union-budget-2025-26-focuses-on-tax-relief-growth-and-innovation

Union Finance Minister Nirmala Sitharaman presented the Union Budget for 2025-26 on 1 February 2025, aiming to boost economic growth, provide tax relief, and drive inclusive development under the theme “Sabka Vikas”.

In a major move, the government introduced tax reforms to provide relief for the middle class. Individuals earning up to ₹12.75 lakh per year will now pay no income tax, while those with monthly earnings up to ₹1 lakh will be exempt from tax under the new regime. Additionally, the threshold for TDS on rent has been raised to ₹6 lakh, and the TDS exemption limit for senior citizens has been doubled to ₹1 lakh. The time limit for updated tax returns has also been extended from two to four years.

📢 Zero Income Tax till ₹12 Lakh Income under New Tax Regime

▶️ Slabs and rates being changed across the board to benefit all tax-payers

▶️ New structure to substantially reduce taxes of middle class and leave more money in their hands, boosting household consumption, savings… pic.twitter.com/QzJ4nCVD0k

— PIB India (@PIB_India) February 1, 2025

The budget outlines four key growth engines: agriculture, MSMEs, investment, and exports.

Agriculture Initiatives

The government has launched the PM Dhan-Dhaanya Krishi Yojana to enhance productivity in 100 low-yield districts and a six-year mission for Aatmanirbharta in Pulses focusing on Tur, Urad, and Masoor. Furthermore, the Kisan Credit Card (KCC) loan limit has been increased from ₹3 lakh to ₹5 lakh.

Support for MSMEs

The budget also proposed increased credit guarantees for MSMEs, raising the cover from ₹5 crore to ₹10 crore. A new scheme for 5 lakh women and SC/ST entrepreneurs will offer loans of up to ₹2 crore. The National Manufacturing Mission will promote the growth of industries across all sectors.

Investment in Infrastructure and Innovation

A ₹1 lakh crore Urban Challenge Fund has been set aside to develop smart cities and infrastructure. The government has also committed ₹50,000 for the establishment of Atal Tinkering Labs in government schools over the next five years and ₹20,000 crore for R&D and innovation in the private sector. Gig workers will also benefit, with ID cards and access to healthcare under the PM Jan Arogya Yojana.

Trade and Export Reforms

In a significant policy shift, the government raised the Foreign Direct Investment (FDI) cap in the insurance sector from 74% to 100%. The BharatTradeNet platform will facilitate seamless international trade, and the UDAN scheme will be modified to increase regional air connectivity, adding 120 new destinations.

Economic Policies and Sector-Specific Reforms

The fiscal deficit target for the year is set at 4.4%, a reduction from the previous year’s 4.8%. A fund of ₹15,000 crore has been earmarked to complete 1 lakh stalled housing units. In the energy sector, ₹20,000 crore will be allocated for nuclear energy R&D focused on small modular reactors. Additionally, customs duties on 36 life-saving drugs and electric vehicle battery components have been exempted.

⭐️ KEY NUMBERS ⬇️#UnionBudget2025 #BudgetForViksitBharat pic.twitter.com/MCoQCIg1Ta

— PIB India (@PIB_India) February 1, 2025

Union Budget 2025-26: Key Takeaways

Tax Reforms & Middle-Class Benefits

• No income tax on monthly income up to ₹1 lakh (₹12 lakh per annum).
  
  

• Salaried individuals earning up to ₹12.75 lakh per annum pay zero tax (after deductions).
  
  

• New income tax slabs:
  
  

• ₹0–4 lakh: 0%

• ₹4–8 lakh: 5%

• ₹8–12 lakh: 10%

• ₹12–16 lakh: 15%

• ₹16–20 lakh: 20%

• ₹20–24 lakh: 25%

• Above ₹24 lakh: 30%
  
  

• TDS/TCS changes:
  
  

• TDS on rent threshold raised from ₹2.4 lakh to ₹6 lakh.

• TDS limit for senior citizens’ interest income doubled to ₹1 lakh.

• TCS threshold raised to ₹10 lakh.
  
  

• Updated tax returns filing time extended from 2 to 4 years.

Four Growth Engines Identified

1. Agriculture:
   
   

• ₹ Prime Minister Dhan-Dhaanya Krishi Yojana to boost productivity in 100 low-yield districts.

• Mission for Aatmanirbharta in Pulses with focus on Tur, Urad, and Masoor.

• Kisan Credit Card (KCC) loans limit raised from ₹3 lakh to ₹5 lakh.
  
  

2. MSMEs:
   
   

• Credit guarantee cover for MSMEs doubled from ₹5 crore to ₹10 crore.

• ₹2 crore loans for 5 lakh first-time women, SC, and ST entrepreneurs.

• National Manufacturing Mission to strengthen small, medium, and large industries.
  
  

3. Investment:
   
   

• ₹ 1 lakh crore Urban Challenge Fund for ‘Cities as Growth Hubs’.

• ₹ 20,000 crore fund for private sector-led R&D and innovation.

• 50,000 Atal Tinkering Labs in government schools in five years.

• ₹ 1.5 lakh crore interest-free loans to states for infrastructure.
  
  

4. Exports:
   
   

• Export Promotion Mission to help MSMEs tap international markets.

• ‘BharatTradeNet’ digital platform for trade documentation and financing.

• Support for air cargo infrastructure for perishable goods.

Sectoral & Economic Reforms

• FDI limit in insurance raised from 74% to 100%.

• Jan Vishwas Bill 2.0 to decriminalize 100+ laws.

• ₹15,000 crore SWAMIH fund for completion of 1 lakh stressed housing units.

• Nuclear Energy Mission with ₹20,000 crore for Small Modular Reactors.

• Modified UDAN scheme to enhance regional connectivity to 120 new destinations.

• PM SVANidhi scheme: Enhanced loans for street vendors, UPI-linked credit cards with ₹30,000 limit.

• Gig workers to get ID cards, E-Shram registration, and health coverage.

Customs & Import Duty Changes

• Basic Customs Duty (BCD) relief on:
  
  

• 36 lifesaving drugs (for cancer, rare, and chronic diseases).

• Raw materials for EV & mobile battery production.

• Shipbuilding components (10-year BCD exemption).
  
  

• Increased BCD on:
  
  

• IFPDs (TV panels) to 20%.
  
  

• Reduced BCD on:
  
  

• Frozen fish paste (30% to 5%).

• Fish hydrolysate (15% to 5%).

Fiscal Deficit & Budget Estimates

• FY25 fiscal deficit: 4.8% of GDP (target: 4.4% in FY26).

• Total expenditure: ₹50.65 lakh crore.

• Capital expenditure: ₹10.18 lakh crore.