UNION BUDGET 2025

HIGHLIGHTS

Finance Minister Nirmala Sitaraman on Saturday (February 1, 2025) presented the Union government’s second budget after the NDA secured third consecutive win in 2024.

Union Finance Minister begins Budget speech

Union Finance Minister Nirmala Sitharaman commenced her eighth consecutive budget speech stating that this budget continues the government’s efforts to:

1. accelerate growth
2. secure inclusive development
3. private investment
4. uplift household sentiment
5. enhance spending power of India’s rising middle class

Viksit Bharat encompasses

Proposed development measures in the budget.

These span 10 broad areas, focusing on gareeb, youth, annadata, and naari.

Budget Estimates for 2025-26

Total receipts other than borrowing: ₹34.96 lakh crore
Total expenditure: ₹50.65 lakh crore
Fiscal Deficit: 4.4% of GDP. To finance the fiscal deficit, the net market borrowings from dated securities are estimated at ₹11.4 lakh crore.

Union Budget 2025: Where does the money come from and go?

Borrowings and other liabilities form the largest chunk of where money flows in from for this Budget, at 24%, last year it was 27%. At the second spot is income tax at 22% (previous year 19%), followed by inflow from GST and other taxes at 18%, same as 2024-25. Corporation tax also makes up a significant chunk at 17%. Non-tax revenue, union excise duties, customs and non-debt capital receipts is where the government gets the rest of its budget money from.

Where does the money come from ?

• Borrowing and other liabilities 24%
• Income tax 22%
• GST and Other taxes 18%
• Corporation Tax 17%
• Non Tax receipts 9%
• Union Excise duties 5%
• Customs 4%
• Non Debt capital receipts 1%

Where does the money go?

• State’ share of Taxes and Duties 22%
• Interest Payments 20%
• Central sector scheme 16%
• Finance commission and other transfers 8%
• Defence 8%
• Centrally sponsored schemes 8%
• Subsidies 6%
• Pensions 4%
• Others 8%

New tax slabs

• Upto ₹4 lakhs: Nil
• ₹4 lakhs – ₹8 lakhs: 5%
• ₹8 lakhs – ₹12 Lakhs: 10%
• ₹12 lakhs – ₹16 lakhs: 15%
• ₹16 lakhs – ₹20 lakhs: 20%
• ₹20 lakhs – ₹25 lakhs: 25%
• Above ₹25 lakhs: 30%
• No income tax payable upto incomes of ₹12 lakh

List of items set to become cheaper and costlier.

Cheaper:

• Imported cars priced over USD 40,000 or engine capacity of more than 3,000 cc
• Imported motorcycles as completely built (CBU) unit with engine capacity not exceeding 1600cc
• Motorcycles with engine capacity not exceeding 1600cc imported in completely knocked down form
  Imported motorcycles with engine capacity of 1600cc and above in CBU form
• Motorcycles with engine capacity of 1600cc and above in SKD form.
• Motorcycles with engine capacity of 1600cc and above in CKD form.
• Imported vehicles for transport of 10 or more persons- Parts of electronic toys, Synthetic flavouring essences and mixtures, used in food and drink industries, Articles of Jewelery, goldsmiths’ and silversmiths’ ware, Ethernet switches Carrier grade.
• Motorcycles with engine capacity not exceeding 1600cc imported in semi-knocked down (SKD) form

Costlier

• Smart meter
• Solar Cells
• Imported footwear
• Imported Candles and tapers
• Imported Yachts and other vessels
• PVC Flex Films, PVC Flex Sheets, PVC Flex Banner.
• Interactive Flat Panel Displays which are imported as completely built units.
• Certain imported knitted fabrics

Agriculture as the first engine: Sitharaman

Proposals for agriculture:

• PM Dhan Dhanya Krishi Yojana, a developing Agri-districts program, will cover 100 districts.
• A national mission for high yielding seeds will be launched.
• A comprehensive program for vegetable and fruits will also be launched in partnership with States.
• Makhana Board to be set up in Bihar.
• India ranks second largest globally in fishery products. “Our government will bring an enabling framework for sustainable harnessing of fisheries in India’s economic zone.”
• Mission for Cotton productivity will facilitate significant improvement in cotton farming.
• Kisan credit cards facilitate short term loans for 7.7 crore farmers, fishermen and dairy farmers. The loan limit will be enhanced from ₹3 lakh to ₹5 lakh.
• For Atmanirbharta in urea production, a plant with annual capacity of 12.7 lakh metric tonnes will be set up in Assam.
• India Post with 1.5 lakh rural post offices, complemented by the India Posts Payment Bank, will be repositioned to act as a catalyst for the rural economy. India Post will also be transformed as a large public sector logistics organization to meet rising needs.

MSMEs as the second engine: Sitharaman

MSMEs are the second engine which encompasses manufacturing and services, with a focus on MSME numbering 5.7 crores.
Currently, over 1 crore registered MSMES, generating 36% of our manufacturing have come together to position India as a global manufacturing hub, These MSMEs are responsible for 45% of our exports. To help them achieve higher efficiencies of scale, technological upgradation, get better access to capital, the investment and turnover limit for classification of all MSMEs will be enhanced to 2.5 and 2 times respectively.

To improve access to credit, the credit guarantee cover will be enhanced, which will also include Start-ups.

Fund of Funds for Startups – Alternative investment funds have received commitments of more than ₹91,000 crore. Now a new Fund of Funds with expanded scope and a fresh contribution of another ₹10, 000 crore will be set up. A new scheme will be launched for 5 lakh women Scheduled Caste and Schedule Tribe first-time entrepreneurs.

Investment as third engine: Sitharaman

Investment – the third engine, Ms. Sitharaman says encompasses investing in people, economy and innovation.
Investing in People: Saksham Anganwadi and Poshan 2.0 provides nutritional support to over 8 crore children and 1 crore pregnant women, mothers and 20 lakh adolescent girls. The cost norms will be enhanced in the scheme.

50,000 Atal Tinkering labs will be set up in government schools in the next five years.

Broadband connectivity to be provided to all government secondary schools and primary centres in all rural areas.
A Bharatiya Bhasha Pustak scheme to be implemented for Indian language books for schools and higher education. Five National centres of excellence for Skilling will be set up with global expertise and partnerships, building on announcements made in July 2024 budget.
IITs’ capacity will be expanded. Total number students in 23 IITs has increased 100% from 65,000 to 1.35 lakh in the past 10 years. Additional infrastructure will be created in the five IITs started after 2014 and IIT Patna will also be expanded.

Manufacturing Mission

Ms. Sitharaman, in her budget speech announced the setting up of a National Manufacturing Mission for small, medium and large industries to further Make In India.
The mission will also support clean tech manufacturing and will help build our ecosystem for solar cells, EV batteries, motors, controllers, wind turbines, grid-scale batteries etc.

Sector

Measures for labor- intensive sectors

For Labor-intensive sectors, to promote employment, our government will undertake specific policy and facilitation measures, says Ms. Sitharaman during her budget speech.
For the footwear and leather sector, a Focus Product scheme will be implemented. The scheme is expected to generate 22 lakh jobs.

For the toy sector, we will implement a scheme to make India a global hub of toys.

For food processing, we will establish a National Institute of Food Technology, Entrepreneurship and Management in Bihar. “This will result in enhanced income for farmers through value addition and skilling, entrepreneurship and employment opportunities for the youth.”

Exports as fourth engine: Sitharaman

Expanding on the government’s allocation of Exports as fourth engine to driving the goal of Viksit Bharat, Ms. Sitharaman announces setting up an export promotion mission, driven by the Ministries of Commerce, MSMEs and Finance, that will support easier access to credit and help MSMEs to deal with non-tariff barriers.

Digital Public Infrastructure — Bharat Trade Net — for international trade will be set up for trade documentation and financial solutions.
A national framework will be formulated as guidance to States for promoting Global Capability Centres in emerging tier-2 cities.

Investing in Innovation

• Announcing measures to promote “Investing in Innovation”, Ms. Sitharaman announces an allocation of ₹20,000 crores.
• A DeepTech Fund of Funds will also be explored to catalyse the next generation startups.
• 10,000 fellowships to be provided for technological research in IITs and IISC with enhanced financial support.
• National geo-spacial mission to be set up to develop foundational geo-spacial infrastructure and data.
• Gyan-Bharatam Mission for survey, documentation, and conservation of manuscripts heritage will be undertaken to cover 1 crore manuscripts.

Tourism for employment-led growth: Sitharaman

Top 50 tourism sites to be developed with States in a challenge mode. Hotels under this program will be included in the infrastructure harmonized list.

Measures will be taken for facilitating employment-led growth which will include: Organizing intensive skill development programs in institutes of hospitality management. Providing Mudra Loans for homestays, Providing PLIs to States for effective destination management, including tourist amenities and marketing efforts, and will include e-visa facilities for some tourists.
Medical tourism and Heal In India will be promoted in partnership with the private sector along with capacity building and easier visa norms.

Mining sector reforms

Mining sector reforms, including those for minor minerals, will be encouraged through sharing of best practices and the institution of a State Mining Index, Ms. Sitharaman says in her Budget speech.
A policy of recovering critical minerals from tailings will be brought out.

Modified UDAAN regional connectivity scheme will be launched

The UDAAN regional connectivity scheme, Ms. Sitharaman says, has enabled 1.5 crore middle class people to make their aspirations for speedier travels.

A modified Udaan scheme will be launched to enhance regional connectivity to 120 new destinations and carry 4 crore passengers in the next 10 years. The scheme will also support helipads and smaller airports in hilly and aspiration districts.

Greenfield airports will be facilitated in Bihar to meet the future needs of the State. These will be in addition to expansion of Patna airport.

Western Kosi canal project in Mithilanchal will be given financial support that will benefit a large number of farmers in Bihar.

Ship building financial assistance policy to be revamped

Ship building financial assistance policy will be revamped to address cost disadvantages, which will also include credit notes for ship-breaking in Indian yards to promote the circular economy. For long term financing of maritime industry, a Maritime Development Fund with a corpus of ₹25,000 crore will be set up. This will have up to 49% of contribution from the government and the balance will be from ports and the private sector.

Nuclear Energy Mission

Urban sector reforms

Building on the July Budget proposals, Ms. Sitharaman says in her Budget speech, urban sector reforms will be incentivized through an Urban Challenge Fund of ₹1 lakh crore to implement proposals for creative redevelopment of cities and Cities as growth hubs, and for water and sanitation projects.

This fund will finance upto 25% of the cost of bankable projects, with a stipulation that at least 50% of the funding is secured through bonds, bank loans and PPPs. Allocation of ₹10,000 crores proposed.

Jal Jeevan Mission

Speaking on the Jal Jeevan Mission, Ms. Sitharaman informs that since 2019, the mission has benefited 15 crore households with potable tap water connections. To achieve 100% coverage by 2028 in rural India, from the current 80%, the outlays will be enhanced, she announced.

Investing in the Economy

Strengthening urban livelihoods; ID cards for gig workers

Centre of excellence for Artificial Intelligence in Education announcned

Continuing her speech on Investment as an engine for growth, Ms. Sitharaman announced the setting up of Centre of excellence for Artificial Intelligence.

A centre of excellence for Artificial Intelligence in Education will be set up at a total outlay of ₹500 crore.

The government will also focus on expansion of medical education. Ms. Sitharaman notes that the government has added 1.1 lakh UG and PG seats in 10 years. In the next year, 10,000 additional seats to be added in medical education.

“Our government will facilitate setting up day-care Cancer centres in all district hospitals in the next three years, with 200 centres to be established in 2025-26 itself.”

Other tax provisions announced

Other tax provisions announced by Ms. Sitharaman in her budget speech included:

• The compliance burden for small charitable trusts is being reduced by giving them 10 years for registration instead of 5 years.
• Taxpayers can claim annual value of self-occupied homes as nil only on certain conditions. This will now be allowed for two such properties without any conditions.
• With a view to reduce litigation and provide certainty in international taxation, the scope of safe harbor rules is being expanded.
• Senior citizens with very old National Savings Scheme accounts that are not attracting interest anymore, will be allowed to withdraw their savings without any tax.
• To promote investment and employment, it is proposed to provide a presumptive taxation scheme to non-residents who provide services to manufacturing of electronics.
• The tonnage tax scheme is only available to sea-going ships, and will be extended to inland vessels to promote inland water transport in the country.
• For startups, propose to extend the period of incorporation by 5 years to those that are incorporated by 2030.
• Time limit for filing updated returns for any assessment year is being raised from two years to four years.

Rationalization of TDS and TCS for easing difficulties

• Propose to rationalize TDS and TCS by reducing the number of rates and the thresholds at which TDS is deducted.
• The limit for TDS on Interest for senior citizens is being doubled from ₹ 50,000 to ₹ 1 lakh.
• TDS threshold on annual rent is being raised from ₹1 lakh to ₹6 lakh.
• TCS limit on LRS remittances being raised from ₹7 lakh to ₹10 lakh.
• Both TDS and TCS are being applied on any transaction related to sale of goods. To prevent such compliance difficulties, propose to omit TCS and apply higher TDS deductions only on non-PAN cases.

Direct Tax

Objective of proposals:

• Personal Income Tax reforms with special focus on middle class.
• Rationalization of TDS and TCS for easing difficulties
• Encouraging voluntary compliance
• Reducing compliance burden
• Ease of doing business
• Employment
• Investment

Support to domestic manufacturing and value addition

• Propose to fully exempt cobalt powder, and waste, scrap of lithium iron battery, lead, zinc and 12 more critical minerals.
• To promote domestic production of technical textiles at competitive products, propose to add two more types of shuttle-less looms to the exemption list from import duty.
• In line with Make In India, propose to raise BCD from 10% to 20% on Flat LED TV panels.
• 35 more capital goods will be added to the exempt list for Lithium ion batteries and 28 items for mobile phones.
• Propose to reduce BCD on carrier-grade internet switches to 10% from 20%.
• Propose to add nine items to the list of duty-free inputs.
• Presently, time limit for provisional assessment is not provided under the current Customs Act, leading to uncertainty and cost to trade. Propose to fix a time limit of 2 years, extendable by 1 year, for provisional assessments.
• For industry to better plan their imports, the time limit for end use of those imports is being raised from 6 months to 1 year.

36 life saving drugs are being added to the list of fully exempted from customs duty

To provide relief to patients suffering from cancer and rare diseases, 36 life saving drugs are being added to the list of fully exempted from customs duty. I also propose to add six life saving medicines to the list of concessional customs duty.
Specified drugs and medicines under patient assistance programs run by the pharma companies are fully exempt from BCD. I propose to add 37 more drugs and 13 more patient management programs under this.

Indirect taxes

For industrial goods, the Finance Minster announces:

• Removal of seven tariff rates. “After this, there will be only 8 tariff rates including zero rate.”
• Apply appropriate cess to broadly maintain effective duty incidents except on a few items.
• Levy not more than one cess or surcharge. Propose to exempt Social Welfare Surcharge on 82 tariff lines.

Fiscal Policy

Announcing the fiscal policy for this year’s Budget, Ms. Sitharaman says that the roadmap for the next 6 years for fiscal consolidation has been detailed in the FRBM statement.

Measures for reforming Regulatory framework

In order to reform regulatory framework, making it more people-friendly, Ms. Sitharaman announces four measures:

• A high-level committee for regulatory reforms for a review of all non-financial sector regulations, certifications, licences and permits. The Committee will be expected to make recommendations within a year to drive trust-based regulations.
• Investment-friendliness index of States will be launched in 2025
• Mechanism will be set up to evaluate impact of current financial regulations and subsidiary instructions.
• In the Jan Vishwas Act, 2023, more than 180 legal provisions were decriminalised. A new bill Jan Vishwas 2.0 will be moved to decriminalise another 100 provisions.

Financial sector reforms

Announcing reforms in the Financial Sector, Ms. Sitharaman said that the FDI limit in the insurance sector will be enhanced from 74% to 100%, for companies that invest their entire premium in India.

• The services of India Post Payment Bank will be deepened and expanded in rural India.
• Public sector banks will develop a Grameen credit score framework. A forum for regulatory coordination and development of pension products will be set up.
• A revamped central KYC registry will be rolled out in 2025, and we will also streamline the process for speedier re-KYCs .
• Bilateral investment treaties were signed with two countries in 2024. To encourage more investment, the current BIT will be revamped and made more investor-friendly.