Indian Union Budget 2025 -Key highlights

Indian Union Budget 2025: Key Highlights and Analysis

Finance Minister Nirmala Sitharaman delivered the first complete Union Budget of Prime Minister Narendra Modi’s third term on February 1. This marked her record eighth consecutive Budget presentation, lasting one hour and 17 minutes, bringing her closer to Morarji Desai’s record of 10 Budgets.

Economic Context & Budget Priorities

The 2025 Budget comes at a crucial juncture as India grapples with a slowing economic growth rate and rising global uncertainties, including U.S. trade policies and geopolitical tensions. The government’s financial strategy aims to drive economic resilience by focusing on tax reforms, infrastructure development, and key sectoral incentives.

Measures to Control Fiscal Deficit, Inflation & Long-Term Wealth Creation

·?Fiscal Deficit Reduction: The budget projects a fiscal deficit of 4.8% of GDP in FY25, down from 5.9% in FY24, with a target of 4.4% by FY26, ensuring fiscal discipline.

·?Market Borrowing Control: Gross market borrowing for FY26 is ?14.82 lakh crore, ensuring liquidity management without excessive debt burden on the economy.

·?Capex Boost for Growth: A record ?10.18 lakh crore was allocated for capital expenditure in FY25, focusing on infrastructure, manufacturing, and job creation, promoting sustainable wealth.

·?Tax Relief & Middle-Class Savings: Significant income tax cuts (no tax up to ?12 lakh) and simplified new tax slabs to boost disposable income and long-term consumption.

· Inflation Management via Tariff Adjustments: 7 tariff rates removed, customs duty reduced on critical minerals & solar PVs, and import duty hikes on select goods to support local industries while controlling inflation.

·?MSME & Startup Support: A ?10,000 crore fund-of-funds and higher credit guarantee (?20 crore) to fuel entrepreneurship, employment, and long-term economic resilience.

· Agriculture & Rural Growth: ?1.5 lakh crore in 50-year interest-free loans to states for rural and infrastructure development, boosting agricultural output and food security.

·?Energy & Sustainability Investments: ?25,000 crore Maritime Development Fund and ?20,000 crore for Small Modular Nuclear Reactors, ensuring long-term energy security and stable power costs.

·?Social & Healthcare Development: ?500 crore AI education fund, 10,000 new medical seats, and 200 district cancer centers to improve human capital, ensuring long-term economic productivity.

·?Urban & Industrial Expansion: ?1 lakh crore Urban Challenge Fund, 50,000 Atal Tinkering Labs, and new manufacturing & EV incentives to position India as a global industrial hub.

This budget ensures fiscal prudence, inflation control, and wealth-building by focusing on strategic investments, tax relief, and long-term financial stability.

Major Tax Reforms & Relief Measures

• No Income Tax for Earnings Up to Rs 12 Lakh – Individuals earning up to Rs 12 lakh annually are exempt from income tax.
• Tax Benefits for Higher Income Brackets – Individuals earning Rs 25 lakh annually will receive tax benefits of Rs 1.1 lakh under the revised tax regime.
• New Tax Structure:
• Reduction in TDS & TCS Complexity – The number of Tax Deducted at Source (TDS) rates and thresholds will be simplified to enhance compliance.
• Higher TCS Threshold for Foreign Remittances – The threshold for remittances under the Liberalized Remittance Scheme (LRS) has been raised from Rs 7 lakh to Rs 10 lakh.
• Relief on Rent Payments – The TDS threshold for rent has been increased to Rs 6 lakh.
• Education Loan Exemptions – TCS on education loans up to Rs 10 lakh from specific financial institutions will be waived.
• Updated Tax Filing Deadline – The time limit to file updated tax returns is extended from two to four years.

Sectoral Reforms & Incentives

• Startups & MSMEs – Tax benefits for startups extended by five years, MSME credit guarantee cover doubled to Rs 20 crore.
• Customs & Tariff Adjustments – Seven tariff rates removed, life-saving drugs exempted from Basic Customs Duty (BCD), and import duties on key manufacturing inputs revised.
• Infrastructure Investment – Revised capital expenditure set at Rs 10.18 lakh crore, with Rs 1.5 lakh crore in 50-year interest-free loans to states for capital projects.
• Insurance & Financial Sector Reforms – Foreign Direct Investment (FDI) in insurance raised from 74% to 100%.
• Technology & Innovation – AI research centers established, deeptech fund initiated for startups, and geospatial mission launched for enhanced mapping capabilities.
• Energy & Regional Development – India targets 100 GW of nuclear energy by 2047, maritime fund of Rs 25,000 crore set up, and shipbuilding financial assistance revamped.
• Education & Healthcare – Broadband for government schools, 10,000 additional medical seats, cancer daycare centers, and AI research initiatives.

Top 20 Key Announcements from Budget 2025 for Investors

Analysis: Sectors Poised for Growth

• Middle-Class Economy – Significant tax relief will boost disposable incomes and spending.
• Infrastructure & State Development – Higher capital expenditure and state support will spur long-term development.
• Technology & Startups – AI initiatives and deeptech funding will drive innovation.
• Insurance & Finance – Increased FDI and financial reforms will attract global investors.
• Energy Sector – Renewables and nuclear energy push will reshape India’s energy mix.
• Healthcare – Expansion in medical education and cancer centers will improve public health access.
• Tourism & Local Enterprises – Support for homestays, medical tourism, and MSMEs will strengthen local businesses.
• Agriculture & Rural Growth – Cotton production boost and sustainable farming will aid the rural economy.
• Manufacturing & Trade – Tariff reductions and new industrial policies will enhance production capabilities.
• Maritime & Logistics – A revamped shipbuilding policy and logistics investments will position India as a trade hub.

Conclusion

The Union Budget 2025 presents a growth-oriented strategy focusing on tax relief, infrastructure expansion, and sector-specific incentives. The push for innovation, manufacturing, and economic inclusivity signals a long-term vision for India’s economic resilience amid global uncertainties.