Union Budget 2025 Highlights & Tax Slabs: Key Updates & Summary

2025-02-01

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Nirmala Sitharaman, the Finance Minister, has unveiled the Union Budget for Modi 3.0, outlining key measures to propel India toward its vision of a Viksit Bharat by 2047. This year’s Budget focuses on a comprehensive set of reforms, incentives, and fiscal strategies designed to bolster economic growth, drive industrial progress, and enhance the overall well-being of the population. With a clear focus on sustainable development and long-term growth, the Budget aims to lay the groundwork for a stronger, more resilient economy.

Key Takeaways

Individuals earning up to ₹12 lakh will not pay income tax, enhancing disposable income for the middle class.
The senior citizen deductions have been raised from ₹50,000 to ₹1 lakh, providing greater financial relief.
Significant investments are allocated for roads, railways, and digital infrastructure to enhance connectivity and support economic growth.
A new mission will provide MSMEs with access to export credit and support the development of Global Capability Centres in tier 2 cities.
The Budget outlines various green initiatives aimed at promoting sustainable agricultural practices.

What to Expect from Union Budget 2025-2026

The Union Budget 2025 is critical for both India’s economy and its citizens. With the country facing an economic slowdown, GDP growth is expected to hit a four-year low of 6.4% in FY24, roughly in line with the decade’s average. This makes the Budget an important tool for guiding the economy back on track. According to the Economic Survey, growth is projected to be between 6.3% and 6.8% in FY26.

India’s once-rapid growth has slowed, and keeping an annual growth rate of 8% is now more crucial than ever. While growth in FY25-26 is expected to improve slightly from FY24, it will still fall short of the 8.2% growth seen in FY23-24. With this in mind, the Budget focuses on critical reforms, particularly in land and labour, to unlock the country’s growth potential and move us closer to a more developed and resilient India.

Key Highlights of Budget 2025-2026

Income Tax and Policy Reforms:

Relief for Lower Income Individuals: Tax slabs are adjusted, with the lower income brackets seeing more relief, especially for those earning up to ₹5 lakhs.

Enhanced Tax Rebate for Salaried Individuals: Those earning up to ₹12.75 lakh annually will now be exempt from income tax. This is due to an increase in the tax rebate from ₹25,000 to ₹60,000. However, it’s important to note that the rebate does not apply to incomes taxable at special rates, like capital gains.

Tax Benefits for Higher Income Groups: For individuals with an annual income of ₹18 lakh, the tax benefit is approximately ₹70,000, while those with ₹12 lakh annual income will benefit by ₹80,000 in tax savings.

Tax Deduction Limit for Senior Citizens Doubled: The tax deduction limit for senior citizens has been doubled from ₹50,000 to ₹1 lakh, providing greater relief for this demographic.

Increased TDS Limit on Rent Payments: The annual threshold for Tax Deducted at Source (TDS) on rent has been raised from ₹2.40 lakh to ₹6 lakh. The increased TDS limit will help in reducing tax burdens for landlords and tenants.

Higher Threshold for TCS on Remittances: The Budget raises the threshold for collecting TCS on remittances under the RBI's Liberalised Remittance Scheme (LRS) from ₹7 lakh to ₹10 lakh. This change reduces the tax burden for individuals making smaller transfers.

Relaxation for TDS and TCS Provisions: The recent Budget highlights relaxations for TDS and TCS, including removing TCS on educational remittances funded through loans and on goods transactions. It helps ease compliance for taxpayers and businesses.

Extended Time Limit for Filing Updated Returns: The Union Budget updates the time limit to file updated returns, which has been extended from two years to four years.

Industries:

Agricultural Support: Recognising the importance of agriculture in India's economy, several measures are introduced, including the PM Minister Dhan-Dhaanya Krishi Yojana, a 5-year mission to improve cotton productivity, sustainable agricultural practices, and a focus on climate-resilient seeds for pulses like Tur, Urad, and Masoor.

Infrastructure Development: A key pillar of the Union Budget this year is infrastructure, with the government announcing record funding for roads, railways, and digital infrastructure. With an emphasis on connectivity, significant investments have been made to enhance both urban and rural infrastructure. It also outlines plans for expanding medical and educational infrastructure.

Technology and Digital Infrastructure Development: The new Union Budget emphasises enhancing digital infrastructure by rolling out 5G, supporting tech startups with tax incentives, and strengthening cybersecurity to position India as a global leader in emerging technologies like AI, blockchain, and IoT.

Support for MSMEs and Entrepreneurs: The Budget acknowledges the importance of MSMEs, which contribute 36% to India’s manufacturing and 45% to the nation’s exports. Thus, it introduces several measures to support MSMEs, including customised credit cards with a ₹5 lakh limit for micro-enterprises and a new scheme offering term loans up to ₹2 crores for first-time entrepreneurs. Additionally, it highlights targeted initiatives for labour-intensive sectors like footwear, toys, and food processing.

Investing in People, Economy, and Innovation: The Union Budget highlights development measures for key groups such as the underprivileged, youth, farmers, and women, including the establishment of 50,000 Atal Tinkering Labs, expanding broadband connectivity in rural areas, and introducing digital Indian language books.

Promoting Exports: Export Promotion Mission helps provide MSMEs with export credit access and cross-border factoring support. The Budget 2025 also launches BharatTradeNet, a unified platform for trade documentation and financing, and supports the development of Global Capability Centres in tier 2 cities. Additionally, there are plans to upgrade infrastructure and warehousing facilities for air cargo.

Conclusion

The 2025 Union Budget by Nirmala Sitharaman is a bold step towards unlocking India's full potential under the visionary leadership of the Prime Minister. With a clear focus on accelerating growth and fostering a ‘Viksit Bharat,’ the Budget aims to strengthen the economy, promote innovation, and drive inclusive development. Emphasising India's position as the fastest-growing major economy, the Budget outlines key initiatives to enhance infrastructure, support MSMEs, improve welfare, and expand digital capabilities. As the government continues its efforts to drive sustainable growth, this Budget sets the stage for a more prosperous and resilient future for India.

Glossary

Tax Rebate: A reduction in the amount of tax owed.
LRS: A scheme that allows Indian residents to send money abroad for various purposes like education, medical expenses, etc.
Tax Deducted at Source: A method of collecting income tax where tax is deducted at the source of income before it reaches the recipient.
Tax Collected at Source: Tax that is collected by the seller from the buyer on certain goods or services, then remitted to the government.
MSMEs (Micro, Small, and Medium Enterprises): Small-scale businesses that contribute significantly to India's economy.

Frequently Asked Questions on Union Budget 2025

The Union Budget is the government’s annual financial plan detailing expected revenue and planned expenditure for the upcoming fiscal year.

The Union Budget is presented by Nirmala Sitharaman, the Finance Minister of India.

The key components include:

Revenue Budget
Expenditure Budget
GDP growth projections
Policy Announcements

Yes, under the new tax regime, individuals earning up to ₹12 lakh annually will not have to pay income tax, excluding special rate incomes like capital gains.

Yes, the government plans to add 6,500 new IIT seats and 10,000 new medical seats in 2025 to expand educational opportunities.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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