In terms of all worldwide economies, India is one of the fastest growing economy. From the last a decade, the current government that is the Modi government’s progress track record and havoc improvements have gained attention globally. The last 2 tenure of the Modi government are so alterative because they served as a leading light or beacon and has enabled the government to make a headway with perseverance.  In the union budget 2025, the proposed expansion measures focuses on different and numerous sectors that are garib, yuva, annadata and nari (poor, youth, farmers, women).

Theme of Union Budget 2025

The theme of union budget of fiscal year 2025-26 roam around ‘SABKA VIKAS’ which encourages balanced development of all sectors. This budget’s motive is ‘VIKSIT BHARAT’ which incorporates zero poverty, up to the hilt education for everyone, reasonable and good quality healthcare, excellent skilled labour with significant employment, 70% women involved in economic activities, and last but not the least, farmers making our nation the ‘food basket of the world.’ 

The growth journey of the budget revolves around 4 engines which are agriculture, MSME, investment and exports. The projected development measures focuses on the garib, yuva, annadata and nari which covers 10 wide range which includes accelerating agricultural growth and productivity, building rural prosperity and resilience, taking everyone along on the path of inclusive development, to promote manufacturing and advance make in India, support to MSMEs, enabling employment-led growth, investing in people, economy and innovation, securing energy supplies, encouraging exports, and fostering innovation.

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What are the Budget Estimates of FY 2025-26?

The budget estimates are:

• Total incomes and total expenditure, excluding borrowings, are estimated at ₹ 34.96 lakh crore and ₹ 50.65 lakh crore respectively.
• Net tax receipts are estimated at ₹ 28.37 lakh crore.
• Fiscal deficit is estimated to be 4.4% of GDP.
• Gross market borrowings are estimated at ₹ 14.82 lakh crore.
• Capital expenditure earmarked at ₹11.21 lakh crore (3.1% of GDP) in FY 2025-26.

Direct Tax

This time the budget focuses the middle class as they provide strength for the country’s growth. The new structure will significantly decrease taxes for the middle class, leaving further money that will promote domestic accommodation, savings and investment. Under the new regime, no personal income tax is payable up to income of Rs 12 lakh (i.e. average income of Rs 1 lakh per month other than special rate income such as capital gains). For salaried taxpayers, this limit will be Rs 12.75 lakh due to standard deduction of Rs 75,000. The new Income Tax Bill will be clear and direct so that it is easy to understand for taxpayers and the tax administration, thereby increasing tax certainty and reducing litigation. Revenue of about Rs 1 lakh crore in direct taxes will be waived off.

Measures in Direct Taxation

• To rationalize Tax Deducted at Source (TDS), the number of rates and limits above which TDS is deducted has been reduced and the limit for tax deduction on interest for senior citizens has been doubled from the current Rs 50,000 to Rs 1 lakh.
• The annual limit for TDS on rent was increased from Rs 2.40 lakh to Rs 6 lakh. The limit for collect tax at source (TCS) on remittances under the Liberalized Remittance Scheme (LRS) of RBI has been augmented from Rs 7 lakh to Rs 10 lakh and the provisions for higher TDS inference will be applicable only in non-PAN cases.
• Cases of delay in payment of TCS till the due date of filing the return will be decriminalized.
• Increasing the period of registration of small charitable trusts/institutions from 5 years to 10 years will reduce their compliance burden and the benefit of claiming the annual value of self-occupied properties as nil for two such self-occupied properties. Will be extended without any conditions.
• As a measure to promote ease of doing business, the government has set a 2 year period for finalizing the provisional valuation, extendable by up to one year.
• The government has proposed to give exemption on withdrawals made from NSS by individuals on or after August 29, 2024. 
• The government also proposes to allow for NPS Vatsalya accounts the same tax treatment as is available for normal NPS accounts, subject to overall limits.
• Expanding the scope of safe harbor rules to decrease legal cases and provide confidence in international taxation.
• Certainty of taxation on Category I and Category II AIFs investing in infrastructure and other such sectors on gains from securities.
• Exclusive benefits to ship-leasing units, insurance offices and treasury centers of global companies established in IFSC.
• Tax certainty for electronics manufacturing schemes, tonnage tax scheme for inland vessels and 5-year extension for incorporation of start-ups.

Also Read: Income Tax Slabs FY 2023-24 & AY 2024-25 (New & Old Regime Tax Rates)

Measures in Indirect Taxation

• Rationalization of customs tariff structure for industrial goods: Removal of seven tariff rates, not imposing more than one cess or surcharge and imposing equivalent cess to maintain effective duty incidence on most of the goods and imposing lower cess on some goods.
• Enhanced access to life-saving medications: 36 life-saving medicines/drugs in the exempted list, 37 medicines in the 5% duty list and 13 new patient assistance programs in the exempted list.
• Make in India: Open sale discount is going to be available for LED/LCD TV textiles, capital goods for lithium ion batteries of mobile phones and EVs.
• Promotion of MRO: 10 years exemption on ship goods for construction and breaking of ships, extension of time limit for export of railway goods transported for repair.
• Export Incentives: Duty free input zone for handicrafts and leather.
• Trade Facilitation: Time limit fixed for finalizing provisional assessment, new provision for voluntary declaration of material proofs after clearance and fee payment with interest but without forfeit, IGCR rules were modified to prolong the time limit to 1 year and to file quarterly returns instead of monthly.

Engines of Development

Agriculture as the 1st Engine of Development

• Pradhan Mantri Dhan Dhanya Krishi Yojana, the Developing Agricultural Districts Program will be launched in partnership with states, covering 100 districts with low productivity, moderate cropping intensity and below average credit parameters, to benefit 1.7 crore farmers.
• A comprehensive multi-sectoral program will be launched in partnership with States to address underemployment in agriculture through skills, investment, technology and to strengthen the rural economy while building rural prosperity and resilience. In this, 100 developing agricultural districts will be included in Phase-1.
• The government will launch a 6-year “Mission for Aatmanirbharta in Pulses” focusing on arhar, urad and masoor. NAFED and NCCF will purchase these pulses from farmers during the next 4 years.
• A comprehensive program for vegetables and fruits will be launched to promote production, efficient supply, processing and remunerative prices for farmers in partnership with states and a Makhana Board will be established in Bihar to improve the production, processing, value addition and marketing of Makhana.
• A National Mission on High Yielding Seeds will be launched aimed at strengthening the research ecosystem, targeted development and dissemination of high yield seeds and commercial availability of more than 100 seed varieties.
• The Government will bring in an empowering framework for sustainable harnessing of fisheries in the Indian Exclusive Economic Zone (EEZ) and high seas with special focus on Andaman and Nicobar and Lakshadweep Islands.
• A 5-year mission announced to significantly improve the productivity and sustainability of cotton farming and promote extra-long staple cotton varieties and the loan limit under the revised interest subvention scheme for loans taken through KCC will be increased from ₹ 3 lakh to ₹ 5 lakh.
• A urea plant with an annual capacity of 12.7 lakh metric tonnes will be set up in Namrup, Assam.

MSMEs as the 2nd Engine of Development

• Credit cards for micro enterprises: Customized credit cards with a limit of ₹ 5 lakh for micro enterprises registered on the Udyam portal, 10 lakh such cards will be issued in the first year.
• Scheme for first-time entrepreneurs: A new scheme will be launched to provide term loans up to ₹ 2 crore during the next 5 years to 5 lakh first-time entrepreneurs, including women, Scheduled Castes and Scheduled Tribes.
• Manufacturing mission with the order to emphases on a vibrant and dynamic MSME sector, ease and cost of doing business, quality products, future ready workforce for in-demand occupations, clean technology manufacturing and ultimately availability of technology for climate-friendly development.
• Focus product scheme for footwear and leather sectors: The scheme is expected to facilitate employment for 22 lakh people, turnover of Rs 4 lakh crore and exports of over Rs 1.1 lakh crore.
• Measures for the toy sector: Focus on development of groups, skills and a manufacturing system that will create high quality, exclusive, ground-breaking and ecological toys to signify the 'Made in India' brand.
• Support for food processing: Establishment of National Institute of Food Technology in Bihar, increase in income of farmers and skills, entrepreneurship and employment opportunities for youth.

Revision in classification criteria for MSMEs

Major increase in credit availability with guaranteed cover

Investment as the 3rd Engine of Development

Investing in People

• Saksham Anganwadis and Nutrition 2.0 provide nutritional support to more than 8 crore youngsters, 1 crore pregnant women and breastfeeding mothers across the country and about 20 lakh teenage girls in aspirational districts and the North-East region.
• 50,000 Atal Tinkering Labs will be set up in government schools in the next 5 years and broadband connectivity will be delivered to all government secondary schools and primary health centers in rural areas under the BharatNet project.
• Bharatiya Bhasha Pustak Scheme was announced to make Indian language books available in digital form for school and higher education.
• 5 National Centers of Excellence for skills will be set up with global proficiency and partnerships to prepare our youth with the skills essential for “Make for India, Make for the World” manufacturing.
• Additional infrastructure will be made in the 5 IITs started after 2014 to enable education for more than 6,500 students. Center of Excellence in Artificial Intelligence for Education will be set up with a total outlay of ₹500 crore.
• 10,000 more seats will be added in medical colleges and hospitals next year, taking the rise to 75000 seats in the next 5 years. The government will set up day care cancer centers in all district hospitals in the next 3 years, 200 centers in 2025-26.
• A scheme was announced for the socio-economic upliftment of urban workers to help them improve their income and achieve sustainable livelihood.
• The scheme will be revamped with enhanced loans from banks, UPI linked credit cards with a limit of Rs 30,000 and capacity building support. The government will make arrangements for identity cards, registration on e-Shram portal and health care under PM Jan Arogya Yojana for gig-workers.

Investing in Economy

• The infrastructure related ministries will come up with a 3-year pipeline of projects in public private partnership mode. Proposed outlay of ₹1.5 lakh crore for 50-year interest-free loans to states to incentivize capital expenditure and reforms.
• A second asset monetization plan for 2025-30 was announced to bring back ₹10 lakh crore of capital in new projects and the Jal Jeevan Mission will be extended till 2028 with an increased total outlay.
• Urban Challenge Fund of ₹ 1 lakh crore announced to implement proposals on 'Cities as Growth Hubs', 'Creative Redevelopment of Cities' and 'Water and Sanitation', ₹ 10,000 crore for 2025-26 Allocation is proposed.
• The Atomic Energy Act and the Civil Liability for Nuclear Damage Act will be revised. Nuclear Energy Mission to be set up for research and development of Small Modular Reactors (SMRs) with an outlay of ₹20,000 crore, 5 indigenously developed SMRs will be operational by 2033.
• The shipbuilding financial assistance policy will be redesigned. Large vessels above a specified size will be included in the Infrastructure Harmonized Master List (HML). A Maritime Development Fund will be set up with a corpus of Rs 25,000 crore, of which up to 49 per cent will be contributed by the government and the remaining by ports and the private sector.
• A policy will be brought in for recovery of critical minerals from the remains. SWAMIH Fund 2 will be set up as a hybrid finance facility with contributions from the government, banks and private investors. This ₹15,000 crore fund will aim to quickly complete another 1 lakh units.

Investing in Innovation

• The government has allocated ₹20,000 crore to implement private sector-driven research, development and innovation announced in the July Budget. As a part of this initiative, a Deep Tech Fund of Funds will also be explored to catalyze the next generation of start-ups.
• Over the next 5 years, under the PM Research Fellowship Scheme, we will provide 10,000 fellowships for technical research in IITs and IISc with enhanced financial support.
• A second gene bank with 10 lakh germplasm lines will be established for future food and nutrition security. 
• Launch of a National Geospatial Mission to develop basic geospatial infrastructure and data.
• A Gyan Bharatam Mission will be launched with educational institutions, museums, libraries and private collectors to survey, document and conserve our manuscript heritage, covering more than 1 crore manuscripts.

Export as 4th Engine of Development

• 'Bharat Trade Net' (BTN), a digital public infrastructure for international trade, will be set up as an integrated platform for trade documentation and financing solutions.
• A national framework will be made to stimulate Global Competence Centers (GCCs) to help states in setting up GCCs in emerging Tier 2 cities.
• The government will facilitate improvement of infrastructure and warehouses for air cargo including high value perishable horticultural products.
• To simplify the export of handicrafts, the Government has increased the time frame of export from 6 months to 1 year.
• The government has presented a new provision that will permit importers or exporters, after clearance of goods, to voluntarily declare material facts and pay the duty along with interest, but without fines. This will encourage voluntary compliance.

Also Read: MSME Loan Scheme 2025

Reforms as Fuel: Financial Sector Reforms and Development

• The FDI limit in the insurance sector will be increased from 74 to 100 percent for companies that invest their entire premium in India.
• NaBFID will set up a 'Partial Credit Enhancement Facility' for corporate bonds for infrastructure.
• Public sector banks will develop 'Grameen Credit Score' framework to meet the credit needs of SHG members and people in rural areas.
• A platform will be established for regulatory coordination and development of pension products. A high-level committee for regulatory reforms will be constituted to review all non-financial sector rules, certificates, licenses and permissions.
• An Investment Friendliness Index of States will be launched in 2025. 
• Under the FSDC (Financial Stability and Development Council), a mechanism will be set up to evaluate the impact of current financial regulations and supporting directives.
• Jan Vishwas Bill 2.0 will be introduced to decriminalize more than 100 provisions in various laws. (More than 180 legal provisions were decriminalized under the Public Trust Act 2023.)

Conclusion

Union Minister of Finance and Corporate Affairs Smt. Nirmala Sitharaman said that democracy, demography and demand are the main pillars of the journey to a developed India. This budget is all about firmness, growth and commencement. This budget focuses on poor, youth, farmer, and woman. In this budget there are 4 engines of development which will help in country’s growth and productivity. The 4 engines includes agriculture, MSME, investments and export. The major change that budget brought is in taxation, the government has reduced its tax burden from time to time. Right after 2014, the 'zero tax' slab was increased to ₹2.5 lakh, which was further increased to ₹5 lakh in 2019 and ₹7 lakh in 2023. In this budget the government has announced that no income tax will be payable upto income of ₹12 lakh. The government have made this budget seeing middle class, so that they don’t feel stressed.