India’s Union Budget 2025-26: Major Announcements & Tax Updates

On Saturday, February 1, Union Finance Minister Nirmala Sitharaman presented her eighth consecutive Union Budget with the theme “Sabka Vikas.” This Budget promises real relief and a more straightforward, transparent tax system for everyone, from salaried individuals to homeowners and business owners. There have been 79 Union Budgets (including interim budgets) from 1947 to 2025.

The budget highlights that agriculture, MSME, investment, and exports are driving forces in the journey to Viksit Bharat, empowered by reforms and dedicated to fostering inclusivity. 

Key Features of Union Budget 2025-26

The government’s projected expenditure is Rs 50,65,345 crore in 2025-26, 7.4% higher than the revised estimate of 2024-25. The government has projected a nominal GDP growth rate of 10.1% in 2025-26. Below are the areas where this year’s budget will impact majorly:

Agriculture

The central government will launch a six-year mission, “Mission for Aatmanirbharta in Pulses”, to become self-reliant on pulses. The Modified Interest Subvention Scheme loan limit will be increased from Rs. 3 lakh to Rs. 5 lakh, supporting 7.7 crore farmers, fishermen, and dairy farmers for loans via the Kisan Credit Card. Further, Prime Minister Dhan-Dhaanya Krishi Yojana will be executed to improve productivity and crop diversification in 100 low-productivity districts. 

MSME

The investment and turnover limits for classifying all MSMEs were enhanced to 2.5 and 2 times, respectively. During the next 5 years, term loans up to Rs. 2 crore will be provided. To better credit access, credit guarantee cover will be increased: (i) from Rs 5 crore to Rs 10 crore for micro and small enterprises, (ii) from Rs 10 crore to Rs 20 crore for start-ups, and (iii) up to Rs 20 crore for exporter MSMEs. For micro enterprises registered on the Udyam portal, 10 lakh credit cards with a credit limit of Rs 5 lakh will be provided within the scheme’s first year. 

Investment

The Union Minister prioritised investment in people, economy and innovation. Under the investment in people, 50 Thousand Atal Tinkering Labs will be set up in Government schools in the next 5 years. A Centre of Excellence in Artificial Intelligence for Education will be set up with a total outlay of 500 crore. The government will establish an Urban Challenge Fund of Rs. 1 lakh crore and an allocation of ₹. 20,000 crore was announced to implement a private sector-driven Research, Development, and Innovation initiative.

Exports

The Export Promotion Mission will facilitate easy access to export credit, cross-border factoring support, and support for MSMEs in tackling non-tariff measures in overseas markets. Further, a digital public infrastructure, ‘BharatTradeNet’ (BTN), for international trade was proposed. A national framework for global capability centres has also been proposed to promote in emerging tier 2 cities. 

Economic Projections:

Fiscal deficit in 2025-26 is projected at 4.4% of GDP, lower than the revised estimate of 4.8% in 2024-25.

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Changes in New Income Tax Regime:

The new tax regime has modified the tax slabs. An annual income of up to Rs 12 lakh will receive a 100% rebate on taxable income, whereas earlier, this only applied to income of up to Rs 7 lakh. The old tax regime remains unchanged.  You can refer to the below-presented table for both the new and old tax structure:

Tax Slabs: Old vs. New

Tourism for Employment-Led Growth

The top 50 tourist destination sites will be developed in partnership with states. The government will introduce streamlined e-visa facilities, MUDRA homestay loans, and performance-linked incentives for states.

Things That Have Got Cheaper

The revisions in import duties will make some products cheaper:

• Mobile Phone Components: Duty exemptions on 28 items used in mobile phone battery manufacturing will decrease the prices for phones and accessories.

• Medical Equipment and Life-saving Drugs: The budget exempts 36 lifesaving medicines from essential customs duty (BCD). 

• Raw Materials for Leather and Shipbuilding: Import duties on wet blue leather and raw materials for shipbuilding have been reduced.

• Seafood Imports: Duty reductions on frozen fish paste and fish hydrolysate to promote exports.

• Motorcycles and Bikes: The essential customs duty on motorcycles with an engine capacity not exceeding 1600 CC will now be 40% instead of 50%, while the duty on bikes with 1600 CC and above engine capacities will be reduced to 30% from 50%.

Things That Have Got Costlier

The revisions in import duties will make some products costlier:

• Interactive Flat Panel Displays: Customs duties on interactive flat-panel displays have been increased from 10% to 20%.

• Knitted Fabrics: The duty increase from “10% or 20%” to “20% or 115 per kg” aims to boost domestic textile production and promote technical textiles.

Conclusion

The Union Budget 2025 takes a balanced approach to fostering a more taxpayer-friendly environment. It includes reforms like increased income-tax exemptions, streamlined TDS and TCS processes, a more straightforward tax system, and promote inclusive growth, poverty eradication, quality education, and economic empowerment. The Finance Minister proposed to remove seven tariff rates. The Budget aims to stimulate sustainable development and private sector investment while ensuring social equity by prioritising youth, women, farmers, and the middle class.