On Saturday, Finance Minister Nirmala Sitharaman presented the first full Union Budget of Prime Minister Narendra Modi’s third term, marking her record eighth consecutive Budget. This milestone brings her closer to the record set by Morarji Desai, who presented 10 Budgets. The Union Budget for 2025 arrives at a critical time, with India’s economic growth slowing to a four-year low amidst global uncertainties. Despite challenges such as U.S. tariff threats and geopolitical tensions, the Budget outlines a clear roadmap for resilience, with a focus on tax relief, infrastructure expansion, and sectoral reforms.
Tax Reforms: Simplification and Relief For The Middle Class
A major highlight of the Budget is the reform of the income tax regime, which introduces higher exemptions and simplified tax slabs.
- No Tax Up to Rs 12 Lakh: Individuals earning up to Rs 12 lakh annually will be exempt from paying income tax.
- Tax Relief for Higher Incomes: Those earning up to Rs 25 lakh will benefit from a Rs 1.1 lakh tax reduction under the new regime.
The new tax slabs are as follows:
- Up to Rs 4 lakh: No tax
- Rs 4 lakh – Rs 8 lakh: 5%
- Rs 8 lakh – Rs 12 lakh: 12%
- Rs 12 lakh – Rs 16 lakh: 15%
- Rs 16 lakh – Rs 20 lakh: 20%
- Rs 20 lakh – Rs 24 lakh: 25%
- Above Rs 24 lakh: 30%
The tax exemptions will result in Rs 1 lakh crore in direct tax revenue foregone, along with Rs 2,600 crore in indirect tax losses. Additionally, several reforms aim to simplify compliance, such as the rationalization of Tax Deducted at Source (TDS) rates and an increase in the threshold for Tax Collected at Source (TCS) on remittances under the Liberalized Remittance Scheme (LRS) from Rs 7 lakh to Rs 10 lakh.
Support For Startups And MSMEs
To bolster economic growth, the Budget extends several measures aimed at supporting startups and MSMEs:
- Startup Benefits: The period for startups to avail tax benefits has been extended by five years.
- Credit Guarantee Cover: MSMEs will receive increased credit guarantee cover, expanding from Rs 10 crore to Rs 20 crore for startups.
- New Fund for Startups: A Rs 10,000 crore fund-of-funds will be established to support innovation and entrepreneurship.
These initiatives aim to fuel innovation, increase employment, and provide a stable environment for new ventures to thrive.
Customs Duty And Tariff Adjustments
The Budget also includes several tariff adjustments:
- Customs Duty on Flat Panel Displays: The duty has been raised from 10% to 20%.
- Exemption for Critical Minerals: 12 more critical minerals will be exempt from Basic Customs Duty (BCD).
- Tariff Rate Changes: Seven tariff rates remove to streamline the customs process.
The government has projected the fiscal deficit for FY25 at 4.8% of GDP, with a target of 4.4% for FY26. It has also revised the capital expenditure (Capex) for FY25 to Rs 10.18 lakh crore, signaling a strong push for infrastructure development.
Key Announcements On Infrastructure And Energy
The Budget also lays out significant plans for infrastructure development:
- Energy Transition: A nuclear energy mission will focus on developing small modular reactors with an allocation of Rs 20,000 crore, aiming for 100 GW of nuclear energy by 2047.
- Development of Tourist Sites: The government plans to develop the top 50 tourism destinations in partnership with states, boosting domestic tourism and creating employment opportunities.
- Transport Infrastructure: The modified Udaan scheme will connect 120 new destinations, while financial support for greenfield airports in Bihar and the Western Kosi Canal project will further enhance regional connectivity.
Key Focus Areas: Education, Healthcare, And Social Welfare
The Budget also prioritizes sectors such as education, healthcare, and social welfare:
- Broadband Connectivity: All government secondary schools and primary healthcare centers will receive broadband connectivity.
- Healthcare Initiatives: Day-care cancer centers will be established in every district, with a target of 200 centers by 2025-26.
- Medical Education: 10,000 new medical seats will be added in colleges and hospitals by FY26.
The government will introduce a new social security scheme for gig workers, ensuring their registration on the E-shram portal and providing insurance coverage.
Focus On Agriculture And Rural Development
Agriculture remains a key focus, with the introduction of the Dhan Dhanya Krishi Yojana, which targets 100 low-productivity districts and aims to support 1.7 crore farmers. Other initiatives include a national mission to promote high-yielding seeds and a 5-year mission to boost cotton production.
Geopolitical Considerations And Global Economic Growth
Despite geopolitical challenges that may dampen global economic growth, India has drawn global attention for its resilience over the past decade. The Budget reflects India’s commitment to continuing its growth trajectory, supporting sectors that contribute to inclusive development, and boosting exports.
Conclusion: A Vision For A Self-Reliant India
The Union Budget 2025 aims to strengthen India’s position on the global stage while fostering growth across key sectors. With a focus on infrastructure, innovation, and inclusive growth, the government is laying the foundation for a more resilient and self-reliant economy. As the government moves forward with these initiatives, the Budget reflects a commitment to both immediate economic relief and long-term development.
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