Union Budget 2025: Tax Cuts, Growth Plans & Key Highlights You Need to Know!
Tanushree S.
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On February 1, 2025, Finance Minister Nirmala Sitharaman unveiled the Union Budget 2025–26, which includes major measures meant to increase the purchasing power of the middle class, support inclusive growth, and stimulate private investment. This thorough analysis explores the budget's main features, paying special attention to income tax adjustments, and offers a historical perspective on budget releases throughout the previous ten years. Income Tax Reforms in the 2025–2026 Union Budget The significant reform of the personal income tax system, which is intended to help middle-class taxpayers and boost consumer demand, is one of the Union Budget 2025–2026's most noteworthy aspects.
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1.???? Raising the Tax Exemption level: The budget increases the annual nil tax slab level to ?1.2 million, which exempts people from paying income tax up to this amount. For a sizable section of the population, this action is anticipated to increase discretionary income.
Source :- Reuters.com
2. Updated Tax Rates and Slabs: Under the new tax system, the income tax slabs have been recalculated as follows: o Earn up to 1.2 million naira: 10% increase in income from 1.2 million to 2.4 million 30% of income over ?2.4 million The goal of this reorganization is to lessen the tax burden on middle-class individuals and streamline the tax code.
Source :- Reuters.com
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3.Standard Deduction Enhancement: To further alleviate financial strain and promote savings, the standard deduction for salaried workers has been raised. 4. TDS (tax deduction at source) and TCS (tax collection at source) Justification: In order to streamline compliance and lessen the financial burden on taxpayers, the budget suggests streamlining TDS and TCS rules.
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Forecasts for the Economy and Fiscal Restraint For the fiscal year 2025–2026, the government intends to lower the budget deficit to 4.4% of GDP while projecting nominal GDP growth of 10.1%. The predicted ?50.65 trillion in total budget expenditures demonstrate a dedication to fiscal restraint while bolstering growth measures.
Source :-Reuters.com
Sector-Specific Projects In addition to tax reforms, the budget lists a number of projects in several sectors:
1. Agriculture: To increase farm productivity and assist farmers' income, missions focusing on high-yield crops, such as cotton and pulses, were introduced.
2. Manufacturing: To improve industrial output and worldwide competitiveness, a National Manufacturing Mission was established.
3. Foreign Direct Investment (FDI): To increase foreign investment and fortify the insurance industry, a proposal to increase the FDI cap to 100% has been made.
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4. Startups and Small enterprises: Funds and incentives are introduced to assist startups and small enterprises, encouraging entrepreneurship and innovation.
5. Infrastructure Development: While continuing to invest in road transport infrastructure, there is a greater emphasis on modernizing the railway system, with plans to add high-speed trains and expand the network.
source :- Reuters.com
6. Energy: The government's dedication to sustainable energy sources is highlighted by the launch of a Nuclear Energy Mission that aims to generate 100 GW of nuclear power by 2047. Source :-apnews.com
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Industry and Expert Reactions Industry leaders and experts have responded to the budget in a variety of ways:
? Positive Comments: A lot of people have praised the middle-class tax cuts, seeing them as a boost to consumer spending and economic expansion. Infrastructure, industry, and agricultural initiatives have all been praised for their capacity to spur growth.
source :-Reuters.com
Concerns: A few analysts voice concerns about the potential impact on efforts to achieve fiscal consolidation as well as the viability of revenue estimates. There is ongoing debate over how to strike a balance between promoting growth and upholding fiscal restraint.
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In conclusion
A major step toward strengthening the middle class, encouraging inclusive growth, and upholding fiscal restraint is represented by the Union Budget 2025–2026. The comprehensive income tax revisions will increase disposable incomes, which will boost consumer demand and support economic growth.
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