSME

Here’s a breakdown of the key points of the government’s efforts to boost Micro, Small, and Medium Enterprises (MSMEs) and related sectors:   

MSMEs- Engine of Growth: MSMEs remain vital to India’s economy, employing millions and contributing substantially to manufacturing and exports. The government plans to bolster its position through amendments to classification rules to allow more firms to grow and compete in the global market. The limits of MSME’s investment and turnover will be raised to accelerate their growth and job creation.

Enhanced Access to Credit: The government plans to improve MSME access to credit; for instance:

• Micro and small businesses can now get loans of up to ₹10 crore (up from ₹5 crore).
• More funding with lower fees for startups.
• Exporter MSMEs can access loans up to ₹20 crore.

Credit Cards for Micro Enterprises: The government is planning to introduce special credit cards for micro-enterprises that would extend loans up to ₹5 lakh, which would allow them quick funds for day-to-day workings.

Support for Startups: A fresh fund worth ₹10,000 crore for supporting startups is being set up. Besides, the government has assured support for women and those from Scheduled Castes and Tribes entrepreneurs through loans and capacity-building programs.

Focus on Labour-Intensive Sectors: The government seeks to create more jobs within certain labour-intensive sectors. Policies would be framed to bring such industries into focus to support them.

Support for the Footwear and Leather Industry: A scheme being launched would aim at boosting production efficiency and competitiveness for India’s footwear and leather industries with huge job creation and massive export gains.

Toy Sector: India to emerge as a global toy hub. The government will be developing clusters, skill sets, and manufacturing ecosystems for high-quality, sustainable toys, championing India’s brand, “Made in India.”

Food Processing: The government’s setting up of a National Institute of Food Technology in Bihar shall work toward enhancing and supporting the food processing sector. The initiative shall go a long way in enhancing the livelihood of farmers and creating employment in food processing, especially in eastern India.

Manufacturing and “Make in India”: The government shall be launching a National Manufacturing Mission to Julian’s support for industries of all sizes, with a new wave focused on clean technology, such as solar and EV batteries focused on a move toward self-sufficiency in these sectoral aspects.

3rd Engine: Investment

The following are three key focus areas for growth: people, economy, and innovation. These can be summarized as follows:

Investing in People

Logo: A program for providing nutritional support to children, pregnant women, and mothers in underserved areas.

Atal tinkering labs: 50,000 labs will be set up in schools to stimulate curiosity and innovation among students.               

Bharatnet Project: Broadening connectivity to all government schools and health centres in rural areas.

Bharatiya Bhasha Pustak Scheme: Digital books in Indian languages will be brought into circulation.

Centers of Excellence for Skill Development: Five centers will be created for training youth in manufacturing jobs in India.

Medical Education: 10,000 new medical seats to be added this year, growing to 75,000 in five years.

Support to Urban Poor: New schemes designed to help urban workers increase their earnings and levels of production.

PM SVANidhi Scheme: More street vendors will be promoted for loans and support to grow businesses.

Support for gig workers: Online platform workers will receive health and identification cards, covering about 1 crore workers.

Investing in the Economy

Public-private partnerships (PPP): More infrastructure projects will be developed by public-private partnerships for faster development.

State Support: States will receive ₹1.5 lakh crore in interest-free loans for capital projects.  

Jal Jeevan Mission: The mission of providing drinking water to rural households will continue until 2028.

Urban Sector Reforms: Funding of ₹1 lakh crore to be allocated for urban governance and infrastructure improvements.

Energy and Shipbuilding: Support shall be provided to the nuclear power and shipbuilding industries to promote energy and maritime development.

UDAN scheme: More regional airports and flights will come up in rural and underserved areas.

SWAMIH Fund: A new fund will be used to complete housing projects, thus benefiting middle-class families.

PM Gati Shakti Data: The relevant data and maps from the PM Gati Shakti Portal will provide access to the private sector for project planning and enhancing public-private partnerships (PPPs).

Tourism for Employment-led Growth: The development of 50 top tourist destinations in a state-partner-based approach, with land for infrastructure provided by the states.

• Skill Development: Intensive youth skill development programs will be organized for hospitality management institutes with a focus on placement.
• MUDRA Loans for Homestays: Funding through the MUDRA loans will be provided for creating homestays geared toward tourism and entrepreneurship at the local level.
• Travel and Connectivity: Efforts to boost tourism and employment will be made to enhance travel connectivity to tourist destinations.
• Performance-based Incentives: States will receive performance-based incentives for effective destination management. This also includes amenities, cleanliness, and marketing.
• Evisa Services: Streamlined Evisa services complemented by exemptions from visa fees for certain tourist groups will be initiated.
• A Special Focus on Spiritual Destinations: Special emphasis will be given to promoting destinations related to the life and teachings of Lord Buddha while continuing with the thrust on other spiritual and religious sites. 

Medical Tourism and Heal: Medical Tourism and Heal in India will be promoted in partnership with the private sector along with capacity building and easier visa norms.

Investing in Innovation

Private Sector Research and Development (R&D): ₹20,000 crore allocated to support private sector-driven research and innovation.   

Deep Tech Fund of Funds: A new fund to support next-generation tech startups.

PM Research Fellowship: Ten thousand fellowships have been offered for work in technological research at IITs and IISc over the next five years.

Gene Bank for Crops: Setting up of a second gene bank with a collection of 10 lakh germplasm lines to safeguard the country’s future food security.

National Geospatial Mission: To develop a geospatial infrastructure for urban planning and land records.

Gyan Bharatam Mission: To preserve, document, and digitize one crore manuscripts and set up a National Digital Repository.

4th Engine: Exports

This initiative focuses on increasing India’s exports and ease of trading undeterred across the globe:

The Export Promotion Mission: A new mission by the Government of India shall help exporters fettered by the lack of export credits, providing support to the MSME sector while highlighting some of the ingenious trade regulations to enhance exports.

The Bharat Trade Net: A digital platform will ease the documentation and financing process, paving the way for trade facilitation.

Global Supply Chains: The government will render support to industries to partner with global supply chains by enhancing domestic manufacturing and providing sector-specific assistance.

Industry 4.0: The focus is expected to be on high-tech industries, particularly electronics, opening up opportunities for skilled youth.

Global Capability Centres: This framework will act as an impetus for setting up business centers across tier-2 cities, facilitated by better infrastructure and human resources.

Air Cargo and Warehousing: Enhancement of air cargo and customs processes shall be controlled in terms of high-value perishable products to expedite shipment.

Reforms as the Fuel

The government is focusing on several key reforms to improve the economy:

Tax Reforms

These include faceless assessments and expedited returns to ease pending grievances in the past.

A new income tax bill will be released next week, furthering tax administration reforms.

Financial Sector Reforms

Insurance: The FDI limit in the insurance sector will be increased from 74% to 100%, provided that the investments of any foreign company are entirely directed toward the Indian economy.

Postal Bank: The India Post Payment Bank will expand universally, particularly in rural areas, to broaden accessibility to financial services.

Credit Enhancement Facility: Approval for credit enhancement would be given through a separate scheme so that infrastructure financing through the issuance of corporate bonds is made more encouraging.

Grameen Credit Score: Comprehensive credit scoring for rural areas and, further, for self-help group members will now be created by public sector banks to ease their passage into getting loans.

Pension Sector: This constitutes a more developed idea forum on what can be done for better pension products.

KYC Process: The simplified KYC process will also be rolled out as of 2025 for more convenient updating and capitalization.

Company Mergers: Companies come into the fold of fast-track merging, enabling mergers to be speedily approved, but yet a reduction in the number of companies for which a fast-tracked merger will be considered.

Foreign Investment Treaties: In 2024, two Bilateral Investment Treaties were concluded. The BIT model will again be revised so that the format is more attractive to foreign investors.

Regulatory Reforms The government worked for the past ten years to ease the process of doing business and keep the legal regime updated to catch up with the pace of technological advancement and global changes. They aim to develop a flexible, trust-based system that should enable businesses to expand. Four major reforms are planned:

• High-Level Committee for Regulatory Reforms: A high-level committee for regulatory reforms would review non-financial sector regulations and suggest improvements within a year to ease doing business.
• Investment Friendliness Index of States: The state investment-friendly index is proposed to be announced in 2025. It will rank states on how friendly they are for investments, improving the business climate.
• FSDC Mechanism: This new mechanism under the Financial Stability and Development Council will review current financial regulations and work on improvement.
• Jan Vishwas Bill 2.0: This will simply drop penalties for over 100 legal provisions, simplifying the system for businesses.

Fiscal Policy

The government’s fiscal policy involves the thorough management of the nation’s finances:

Fiscal Consolidation

Settlement of debt is to be reduced in time. The fiscal deficit, which reflects the difference between government income and expenditure, should be on a downward path.

Revised Estimates: 2024-25

• Total Receipts: ₹31.47 lakh crore, of which ₹25.57 lakh crore is to be raised via tax.
• Total Expenditure: ₹47.16 lakh crore, including ₹10.18 lakh crore for capital investment.
• Fiscal Deficit: 4.8% of GDP.

Budget Estimates: 2025-26

• Total Receipts: ₹34.96 lakh crore.
• Total Expenditure: ₹50.65 lakh crore.
• Fiscal Deficit: 4.4% of GDP.
• To finance this deficit, the government will borrow ₹11.54 lakh crore from the market. Gross borrowings amount to ₹14.82 lakh crore.

The government aims to maintain a manageable level of fiscal deficit while being able to promote growth, infrastructure, and welfare programs. 

Indirect Taxes

Customs duties have undergone various amendments by the government in favour of domestic manufacturing, value addition, exports, and relief to the public:

Changes in Customs Tariff

Tariff Rate Cuts: Seven tariff rates will be eliminated, leaving eight tariff rates, including zero.

Cess & Surcharge Adjustments: The government will rightly apply cess to ensure duty levels. Some items will see duty reduced, and a surcharge will be removed on 82 tariff lines.

Tentative Sector-Specific Proposals

Relief for Medicines: A total of 36 life-saving drugs will be 100% exempt from Basic Customs Duty (BCD). BCD will also be lowered to 5% on 6 drugs. In addition, 37 other medicines will be added to the list of drugs exempted from duties under the patient assistance programs.

Critical Minerals: To enhance their availability for the manufacture of products in India, the BCD of 12 critical minerals, such as cobalt and lithium-ion battery scraps, will be exempt.

Textiles: With the aim of furthering the production of technical textiles, two more looms will be exempted from BCD. There will be a change in duty on knitted fabrics.

Electronics: BCD on Interactive Flat Panel Displays (IFPD) will be increased to 20%, with a corresponding cut in or exemption of BCD on parts for LCD/LED TVs to strengthen local manufacturing.

Lithium-ion Batteries: The government will henceforth add 35 capital goods for electric vehicle (EV) batteries and 28 for mobile phone batteries to the exempt list to encourage local manufacturing.

Shipping Sector: The Basic Customs Duty on inputs used for shipbuilding and shipbreaking will remain exempt for the next ten years in order to spur growth in this sector.

Telecommunication: The BCD on carrier-grade ethernet switches will be cut from 20% to 10%, aligning it with noncarrier switches.

Export Promotion

Handicraft Goods: Adding extended time for export of handicrafts for six months to one year, with a further three-month extension subject to need. Nine new items will be added to the duty-free inputs list.

Leather Sector: Wet Blue leather products are to be fully exempt from BCD to aid in domestic value enhancement. Crust leather, likewise, would be exempt from export duties.

Marine Products: BCD on certain seafood products like fish paste and fish hydrolysate is brought down with the intention to boost Indian seafood exports.

Railway Goods: Export time limit for foreign-origin railway goods received for repairs like aircraft and ships will be extended to one year.

Trade Facilitation

Provisional Assessment: The time for finalization of the provisional assessment will be two years extendable by a further one year so that uncertainty is avoided for the traders.

Voluntary Compliance: Importers or exporters will, however, be allowed to voluntarily declare what they believe, and pay all dues, including interest, without penalty against them unless as a result of an investigation already launched by the government.

End-Use Flexibility: The time limit for the end-use of imported materials to be raised from six months to one year, while importers now file quarterly reports rather than monthly ones.

Direct Taxes

The government has initiated various reforms to facilitate tax administration, alleviate compliance burdens, and encourage investment while focusing on middle-class consumers and improving business conditions.

Taxation Reforms

The government is working on a simplified income tax bill to formulate a new reform. It aims to reduce the complexity of the present legislation, enhancing tax administration and taxpayers alike, by removing nearly half of the present volume of the law.

Key Objectives of the Proposals

The overarching goal is to rework the existing structure of personal income taxes, within the ambit of the permitted exemptions on personal income taxes, especially concerning the middle-class taxpayer, ease the process of filing TDS/TCS, foster voluntary compliance while reducing compliance burden and enhance ease of doing business with an emphasis on employment generation and investment opportunities.

Rationalization

TDS: The government is bringing it down to reduce the number of TDS rates and raise the thresholds. For example, the tax deducted limit for senior citizens will be raised from ₹50,000 to ₹1 lakh, while for rent, the limit will raise from ₹2.4 lakh to ₹6 lakh.

TCS: TCS on foreign remittances will be raised from ₹7 lakh to ₹10 lakh; for educational remittances funded by loan, TCS exemption is planned.

TDS on Goods Sales: TCS on direct sales is scrapped and will be substituted and higher TDS in non-PAN cases will apply.

Decriminalization: The government will also take steps to decriminalize delayed and defaulted payments toward TDS.

Encouraging Voluntary Compliance

The government introduced the updated return facility in 2022, allowing taxpayers to revise and correct their income declarations. The time limit for filing updated returns will be extended to four years from the two-year limit.

Easing Compliance Burdens

Charitable Trusts: The registration period for small charitable trusts will be extended from five years to ten, with minor defaults not leading to severe consequences.

Self-Occupied Properties: Taxpayers can avail of the benefit of two self-occupied properties with no additional conditions.

Ease of Doing Business

Transfer Pricing: A scheme for establishing arm’s length prices for international transactions over a three-year period will be initiated.

Digitalization: The appellate stage will be fully digitalized.

The Vivad se Vishwas Scheme: This was introduced for the resolution of tax disputes, and 33,000 taxpayers have benefited from the scheme.

Investment and Employment

Electronics Manufacturing: A presumptive taxation scheme will be introduced for the non-residents providing services to electronics manufacturers.

Tonnage Tax Scheme: This will be extended to inland vessels encouraging a promotion of water transport.

Start-ups: An extension of the period for start-ups to avail of tax exemptions until 2030.

IFSC: The benefits for businesses within the IFSC will be continued, and the cutoff date for such benefits will also be advanced until 2030.

Alternative Investment Funds (AIFs): Tax certainty for AIFs investing in infrastructure will be brought in.

Infrastructure funds: Investments in infrastructure made by sovereign funds and pension funds would be extended to 2030.

Personal Income- Tax Reforms focusing on Middle class

The government has shifted its focus to simplifying the personal income tax structure for the middle class, considered the backbone of the Indian economy. Since 2014, Prime Minister Modi has raised the exemption limit to ₹2.5 lakh in 2014, which is now ₹7 lakh in 2023. The present announcement states that under the new tax regime, income up to ₹12 lakh will not be taxed. For salaried individuals, the exemption limit will go up to ₹12.75 lakh due to the standard deduction of ₹75,000.

The tax slabs are a revised scheme to bring relief to all taxpayers, especially middle-class taxpayer, to lessen their tax burden. New tax rates are:

Annual Income	Tax Rate
0-4Lakhs	Nil
4-8 Lakhs	5%
8-12 Lakhs	10%
12-16 Lakhs	15%
16-20 Lakhs	20%
20-24 Lakhs	25%
Above 24 Lakhs	30%

Taxpayers with taxable income of up to ₹12 lakh (excluding special incomes like capital gains) will be exempt from income tax under the new scheme. Illustrating this with an example:

• A person with ₹12 lakh will be able to save ₹80,000.
• Somebody earning ₹18 lakh will save ₹70,000.
• A person earning ₹25 lakh will save ₹1.1 lakh.

The government is likely to forgo ₹1 lakh crore in direct tax and ₹2,600 crore in indirect tax. Those measures should improve consumption, saving, and investing by leaving more money in the taxpayers’ wallets.

Conclusion

The Union Budget 2025-26 stands out as a testament to the government’s commitment to the establishment of a developed India through many inclusive and sustainable growth strategies. By focusing on agriculture, MSMEs, employment, and innovation, this budget aims to improve the economy and the standards of living of all citizens, mainly the middle class.

The proposed taxes and urban development reforms, along with energy security issues, are set to build India’s global competitiveness and long-term sustainability. With a clear vision for Viksit Bharat, the Budget lays a fertile ground for a future where growth is realized by all.   

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