Union Finance Minister Nirmala Sitharaman presented her eighth consecutive Union Budget on February 1, 2025, bringing forward significant economic reforms, tax reliefs, and sector-specific allocations. The budget, aimed at bolstering economic growth while providing relief to the middle class, introduced new tax slabs, increased capital expenditure, and enhanced employment opportunities.
Union Budget 2025: Key Takeaways
1. No Income Tax Up to ₹12 Lakh
One of the biggest announcements in Union Budget 2025 was the revision of the income tax structure. Under the new tax regime, income up to ₹12 lakh is now exempt from taxation. This is a major relief for salaried individuals and middle-class taxpayers, allowing for greater disposable income and financial flexibility.
2. Revised Income Tax Slabs for FY 2025-26
The revised tax structure under the new regime is as follows:
- Income up to ₹4 lakh – No Tax
- Income from ₹4 lakh to ₹8 lakh – 5%
- Income from ₹8 lakh to ₹12 lakh – 10%
- Income from ₹12 lakh to ₹16 lakh – 15%
- Income from ₹16 lakh to ₹20 lakh – 20%
- Income from ₹20 lakh to ₹24 lakh – 25%
- Income above ₹24 lakh – 30%
Additionally, individuals earning up to ₹12.75 lakh annually will pay zero income tax after considering the standard deduction of ₹75,000.
3. Capex Increase and Fiscal Management
The government increased its capital expenditure (Capex) to ₹11.21 lakh crore for FY 2025-26, aiming to enhance infrastructure, roadways, and public sector growth. However, fiscal discipline remains a priority, with the fiscal deficit estimated to be 4.4% of GDP, down from the previous year.
4. Boost for Bihar: Makhana Board and Greenfield Airports
A significant focus of this year’s budget was Bihar, mentioned six times in the budget speech. A dedicated Makhana Board will be established in Bihar to improve production, processing, and marketing. Additionally, the state will receive new Greenfield Airports, enhancing regional connectivity.
5. Employment Generation: 22 Lakh New Jobs
The government announced a plan to generate 22 lakh jobs through the Focus Product Scheme in the footwear and leather industry. The move is aimed at boosting employment and industrial productivity.
6. UDAN Scheme Revamped: 120 New Destinations
A modified version of the UDAN Scheme was introduced to improve air connectivity. The government plans to connect 120 new destinations and aims to transport 4 crore passengers over the next decade.
7. Nuclear Energy Boost: ₹20,000 Crore Allocation
The government launched a Nuclear Energy Mission, allocating ₹20,000 crore for research and development of Small Modular Reactors (SMRs). India plans to develop five SMRs operational by 2033, strengthening the country’s clean energy initiative.
8. Defence Allocation: ₹4.91 Lakh Crore
The defence sector saw an increase in spending, with an allocation of ₹4.91 lakh crore to bolster security, modernize equipment, and support indigenous manufacturing.
9. IT and Telecom Sector Allocation Reduced
Budget allocations for the IT and Telecom sector dropped to ₹95,298 crore for FY 2025-26, a reduction from ₹1.16 lakh crore in the previous fiscal year. The move aligns with the government’s push for privatization and market-driven investments.
10. Healthcare Benefits for Gig Workers
For the first time, gig economy workers were included in employment welfare schemes. They will receive identity cards and be enrolled in a national registry for better access to welfare benefits, including healthcare under PM Jan Arogya Yojana.
11. Increase in Foreign Direct Investment (FDI) Limit for Insurance
The FDI limit in the insurance sector was increased from 74% to 100%, aiming to attract more foreign investments and improve financial security in the Indian market.
12. Agriculture and Rural Development
- Mission for Aatmanirbharta in Pulses: A six-year mission was announced to increase the production of pulses like Tur, Urad, and Masoor.
- PM Dhan-Dhaanya Krishi Yojana: This initiative will support 1.7 crore farmers across 100 districts with low productivity.
- Kisan Credit Card (KCC) Loan Limit Increased: The loan limit for KCC was raised to ₹5 lakh from ₹3 lakh, offering farmers better financial support.
- Urea Plant in Assam: A new Urea Plant will be set up in Namrup, Assam, with an annual capacity of 12.7 lakh metric tonnes.
13. Real Estate Reforms
- Swamy Fund 2: The government introduced Swamy Fund 2 with a ₹15,000 crore contribution for real estate, with additional contributions from banks and financial institutions.
- Self-Occupied Property Rules Relaxed: Restrictions on claiming two properties as self-occupied have been lifted, benefiting property owners.
14. MSME and Startup Support
- Fund of Funds for Startups: A dedicated fund was announced to support the startup ecosystem.
- Credit Limit Increases: MSMEs now get loans up to ₹20 crore, while startups’ credit limits increased to ₹20 crore with a 1% moderated guarantee fee.
- Customized Credit Card for Micro Enterprises: A new Customized Credit Card with a ₹5 lakh limit will be launched for Micro Enterprises, benefiting 10 lakh businesses in the first year.
15. Energy and Sustainability
- Energy Allocation Up by 18%: The government increased its energy allocation by 18% YoY, reaching ₹81,174 crore.
- Solar PV Cells, EV Batteries, and Lithium-Ion Batteries to Become Cheaper: To promote clean energy, import duties on these components were reduced.
- Shipbuilding, Tourism, and Warehousing Support: Government initiatives for boosting the maritime sector, eco-tourism, and logistics infrastructure were outlined.
16. Simplification of Tax Laws
- New Income Tax Bill: The Finance Bill will be 50% shorter than the current law to improve clarity and reduce litigation.
- Section 87A Rebate Increased: The tax rebate limit was increased from ₹7 lakh to ₹12 lakh, benefiting middle-income taxpayers.
Conclusion: A ‘Dream Budget’ for the Middle Class
Union Budget 2025 has been widely regarded as a ‘dream budget’ for the middle class. With tax relief, higher Capex spending, agriculture reforms, employment generation, and ease of doing business, the budget focuses on boosting economic growth while maintaining fiscal discipline.
This budget not only aims to enhance disposable income for individuals but also sets a clear roadmap for India’s long-term economic growth through strategic investments, infrastructure expansion, and policy-driven development.
