On February 1, 2025, Finance Minister Nirmala Sitharaman presented India’s Union Budget 2025-26, aiming to transform the nation into a Viksit Bharat by 2047. This year's budget brings a slew of tax reforms, sector-specific initiatives, and policy measures aimed at fostering economic growth, simplifying tax compliance, and creating opportunities across various sectors. Let’s break down the most significant provisions of the budget.
- Tax Reforms: A Boost for the Middle Class
This year’s budget focuses heavily on providing relief to the middle class, with new income tax slabs designed to reduce the tax burden and improve overall compliance.
Income Tax Reforms:
- No Income Tax up to Rs 12 Lakh: In a significant move, the government announced that individuals earning up to Rs 12 lakh annually will no longer be required to pay income tax under the new regime. This marks a substantial tax relief for the middle class, offering a financial boost to millions.
- Revised Tax Slabs: The new tax structure has been simplified to benefit taxpayers at various income levels. The revised income tax slabs under the new regime are as follows:
|
Income Range (Rs) |
Tax Rate |
|
4,00,001 to 8,00,000 |
5% |
|
8,00,001 to 12,00,000 |
10% |
|
12,00,001 to 16,00,000 |
15% |
|
16,00,001 to 20,00,000 |
20% |
|
20,00,001 to 24,00,000 |
25% |
|
Above 24,00,000 |
30% |
This revised structure ensures that those in the middle-income bracket benefit from reduced tax rates, translating to substantial savings for taxpayers.
- Tax Benefit for Rs 12 Lakh Income: Individuals earning Rs 12 lakh will see a benefit of Rs 80,000 annually, thanks to these tax reductions, which are designed to enhance disposable income and consumption.
Ease of Tax Filing:
- Updated ITR Facility: To promote voluntary compliance, the time limit to file updated income tax returns (ITRs) has been extended from 2 years to 4 years, giving taxpayers more flexibility.
- TDS and TCS Revisions:
- Rationalization of TDS: The budget introduces the simplification of Tax Deducted at Source (TDS) by reducing the number of rates and thresholds above which TDS is deducted, and doubling the threshold for senior citizens from Rs 50,000 to Rs 1,00,000.
- TCS on Remittances: The threshold for Tax Collected at Source (TCS) on remittances under the Liberalised Remittance Scheme (LRS) has been raised from Rs 7 lakh to Rs 10 lakh.
- TCS on Education Remittances: A notable proposal includes the removal of TCS on remittances for education if funded through loans from specified financial institutions, easing the burden on students and families.
- Simplified Tax Regime: The budget proposes one cess or surcharge, aimed at improving clarity and ensuring a more streamlined tax process. Additionally, the Customs Tariff structure is rationalized to promote domestic manufacturing.
- Strengthening the Energy Sector: Nuclear Energy Mission
To address India's energy needs and support the transition to clean energy, the budget places a significant emphasis on nuclear energy:
- Nuclear Energy Mission: The government aims to develop 100 GW of nuclear power capacity by 2047, marking a major step toward a more sustainable energy future.
- Investment in Small Modular Reactors (SMRs): A budget allocation of ₹20,000 crore has been proposed to foster the development and deployment of SMRs, ensuring India’s energy needs are met sustainably.
- Healthcare and Education: Fostering Well-Being and Innovation
Healthcare Reforms:
- Cancer Care: A new initiative will establish daycare cancer centers in district hospitals across India, with a plan to roll out 200 centers by 2025, offering affordable and accessible treatment for cancer patients.
- Medical Education: The government will create 10,000 new medical seats and aims to increase this figure to 75,000 over the next five years. This will help tackle the shortage of doctors and improve healthcare infrastructure.
Education and Innovation:
- Atal Tinkering Labs: A new initiative will set up 50,000 Atal Tinkering Labs in government schools, designed to foster creativity and scientific temper among students.
- Digital Learning: The government will ensure broadband connectivity in all secondary and primary schools, allowing students to access digital education resources and improving overall educational standards.
- Agriculture: Empowering Farmers and Boosting Productivity
A comprehensive agriculture-focused initiative has been announced to promote sustainability and increase productivity:
- Agricultural District Program: This initiative targets 100 districts with low agricultural output, focusing on crop diversification and the development of post-harvest infrastructure.
- Kisan Credit Card (KCC): The budget increases the loan limit under the KCC scheme from Rs 3,000 to Rs 5,000, benefiting 7.7 crore farmers, including those in the dairy and fishing sectors.
- Promoting Industry and Job Creation: MSMEs and Sectors in Focus
India’s MSMEs remain a crucial sector for employment and economic growth. The budget proposes significant reforms to support the sector:
- Enhanced Investment and Turnover Limits: This will make it easier for MSMEs to access financing and promote growth, fostering employment in local economies.
- Footwear, Leather, and Toys: Specific measures are designed to enhance the productivity and competitiveness of the footwear and leather industries, along with a new scheme to establish India as a global hub for toys. This initiative aims to create high-quality, sustainable, and innovative toys under the ‘Made in India’ brand.
- Economic and Trade Reforms: Boosting India’s Global Position
India is positioning itself as a global leader in multiple sectors:
- Critical Minerals: The full exemption of Basic Customs Duty (BCD) on critical minerals like lithium-ion battery waste and cobalt powder will facilitate the manufacturing of high-tech products and create jobs for the youth.
- Customs Duty Rationalization: The government has streamlined the customs tariff structure, focusing on simplifying the duty process and promoting domestic manufacturing.
- Boosting India’s Global Position in Trade and Investment
- Competitive Cooperative Federalism: To further promote economic growth, the government will introduce the Investment Friendliness Index for states, encouraging cooperative federalism and improving the business environment across regions.
- Promoting Digital Economy: The government will invest in infrastructure for air cargo and streamlining customs protocols to enhance the ease of doing business and improve India’s competitiveness globally.
Conclusion: A Vision for a Self-Reliant India
The Union Budget 2025 lays a strong foundation for India's future growth, with a focus on sustainability, innovation, job creation, and ease of doing business. With substantial reforms in taxation, healthcare, education, and agriculture, the government is steering India toward becoming a self-reliant and developed nation by 2047.
Through these measures, the government seeks to empower the middle class, boost industry, and reduce compliance burdens, all while promoting inclusive growth across all sectors. The journey towards becoming a Viksit Bharat is now clearer, with these reforms acting as catalysts for transformation.
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Disclaimer: Aim of this article is to give basic knowledge about the topic to people who are not in touch with Indian tax norms. When anybody is dealing with these kinds of cases practically, he shall consider all relevant provisions of all applicable Laws like FEMA/Income Tax/RBI /Companies Act etc.