Union Budget 2025: Key Highlights

Finance Minister Nirmala Sitharaman presented the 2025 union budget during the parliament’s first budget session on February 1, 2025. The particulars of the budget include economic reforms which are suggested keeping in view the improvement of the overall economic standing of citizens belonging to the middle class and rural population, and those of MSMEs and startups. The current budget suggests investments in the insurance, manufacturing, education and technological sectors to encourage several new initiatives which can contribute immensely to the progress of the national economy in the face of geopolitical uncertainties and a slowing economic growth. Read on to find out more details.

1. Taxation & Income Tax Reforms

One of the major highlights of this year’s union budget presentation was the introduction of tax rebates for those earning up to Rs. 12 Lakhs a year, thus rendering individuals earning up to INR 12 Lakhs a year in the upcoming financial year, tax-free. This move has provided major relief to taxpayers who opted for the new tax regimen. 

In simple terms, if you are earning an annual income of Rs.12 Lakhs, in the upcoming financial year, you will be eligible for a tax rebate of up to INR 75000 under Section 87 A, which was the amount paid as tax previously. The following is a list of tax slabs for the different income groups.

Tax Relief for Taxpayers:

• No Tax up to Rs 12 Lakh: Individuals earning up to Rs 12 lakh annually will not pay any tax.
• New Tax Slabs:
  • Rs 0–4 lakh: Nil
  • Rs 4–8 lakh: 5%
  • Rs 8–12 lakh: 10%
  • Rs 16–20 lakh: 20%
  • Rs 20–24 lakh: 25%
  • Above Rs 24 lakh: 30%
• Tax Benefit Examples:
  • A taxpayer earning Rs 12 lakh gets a benefit of Rs 80,000 (equivalent to 100% of the tax payable under the existing rates).
  • An individual with an income of Rs 18 lakh saves Rs 70,000.
  • A person with an income of Rs 25 lakh benefits by Rs 1,10,000.
• TDS Reforms:
  • The annual threshold for TDS on rent has been raised from Rs 2.40 lakh to Rs 6 lakh, favoring small taxpayers receiving lower rental payments.
  • Rationalization of TDS and TCS procedures with higher thresholds, such as a Rs 1 lakh limit for senior citizens’ interest income.

2. Customs, Trade, and Fiscal Policy

Major reforms are suggested under the current budget to reduce the fiscal deficit percentage. There is more emphasis on bringing down manufacturing dependency on other countries. Read on to find out more.

• Tariff & Duty Adjustments:
  • Tariff Rationalization: Reduction to 8 tariff rates (including a 0% rate) by removing 7 rates, with a cap of one cess or surcharge (social welfare surcharge exempted).
  • Sector-Specific Reforms:
    • BCD on frozen fish paste reduced from 30% to 5%.
    • Crust leather exempt from a 20% duty; full exemption granted for value addition in the leather sector.
    • Comprehensive duty concessions for essential drugs and medicines.
• Fiscal Discipline:
  • Fiscal deficit is targeted at 4.8% of GDP.
  • Revised revenue estimates include:
    • Total budget receipts of approximately Rs 34.6 lakh crore.
    • Net tax receipts around Rs 28.37 lakh crore.
    • Overall expenditure nearing Rs 50.6 lakh crore.
• FDI & Investment:
  • The FDI limit in the insurance sector is increased from 74% to 100% to boost foreign investment.
  • New bilateral investment treaties and investor-friendly state initiatives are planned with the aim to ease the business environment within the country.

3. Infrastructure, Industry, & Investment

This year’s union budget includes economic provisions to encourage investment in innovation and technology and giving a boost to manufacturing within India.

• Innovation & Technology:
  • A dedicated Rs 20,000 crore fund for startups is being launched—with an additional Rs 10,000 crore government contribution (totaling Rs 20,000 crore).
  • Establishment of a Centre for Excellence in AI for education with an allocation of Rs 500 crore.
  • PM Research Fellowships and initiatives for digital public infrastructure (such as the Bharat Trade Net) to enhance trade documentation.
• Industrial and Manufacturing Boost:
  • National manufacturing mission to promote “Make in India” across sectors including toys, footwear, and leather.
  • Incentives for the shipbuilding industry, with a Maritime Development Fund of Rs 25,000 crore.
  • A new urea plant in Assam with a capacity of 12.7 lakh tonnes is planned.
• Nuclear Energy Mission:
  • A Rs 20,000 crore outlay focused on the research and development of small modular reactors.

4. Social, Agricultural, & MSME Initiatives

Reforms aimed at accelerating the economic growth of the middle class and rural population of the country and novel initiatives boosting the agricultural sector are presented at union budget, 2025.

• For the Middle Class & Rural Economy:
  • Inclusive Tax and Social Policies:
    • The budget emphasizes relief for the middle class, with reforms aimed at accelerating growth and inclusive development.
    • Rural prosperity and resilience programmes will focus on youth, women, and farmers.
  • Agricultural Initiatives:
    • A comprehensive program is announced to boost vegetable and fruit production and secure remunerative prices.
    • PM Dhan Dhyan Krishi Yojana: Targeting 100 districts with low yields and underdeveloped credit parameters, promising benefits for 100 crore farmers.
    • A six-year initiative will promote self-reliance in pulses—with a special focus on tur, urad, and masoor—and Nafed along with NCCF will procure pulses over the next four years.
  • MSME Support:
    • Enhanced credit guarantee cover and an increase in investment and turnover limits.
    • Customized credit cards for micro-enterprises with a Rs 5 lakh limit.
• Startups & Entrepreneurship:
  • A new scheme will support 5 lakh women, SC/ST, and first-time entrepreneurs by providing term loans up to Rs 2 crore over 5 years.
• Education & Health:
  • Medical Education Expansion: Addition of 10,000 new seats in medical colleges next year and 75,000 seats over the next five years.
  • Digital Connectivity: Plans to provide internet connectivity to all government schools and hospitals.
• Logistics & Connectivity:
  • The Udan Scheme is set to expand by adding 120 more destinations.
  • A major logistics initiative aims to transform India into a key logistics hub using 1.5 lakh rural post offices.

5. Governance, Reforms & Economic Outlook

Several new moves aimed at easing mundane administrative activities like KYC, application and registration processes have been mentioned within this year’s union budget.

• Regulatory and Process Reforms:
  • Simplification of KYC processes and facilitation of easier company mergers.
  • Extended time limits for using imported goods (from 6 months to 1 year) and for provisional tax assessments (2 years, extendable by 1 year).
• Economic Survey Highlights:
  • The Economic Survey for 2024–25, tabled by Chief Economic Advisor V. Anantha Nageswaran, projects GDP growth between 6.3% and 6.8% for the coming fiscal year.
  • Some of the highlights, such as food inflation (rising from 7.5% to 8.4%), improved employment metrics, and a decline in NPAs to a 12-year low (2.6% of gross loans) indicate the economy’s resilience.
  • The Survey recommends deregulation, enterprise-friendly reforms, and reducing dependence on other countries by boosting domestic and foreign investments.
• Governance and Policy Initiatives:
  • The new Income Tax Bill is set to be introduced next week, with the text designed to be clear, concise, and taxpayer-friendly.
  • Key areas of focus for reforms include taxation, urban development, mining, the financial sector, power, and regulatory reforms.
• Leadership & Vision:
  • Emphasizing the strength of the Indian economy, FM Sitharaman stated, “Indian economy is the fastest growing among all developing economies,” and noted the next five years as a unique opportunity to stimulate growth.
  • The Budget session was inaugurated with President Droupadi Murmu emphasizing rapid decision-making and the end of “policy paralysis.”

6. Key Announcements & Milestones

Among everything the following reforms are expected to bring about effective economic progress for industries like Insurance, establishment of new educational institutions, and nuclear energy, asserting economic and industrial independence. Several novel initiatives in the logistics and infrastructure sectors will encourage more and more businesses to set up shop in the country. Overall, this year’s budget promises a new start to several industries and economic sectors, thus pulling our nation towards the goal of being a developed nation from a developing one.

• Sectoral Announcements:
  • FDI in Insurance: Raised from 74% to 100%.
  • National Institute of Food Technology, Entrepreneurship, and Management: To be established in Bihar.
  • Nuclear Energy Mission: Focus on small modular reactors with an outlay of Rs 20,000 crore.
• Logistics and Infrastructure:
  • The Centre will boost small businesses with customized credit cards and increased credit guarantee for micro-enterprises.
  • Transforming rural logistics through the extensive use of rural post offices.
• Economic Environment:
  • The Economic Survey underscores strong momentum in construction (15% above pre-pandemic trends) and improvements in labor market metrics.
  • President Murmu highlighted the government’s achievements for the middle class and rapid decision-making in her address.

Conclusion

This year’s union budget was put together with a steady goal of delivering tax relief, boosting infrastructure and manufacturing and improving the financial well-being of MSMEs, and startups. The budget also includes major investments in education, health and technology, thus reflecting a forward-looking vision. Stressing fiscal discipline with innovative policies, the government aims to project India as a resilient global economic leader while contributing significantly to the sustainable progress of the middle class.