Union Budget 2025: Tax Cuts, Growth Initiatives, and Fiscal Prudence

Union Budget for the fiscal year 2025–2026 on February 1, 2025, Finance Minister Nirmala Sitharaman included important initiatives to boost economic development, improve business accessibility, and aid the middle class.

Union Budget Key Highlights:

1. Reforms to the Personal Income Tax:

Raised Tax Exemption Threshold: The income tax exemption threshold was formerly ₹700,000, but it has now been raised to ₹1.2 million (₹12 lakh) annually.

Updated Tax Slabs: To help middle-class taxpayers, new income tax rates have been implemented.

  • 5% of ₹4 lakh to ₹8 lakh
  • 10% of ₹8 lakh to ₹12 lakh
  • 15% of ₹12 lakh to ₹16 lakh
  • 20% of ₹16 lakh to ₹20 lakh
  • 25% of ₹20 lakh to ₹24 lakh
  • 30% over ₹24 lakh

The goal of this reorganization is to increase middle-class investment, savings, and consumption.

2. Fiscal Management and Economic Growth:

GDP Growth Projections: According to the budget, real GDP is expected to rise by 6.4% during the current fiscal year and by 6.3% to 6.8% the next year.

Fiscal Deficit Target: In the fiscal year 2025–2026, the government wants to bring the fiscal deficit down to 4.4% of GDP.

3. Assistance for Rural Development and Agriculture:

High-Yield agricultural Program: To increase agricultural production, a new program has been introduced that targets 17 million farmers.

Subsidized Credit: In an effort to support the agriculture industry, the budget expands subsidized credit for farmers.

4. Energy and Infrastructure Projects:

Nuclear Energy objective: With changes to current legislation to promote private sector involvement, a specific objective has been declared to create at least 100 GW of nuclear power by 2047.

5. Simplicity of Conducting Business:

Regulatory changes: To lessen compliance requirements and promote investment, a high-level committee will be formed to examine and carry out regulatory changes.

6. Employment and Social Welfare:

Support for the Gig Economy: Steps have been taken to formalize gig economy workers, enhancing their access to social programs and healthcare.

Rural Employment Scheme: To provide assistance for rural employment, the budget keeps the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) allocation at ₹860 billion.

7. New Tax Update:

In the Budget 2025 release, Nirmala Sitharaman suggested reduced tax rates, emphasizing that under the new tax system, income up to ₹12 lakh will be subject to zero income tax rates.

8. Capex:

According to the budget projections for FY2024–2026 and FY2024–2025, India’s capital expenditure (Capex) increased to ₹11.21 crore. The budget figures for FY2024–2025 was ₹11.11 lakh crore.

9. Bihar Makhana:

India’s intentions to establish a Makhana Board in Bihar to enhance the production, processing, value addition, and marketing of Makhana were revealed in Budget 2025.

10. Job Scheme:

The Modi 3.0 administration stated that it intended to use this program to create 22 lakh employment in the economy. India wants to make its leather and footwear industry more competitive, productive, and high-quality.

11. UDAN Scheme:

In the upcoming ten years, the government intends to introduce a modified version of the UDAN Scheme with the goal of improving regional connectivity to 120 additional locations and transporting 4 crore people. 

12. The Indian government raised the foreign direct investment (FDI) cap for the insurance industry from 74% to 100% in the Budget 2025 announcement.

13. The goal of this government action is to increase foreign investment in the Indian insurance business. According to the Budget declaration, “those companies that invest the entire premium in India will be eligible for this enhanced limit.”  

14. The Union Budget data indicates that India’s energy allocation climbed from ₹68,769 crore in FY2024–25 budget projections to ₹81,174 crore in FY2025-26 budget estimates.

All things considered, the Union Budget 2025–2026 prioritizes budgetary discipline while promoting economic development, lowering middle-class taxes, assisting agriculture, and improving infrastructure.

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