Decoding Budget 2025: Key Takeaways

The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, has significant implications on the economy and pockets of investors. The budget focuses on accelerating economic growth, promoting inclusive development, boosting private sector investment, uplifting household sentiment, and enhancing the spending power of the middle class through tax reliefs. Additionally, it outlines a fiscal roadmap for the next 5 years, aiming to reduce India's debt-to-GDP ratio by 6-7% by FY31.

Let's delve into the key takeaways:

Support for Agriculture and Rural Development:

• The budget includes measures to boost agricultural productivity, promote diversification, and strengthen rural infrastructure.
• A multi-sectoral initiative called "Rural Prosperity and Resilience" will be launched with state support.
• A Dhan Dhaanya Krishi Yojana will be launched to cover 1.7 crore farmers in 100 districts. The scheme will benefit farmers with low productivity, moderate crop intensity and below-average access to credit.
• Additionally, a 6-year mission aimed at achieving self-reliance in pulses will also be launched.
• The government will implement a comprehensive program for fruits and vegetables, recognizing the growing awareness of nutritional needs and rising income levels.
• The loan limit under Kisan Credit Cards will be raised from Rs. 3 lakh to Rs. 5 lakh.
• These initiatives aim to improve farmers' incomes and enhance rural livelihoods.

Investment in Science, Research, and Innovation:

• India aims to be a global leader in technology, research, and development, and the Budget 2025 reflects this vision through large-scale investments in science and innovation.
• ?20,000 crore has been allocated for a private sector-driven research, development, and innovation initiative to boost industrial R&D.
• The Prime Minister Research Fellowship will provide 10,000 fellowships for research in IITs and IISc, encouraging top talent to pursue cutting-edge technology research.
• These measures will encourage private sector participation in R&D, leading to innovation-driven growth.

Income Tax Relief:

• The government has announced significant income tax relief by raising the tax rebate level to an annual income of Rs 12 lakh, up from Rs 7 lakh. Standard deduction of Rs. 75,000 applicable for salaried taxpayers. The old tax regime remains unchanged.
• Earnings above the mentioned threshold will be taxed according to the revised slabs. Income tax slab rates as per new tax regime are as follows:

• The substantial income tax relief, particularly under the new regime, translates to increased disposable income for the middle class. This is expected to fuel consumer spending, creating a positive ripple effect for sectors like consumer durables, retail, and automobiles.
• Additionally, the limit for Tax Deducted at Source (TDS) on interest for senior citizens has been increased from ?50,000 to ?1 lakh, and the annual TDS limit on rent has been raised from ?2.4 lakh to ?6 lakh.
• Withdrawals from the National Savings Scheme made on or after August 29, 2024, are now tax-exempt.
• The deadline to file updated income tax returns has also been extended from two to four years.
• A new Income Tax Bill is set to be introduced, aiming to further simplify the tax regime and reduce compliance burdens.

Fiscal Discipline Maintained:

Despite the substantial tax cuts, the government aims to reduce the fiscal deficit to 4.4% of GDP in 2025-26. This indicates a commitment to fiscal prudence and managing government borrowing.

Revamped KYC:

In 2025, the government will introduce a simplified and enhanced Central Know Your Customer (KYC) system, along with a new framework for periodic updates. This initiative aims to streamline the KYC process and enhance user experience.

MSMEs:

• The investment and turnover limits for classification of all MSMEs will be increased to 2.5 and 2 times, respectively.
• The credit guarantee cover for micro-enterprises will be increased from Rs. 5 crore to Rs. 10 crore.
• Customized credit cards for micro-enterprises will be provided with a limit of up to Rs. 5 lakh credit limit.

Export Promotion and Industrial Growth:

The budget also includes several tax exemptions and incentives to boost exports and manufacturing, especially in sectors like electronics, electric vehicles (EVs), and shipbuilding.

Continued Push for Regulatory Reforms:

The government plans to set up a committee to review and simplify regulations to make it easier to do business in India. This aims to improve the ease of doing business and encourage investment.

Conclusion

Budget 2025 aims to boost consumption and infrastructure growth while maintaining fiscal prudence. It seeks to achieve this by offering tax relief to the middle class, incentivizing infrastructure development through increased capital expenditure and public-private partnerships, and adhering to a fiscal consolidation roadmap with a targeted deficit. Essentially, the budget attempts to balance stimulating the economy in the short-term with long-term fiscal responsibility.