The Union Budget for the financial year 2025-26 was presented in Parliament today by Finance Minister Nirmala Sitharaman. This marks her eighth budget presentation, making her the first Finance Minister to do so. It is also the first budget of the third term of Prime Minister Narendra Modi's government.

Income tax exemptions up to ₹12 lakh under the new regime were the key announcement. The budget seeks "transformative" improvements in six areas, according to the finance minister: taxation, financial and electricity sectors, urban development, mining, and regulatory reforms. These areas continue to be at the forefront of the government's agenda, with the goals of boosting economic growth, improving infrastructure, enhancing governance and encouraging sustainable development in a variety of fields.

"Together, we aim to unlock India's potential under the visionary leadership of Prime Minister Modi," said the Finance Minister as she began her address. "This budget is dedicated to accelerating growth, driven by our aspirations for a 'Viksit Bharat.' Our economy remains the fastest-growing among all major economies. The Budget 2025-26 continues our government's efforts to secure inclusive development, uplift household sentiment and enhance the power of India's middle class," she added.

Key highlights of the 2025 Budget:

Capex

FY25 revised capex at ₹10.18 lakh crore

Income Tax

The new Income Tax Bill, set to be announced next week, will bring some changes. Under the new regime, no income tax will be payable for earnings up to ₹12 lakh. The tax slabs will be revised across the board, with individuals earning over ₹24 lakh annually now facing a 30% tax rate. Additionally, the time limit for filing tax returns will be extended from 2 years to 4 years. 

Nirmala Sitharaman, the finance minister, emphasised the government's ten-year endeavour to improve taxpayer convenience through tax reforms. Important initiatives include a taxpayer charter, anonymous assessments, and faster return processing—nearly 99 per cent of returns are now self-assessment-based. Highlighting the tax department's strategy of "trust first, scrutinise later," she restated the dedication to making compliance easier. 

• Tax threshold on interest for senior citizens increased to ₹1 lakh

• TDS on rent increased to ₹6 lakh from ₹2.4 lakh

• Remove TCS (Tax Collected at Source) on remittances for education purposes if the remittance is funded through a loan taken from a specified financial institution.

• Provision of higher TDS (Tax deducted on source) only in non-PAN cases

• Additionally, the threshold for TCS on remittances under the RBI's Liberalised Remittance Scheme (LRS) has been increased from ₹7 lakh to ₹10 lakh.

Tariffs and Cess

The government intends to solve duty inversion and encourage exports, value addition and domestic production by streamlining and simplifying the customs tariff structure. This rationalisation is a component of the July 2024 Budget's extensive revision of the customs tariff system. In the 2023-24 Budget, seven tariff rates were removed, and now seven more will be eliminated, leaving just eight remaining, including a zero rate. Most duty rates will stay the same, but a few items will see slight reductions. The government also plans to charge only one cess or surcharge and will remove the social welfare surcharge from 82 tariff lines.

• The FM suggested that cobalt powder, lithium-ion battery waste and scrap and 12 other essential minerals be completely excluded from Basic Customs Duty (BCD).

• The exemption list will include 13 new patient support programs and 37 new medications.

• A list with a 5% customs tax reduction will be expanded to include six life-saving medications.

• Extend BCD completely on damp blue leather. Crust leather is exempt from 20% tariff.

• Cut the BCD on frozen fish paste from 30% to 5%. Cut the BCD of fish hydrolycates from 15% to 5%.

• Reduce the BCD on open cells and other LCD and LED components to 5% and increase the BCD on interactive flat panel displays from 10% to 20%.

Financial Reforms

The Finance Minister announced that the Foreign Direct Investment (FDI) limit for insurance companies, which invest all their premiums in India, will be increased from 74% to 100%. In addition, a revamped central KYC registry will be introduced, emphasising the importance of adapting regulations to keep up with technological advancements and global regulatory changes. The government also plans to speed up approvals for company mergers and expand related regulations. This reflects the government's commitment to improving the ease of doing business by creating a modern, user-friendly and trust-based regulatory framework.

Nirmala Sitharaman announced that an Investment Friendliness Index will be introduced in 2025 to promote healthy competition among states. This will encourage cooperative federalism. Additionally, a mechanism will be set up under the Financial Stability and Development Council (FSDC) to assess the impact of existing financial regulations and related instructions. The aim is to enhance the responsiveness and growth of the financial sector.

Infrastructure

The Finance Minister announced the creation of a ₹1 lakh crore Urban Challenge Fund to transform cities into growth centres, support innovative redevelopment, and improve water and sanitation infrastructure, as mentioned in the July Budget. This fund will cover up to 25% of the cost for bankable projects, with the condition that at least 50% of the funding must come from bonds, bank loans, or public-private partnerships (PPPs). Each infrastructure ministry will present a list of PPP projects for the next three years, focusing on three proposals per ministry. An initial ₹10,000 crore has been allocated for the fiscal year 2025-26 to kickstart this initiative.

The government will provide ₹1.5 lakh crore in interest-free loans to support capital expenditure and offer incentives to promote reforms. In addition, the Finance Minister announced that 40,000 more affordable housing units will be completed by FY26, and a new ₹15,000 crore SWAMI Fund 2 will be established.

Nuclear Energy

The Finance Minister announced a Nuclear Energy Mission to speed up India's move to clean energy, with the goal of generating at least 100 GW of nuclear power by 2047. To attract private sector participation, changes will be made to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act. Additionally, a ₹20,000 crore fund will be set up for research and development of Small Modular Reactors (SMRs), aiming to have at least five homegrown SMRs up and running by 2033.

MSMEs

The Finance Minister has emphasised that MSMEs are a key driver of India's growth, contributing 45% of the country's exports. To support their growth, the government has introduced special credit cards for MSMEs, a fund for startups, and an expanded fund with a broader scope to improve access to capital. Additionally, the government plans to increase the investment and turnover limits for MSMEs, raising them by 2.5 times and 2 times, respectively, to help these businesses grow and operate more efficiently.

Agriculture

In the 2025 Budget, the Finance Minister accorded agriculture a top priority, introducing the Jan Dhanya Krishi Yojana under the Prime Minister Krishi Yojana. This new initiative will target 100 districts with low productivity, moderate crop intensity, and limited access to credit, focusing on crop diversification, improving storage, boosting irrigation and providing both long and short-term credit to farmers. About 1.7 crore farmers are expected to benefit. Additionally, a 6-year mission will be launched to make the country self-reliant in pulses, with a focus on tur and masoor. The government will also set up a Makhana Board in Bihar, as part of the National Mission for Edible Oil & Seeds, to strengthen domestic production and reduce dependence on imports.

Kisan Credit Cards

The Finance Minister announced that Kisan Credit Cards (KCC) will continue to assist 7.7 crore farmers, fishermen and dairy farmers by providing short-term loans. Additionally, under the updated interest subsidy plan, the borrowing limit for KCC-backed loans will be increased from ₹3,000 to ₹5,000, offering greater financial help for agricultural activities. 

Leather and Footwear

The Finance Minister has announced steps to improve productivity, quality, and competitiveness in India's footwear and leather industry. A new plan will offer support for design, component production, and machinery for both non-leather and leather footwear. This initiative is expected to create 22 lakh jobs, generate ₹400 crore, and increase exports to over ₹1.1 lakh crore. Additionally, the toy industry will benefit from a new scheme aimed at making India a global leader in toy production. This will focus on developing manufacturing clusters, enhancing skills, and creating a sustainable ecosystem for producing high-quality, innovative toys.

Investing in people

The Finance Minister highlighted investment as a key driver for growth, focusing on people, the economy, and innovation. As part of this, the government is prioritising the Sashakt Anganwadi and Poshan 2.0 programs, which will provide nutritional support to over 8 crore children, pregnant women, lactating mothers and around 20 lakh adolescent girls in underdeveloped areas and the Northeast. The government has increased the funding for these programs to make them more effective. In addition, the infrastructure in 5 IITs established after 2014 will be expanded to accommodate 6,500 more students. The government is also setting up 5 National Centres of Excellence for skill development. Moreover, the government plans to issue identity cards and register gig workers on the e-Shram portal, aiming to help 1 crore workers.

Power

The Finance Minister announced major reforms in the power sector aimed at improving electricity distribution and transmission. The government will encourage states to carry out reforms in electricity distribution and increase intrastate transmission capacity to strengthen the financial health and efficiency of power companies. To support these efforts, states will be given an additional borrowing allowance of 0.5 percent of their GSDP, based on how well they implement these reforms.

Aviation

The UDAN scheme has helped 1.5 crore middle-class people access 88 airports through 619 routes. A new version of UDAN will soon be introduced, adding 120 more destinations and aiming to serve an additional 4 crore passengers. Additionally, new airports will be built in Bihar to improve connectivity.

Key Figures

For the fiscal year 2024-25, the revised fiscal deficit is expected to be 4.8%. The target for the fiscal deficit in 2025-26 is set at 4.4%.

The total receipts (excluding borrowings) for 2024-25 are revised to ₹31.47 lakh crore, with ₹25.57 lakh crore coming from net tax receipts.

The total expenditure for the year is revised to ₹47.16 lakh crore, which includes ₹10.1 lakh crore for capital expenditure.