The Union Budget 2025-26, presented by Honourable Finance Minister Smt. Nirmala Sitharaman, marks a defining step in India's journey towards economic growth, sustainability, and global competitiveness. With a strong emphasis on inclusive development, the budget aims to address the aspirations of diverse sectors, including middle-class households, businesses, entrepreneurs, and large corporations.
Guided by the vision of "Viksit Bharat" (Developed India) by 2047, this budget underscores the government’s commitment to fiscal discipline, economic resilience, and sustainable progress. By balancing fiscal prudence with growth-driven policies, the Finance Minister laid out a roadmap that aligns with India's long-term economic and social ambitions.
Key Tax Reforms and Implications for Individuals and Businesses
1. Personal Income Tax Reforms
- Revised Income Tax Slabs: The budget proposes a new tax regime with revised income tax slabs, effectively eliminating tax liability for individuals with annual incomes up to ₹12 lakh. This move is anticipated to increase disposable income for the middle class, thereby boosting consumption.
- Extension of Time-Limit to File Updated Returns: The time frame to file updated income tax returns has been extended from the current limit of two years to four years. This extension provides taxpayers with a longer period to rectify any omissions or errors in their tax filings.
2. Tax Deduction at Source (TDS) and Tax Collected at Source (TCS) Rationalization
- Increased TDS Limit for Senior Citizens: The tax deduction limit for senior citizens has been doubled from ₹50,000 to ₹1 lakh. This enhancement aims to provide greater financial relief to the elderly population.
- Higher TDS Threshold on Rental Income: The annual limit for TDS on rent has been increased from ₹2.40 lakh to ₹6 lakh. This adjustment is expected to benefit individuals and businesses involved in rental activities by reducing the tax compliance burden.
3. Corporate Tax and Business Incentives
- Simplification of Corporate Tax Rates: The budget introduces a streamlined corporate tax structure aimed at reducing the tax burden on businesses, thereby encouraging investment and expansion. Specific details on the revised rates and applicable conditions are expected to be outlined in the forthcoming Finance Bill.
- Incentives for Startups and MSMEs: Recognizing the pivotal role of startups and Micro, Small, and Medium Enterprises (MSMEs) in economic development, the budget proposes tax incentives to foster innovation and entrepreneurship. These measures include tax holidays, reduced compliance requirements, and access to funding opportunities.
4. Introduction of a New Income Tax Bill
- Comprehensive Tax Law Overhaul: The government plans to introduce a new income tax bill aimed at simplifying the existing tax laws, reducing litigation, and promoting voluntary compliance. The proposed bill seeks to condense the current law by eliminating outdated provisions and presenting tax rates in a more accessible format.
5. Implications for Individuals and Businesses
- For Individuals: The revised income tax slabs and increased deduction limits are expected to enhance disposable incomes, particularly benefiting the middle class and senior citizens. This increase in disposable income is anticipated to stimulate consumer spending, thereby contributing to economic growth.
- For Businesses: The rationalization of TDS/TCS provisions and the simplification of corporate tax rates aim to reduce the compliance burden on businesses. The proposed incentives for startups and MSMEs are expected to foster a more dynamic business environment, encouraging innovation and job creation.
Union Budget 2025-26: Sector-Specific Reforms and Development Initiatives
At the heart of the budget are four key pillars of growth:
Agriculture and Rural Development – Strengthening food security, boosting farmer income, and enhancing rural infrastructure.
Micro, Small & Medium Enterprises (MSMEs) – Supporting entrepreneurship, reducing compliance burdens, and promoting ease of doing business.
Investments and Infrastructure – Accelerating public and private investments in critical sectors to drive employment and GDP growth.
Exports and Global Trade – Strengthening India’s manufacturing and export capabilities to enhance its global standing.
1. Agriculture and Allied Activities
Prime Minister Dhan-Dhaanya Krishi Yojana: A collaborative initiative with states targeting 100 districts with low productivity. The program emphasizes crop diversification, post-harvest storage, and irrigation enhancements, aiming to benefit approximately 1.7 crore farmers.
Mission for Aatmanirbharta in Pulses: A six-year mission focusing on self-sufficiency in pulses such as Tur, Urad, and Masoor. The National Agricultural Cooperative Marketing Federation (NAFED) and the National Cooperative Consumers' Federation (NCCF) will procure these pulses from farmers over the next four years to ensure stable prices and reduce import dependence.
National Mission on High Yielding Seeds: This mission aims to strengthen the research ecosystem by developing and propagating high-yield seed varieties, with a goal to commercialize over 100 new seed varieties.
Enhanced Credit through Kisan Credit Card (KCC): The loan limit under the Modified Interest Subvention Scheme has been increased from ₹3 lakh to ₹5 lakh, providing greater financial support to farmers, fishermen, and dairy farmers.
2. Micro, Small, and Medium Enterprises (MSMEs)
Revised Classification Criteria: The investment and turnover limits for MSME classification have been enhanced to 2.5 and 2 times, respectively. This adjustment facilitates greater access to capital and technology, enabling MSMEs to scale operations and improve competitiveness.
Customized Credit Cards for Micro Enterprises: A new initiative to issue 10 lakh customized credit cards with a ₹5 lakh limit for micro enterprises registered on the Udyam portal, aiming to improve access to credit and support business expansion.
Fund of Funds for Startups: A new Fund of Funds with an expanded scope and a fresh contribution of ₹10,000 crore has been established to support startup growth and innovation.
Scheme for First-time Entrepreneurs: A scheme targeting 5 lakh women, Scheduled Castes, and Scheduled Tribes first-time entrepreneurs, providing term loans of up to ₹2 crore over the next five years to encourage inclusive entrepreneurship.
3. Infrastructure and Transportation
Maritime Development Fund: A fund with a corpus of ₹25,000 crore is to be established, with up to 49% contribution by the government and the balance from ports and the private sector, aiming to boost maritime infrastructure.
UDAN - Regional Connectivity Scheme: A modified UDAN scheme has been announced to enhance regional connectivity to 120 new destinations and carry 4 crore passengers in the next 10 years. It also supports helipads and smaller airports in hilly, aspirational, and North East region districts.
Greenfield Airport in Bihar: Greenfield airports have been announced in Bihar, in addition to the expansion of the capacity of Patna airport and a brownfield airport at Bihta.
4. Research, Development, and Innovation
Research, Development, and Innovation Initiative: An allocation of ₹20,000 crore has been made to implement a private sector-driven research, development, and innovation initiative.
Deep Tech Fund of Funds: A Deep Tech Fund of Funds is to be explored to catalyze the next generation of startups.
PM Research Fellowship: The government plans to provide 10,000 fellowships for technological research in IITs and IISc with enhanced financial support.
Gene Bank for Crops Germplasm: The second Gene Bank, housing 10 lakh germplasm lines, will be established to ensure future food and nutritional security.
5. Export Promotion
Export Promotion Mission: An Export Promotion Mission, with sectoral and ministerial targets, driven jointly by the Ministries of Commerce, MSME, and Finance, is to be set up.
BharatTradeNet: ‘BharatTradeNet’ (BTN) for international trade is to be set up as a unified platform for trade documentation and financing solutions.
National Framework for Global Capability Centres (GCC): A framework to attract multinational companies to set up Global Capability Centres in India, thereby increasing service exports and creating high-skilled jobs.
6. Healthcare
Day Care Cancer Centres: The government plans to set up Day Care Cancer Centres in all district hospitals in the next three years, with 200 centres to be established in 2025-26.
7. Urban Development
Strengthening Urban Livelihoods: A scheme for the socio-economic upliftment of urban workers has been announced to help them improve their incomes and achieve sustainable livelihoods.
PM SVANidhi: The scheme is to be revamped with enhanced loans from banks, UPI-linked credit cards with a ₹30,000 limit, and capacity-building support.
Budget Estimates 2025-26 vs. Revised Estimates 2024-25: Key Financial Projections
Total Expenditure
- Estimated at ₹50.65 lakh crore, a 7.4% increase over 2024-25’s revised estimate.
- Revenue expenditure to grow by 6.7%, and capital expenditure by 10.1%.
- Allocations for MGNREGS and PM-KISAN remain unchanged from 2024-25.
- Subsidies remain at similar levels as last year.
- Establishment expenditure (pensions & salaries) to increase by 3%.
Total Receipts
- Expected at ₹34.96 lakh crore, marking an 11.1% increase from 2024-25.
- The fiscal gap will be covered through borrowings, estimated at ₹15.68 lakh crore, similar to the previous year.
Transfer to States
- ₹25.59 lakh crore allocated, a 12.5% increase over 2024-25.
- Tax devolution: ₹14.22 lakh crore.
- Grants & financial assistance: ₹11.37 lakh crore.
- Capital expenditure loans: ₹1.5 lakh crore.
Deficit Targets
- Revenue deficit set at 1.5% of GDP (lower than 1.9% in 2024-25).
- Fiscal deficit targeted at 4.4% of GDP (down from 4.8% in 2024-25).
- Lower deficit due to higher revenue growth (11.1%) vs. expenditure growth (7.4%).
GDP Growth Estimate
- Nominal GDP projected to grow at 10.1% in 2025-26.
Conclusion
The Union Budget 2025-26 lays the foundation for sustainable growth, fiscal prudence, and economic resilience. With a strong emphasis on tax reforms, infrastructure investments, MSME support, and rural development, the budget aims to accelerate India's progress toward becoming a developed economy by 2047.
Key measures like rationalized tax structures, enhanced credit access, increased capital expenditure, and sector-specific reforms demonstrate the government's commitment to balancing fiscal discipline with inclusive development. The budget also focuses on job creation, ease of doing business, and global trade competitiveness, ensuring a progressive and forward-looking economic roadmap.
As India moves towards its "Viksit Bharat" vision, the budget’s policies will play a crucial role in driving investments, empowering businesses, and uplifting millions of citizens. While challenges remain, the budget sets the stage for strong, inclusive, and sustainable economic growth in the coming years.
Frequently Asked Questions (FAQs)
1. What are the major highlights of the Union Budget 2025-26?
The budget focuses on tax reforms, infrastructure growth, MSME support, agricultural development, and export promotion. Key announcements include revised income tax slabs, increased capital expenditure, new funding for startups, and expansion of rural and urban development schemes.
2. How has personal income tax changed in this budget?
The budget introduces new income tax slabs, eliminating tax liability for individuals earning up to ₹12 lakh. It also extends the time limit for filing updated returns and increases TDS exemptions for senior citizens and rental income.
3. How does the budget support MSMEs and startups?
The government has announced a Fund of Funds for startups, credit cards for micro enterprises, eased classification criteria for MSMEs, and special loans for first-time entrepreneurs, especially women and marginalized communities.
4. What is the budget allocation for infrastructure and transportation?
Key investments include a ₹25,000 crore Maritime Development Fund, expansion of the UDAN scheme, and new airports in Bihar. The focus is on enhancing connectivity, logistics, and transportation networks.
5. How will this budget impact fiscal deficit and economic growth?
The fiscal deficit is targeted at 4.4% of GDP, lower than 4.8% in 2024-25, showing a stronger fiscal position. The nominal GDP is projected to grow at 10.1%, signaling a positive economic outlook.
6. What support has been announced for agriculture and rural development?
Initiatives like PM Dhan-Dhaanya Krishi Yojana, Mission for Aatmanirbharta in Pulses, Kisan Credit Card (KCC) enhancements, and a National Mission on High Yielding Seeds aim to boost farmer incomes, enhance food security, and modernize agriculture.
7. What is the impact of the budget on exports and global trade?
The government is launching BharatTradeNet for seamless international trade, a National Framework for Global Capability Centres (GCCs) to attract MNCs, and an Export Promotion Mission to enhance India’s global competitiveness.
8. What are the new healthcare initiatives in this budget?
The government has announced the establishment of 200 Day Care Cancer Centres in district hospitals over the next three years, improving accessibility to cancer treatment.
9. How much financial support is being given to states?
The transfer to states is ₹25.59 lakh crore, a 12.5% increase from last year, with ₹1.5 lakh crore allocated for capital expenditure loans.
10. How does this budget contribute to India's long-term economic vision?
With a focus on investment-driven growth, fiscal sustainability, digital transformation, and social welfare, the budget aligns with India's goal of becoming a developed nation by 2047.
