Context:
Finance Minister Nirmala Sitharaman on February 1, 2025, made history as she presented a record eighth consecutive budget, which comes in the backdrop of slowdown in economy and demand for tax cuts for middle class.
Theme: “Sabka Vikas” (Inclusive Growth)
- Zero poverty
- 100% good quality education
- Universal healthcare
- Skilled labor & meaningful employment
- 70% women in economic activities
- India as the food basket of the world”
Economic Growth Strategy: 4 Engines of Development
1st Engine: Agriculture
- Prime Minister Dhan-Dhaanya Krishi Yojana (100 districts) to increase productivity, crop diversification, storage, irrigation, and credit.
- Rural Prosperity & Resilience Programme for skill development, investment, and tech adoption.
- 6-year “Mission for Aatmanirbharta in Pulses” (Tur, Urad, Masoor) with procurement by NAFED & NCCF.
- National Mission on High-Yielding Seeds, Cotton Productivity, and Comprehensive Programme for Fruits & Vegetables.
- Kisan Credit Card Loan Limit Increased from ₹3 lakh to ₹5 lakh under modified interest subvention scheme.
2nd Engine: MSMEs (Micro, Small & Medium Enterprises)
- Investment & Turnover Limits Enhanced (2.5x & 2x) for MSME classification.
- Credit Availability Expanded with guarantee cover.
- New Scheme for Women, SC/ST Entrepreneurs: ₹2 crore term loans for 5 lakh first-time entrepreneurs.
- National Manufacturing Mission for “Make in India”.
- Toy Industry Support to establish India as a global toy manufacturing hub.
3rd Engine: Investment
- Investment in People – 50,000 Atal Tinkering Labs in Government schools.
- Broadband connectivity for all Govt schools & rural health centers under Bharatnet.
- Bharatiya Bhasha Pustak Scheme: digital Indian-language books
- National AI Centre for Education: ₹500 crore outlay
- Gig Workers’ Identity Cards & registration under e-Shram portal.
- Investment in Economy
- Infrastructure Ministries to Launch 3-Year PPP Project Pipeline”
- ₹1.5 lakh crore for 50-year Interest-Free Loans to States for capital expenditure.
- Second Asset Monetization Plan (2025-30): ₹10 lakh crore for new projects.
- Urban Challenge Fund (₹1 lakh crore) for smart city & sanitation projects.
- Investment in Innovation
- ₹20,000 crore for Private Sector-led R&D & Innovation.
- National Geospatial Mission for urban planning.
- Gyan Bharatam Mission on manuscript conservation & digitization of Indian knowledge.
4th Engine: Exports
Export Promotion Mission for MSMEs
- BharatTradeNet (BTN) Digital Infrastructure to facilitate hassle-free international trade.
- Domestic Manufacturing Support for Industry 4.0.
- Air Cargo Infrastructure Upgrades to access perishables & high-value exports
Reforms: The Fuel for Growth
Part A: Financial Sector & Regulatory Reforms
FDI in Insurance Raised to 100% provided the whole premium is invested in India.
- Light-Touch Regulatory Framework based on principles & trust.
- High-Level Committee for Regulatory Reforms (1-year deadline).
- Investment Friendliness Index for States (2025).
- Jan Vishwas Bill 2.0 to decriminalize 100+ provisions across laws.
Fiscal Consolidation
- Fiscal Deficit Target:
- Revised Estimate 2024-25: 4.8% of GDP
- Budget Estimate 2025-26: 4.4% of GDP
- Budgetary Provisions:
- Total Receipts (excl. borrowings): ₹34.96 lakh crore
- Total Expenditure: ₹50.65 lakh crore
- Net Tax Receipts: ₹28.37 lakh crore
Part B: Taxation & Customs Reforms
Direct Taxation
New Income Tax Slabs under Revised Regime
| Total Income (₹) | Tax Rate |
|---|---|
| 0 – 4 Lakh | NIL |
| 4 – 8 Lakh | 5% |
| 8 – 12 Lakh | 10% |
| 12 – 16 Lakh | 15% |
| 16 – 20 Lakh | 20% |
| 20 – 24 Lakh | 25% |
| Above 24 Lakh | 30% |
- More Tax Exemption for Middle Class:
- No tax up to ₹12 lakh annual income.
- Salaried individuals with ₹12.75 lakh income pay NIL tax (₹75,000 standard deduction).
- Revenue loss: ₹1 lakh crore
- Benefits to Senior Citizens
- Exemption on TDS of interest increased from ₹50,000 to ₹1 lakh.
- TDS exemption threshold for rent increased from ₹2.4 lakh to ₹6 lakh.
- National Savings Scheme & NPS Vatsalya accounts exempted from TDS.
Voluntary Compliance & Ease of Doing Business
- The return filing is extended up to 4 years from 2 years.
- Charitable trust registration is extended from 5 to 10 years.
- Enhanced Safe Harbour Rules for certainty in international taxation.
- Presumptive taxation for foreign service providers in electronics manufacturing.
- Incentives for Startups & Sovereign Wealth Funds till 2030.
Customs & Trade Facilitation
- Customs Tariff Rationalization
- 7 tariffs withdrawn, single cess/surcharge policy.
- 36 life-saving drugs & 37 Patient Assistance Programme medicines fully exempted from BCD.
- Domestic Manufacturing Boost
- 25 critical minerals, lithium-ion battery components, & shipbuilding materials exempted.
- “Make in India” Incentives for textiles, semiconductors, electronics.
- Export Promotion
- Handicrafts Export Incentives.
- Wet Blue Leather Exemption for value addition & employment.
- Frozen Fish Paste BCD decreased from 30% to 5%
- Fish Hydrolysate BCD reduced from 15% to 5%
Conclusion
- Union Budget 2025-26 would be the harbinger of economic growth through inclusivity, investment, and innovation.
- Sabka Vikas theme: Prosperity for farmers, MSMEs, women, and youth.
- Tax policies will boost savings, consumption, and investment in the middle class.
- Continued fiscal prudence and reforms for enhanced global competitiveness of India.
