The Ministry of Defence was allocated Rs 6.81 lakh crore in the Union Budget for 2025 by Finance Minister Nirmala Sitharaman, which is 9.55% more than the Rs 6.2 lakh crore that was allotted the previous year.

The government’s focus is on strengthening military preparedness, especially amid the ongoing standoff with China and security concerns along the Pakistan border. Along with addressing operational challenges, the Defence Ministry is also working to improve the welfare of both serving and retired personnel. The government has allocated Rs 3.11 lakh crore for revenue expenditure, which is an increase from Rs 2.83 lakh crore in 2024–25. This rise shows the government's priority on keeping operations running smoothly and supporting ongoing activities.

Revenue expenditure mainly includes the everyday costs of running the armed forces, such as paying salaries, maintaining equipment, buying ammunition and other necessary supplies. The increase in funding shows India’s commitment to ensuring its armed forces remain prepared and able to handle new security challenges. The capital budget for 2025-26 has been set at Rs 1.8 lakh crore, an increase from Rs 1.72 lakh crore in the previous year. This funding will play a key role in modernising the armed forces, allowing for the purchase of advanced equipment, systems and weapons. The government's focus on capital spending is part of a larger plan to strengthen India’s defence capabilities through the Atmanirbhar Bharat initiative. The increased budget will help in acquiring next-generation technology like fighter jets, submarines, and drones, as well as improving military infrastructure.

It also demonstrates that India is trying to maintain a strong strategic posture along its borders, especially the Line of Actual Control (LAC), and is closely monitoring changing geopolitical concerns. The budget also includes a larger allocation for defence pensions, which has increased from Rs 1.41 lakh crore in 2024–25 to Rs 1.6 lakh crore in 2025–26, showing a 13.5% rise. This increase will help provide financial support to retired defence personnel and their families, demonstrating the government's commitment to their welfare. The boost in pension funding is in response to the rising number of retirees and helps support schemes like One Rank, One Pension.

For the financial year 2025-26, the Ministry of Defence (Civil) has been given Rs 28,682 crore, an increase from Rs 25,963 crore in the previous year. This increase is meant to strengthen the administrative and support functions necessary for efficient defence management. The 2025-26 defence budget is balanced, focusing on India’s strategic, operational and welfare needs. The funds will be used for policy planning, research and building support systems to improve the overall effectiveness of the defence forces. Key highlights include an increase in revenue expenditure to keep the armed forces well-equipped and operationally effective, a rise in capital investment showing the government's long-term plans for modernising the defence sector and promoting self-reliance in defence production, and a boost in pension allocation to enhance the social security for retired personnel, ensuring their long-term well-being.