Union Budget 2025: Key Highlights

Finance Minister Nirmala Sitharaman presented the Union Budget 2025 on February 1, 2025, outlining a comprehensive plan aimed at bolstering economic growth, enhancing the spending power of the middle class, and promoting inclusive development across various sectors.

1. Union Budget 2025 Key Highlight: Fiscal Management

Fiscal Deficit Reduction: The government has set an ambitious target to reduce the fiscal deficit to 4.4% of GDP, down from the previous year’s 4.8%. This move underscores a commitment to fiscal prudence while ensuring adequate investment in critical sectors.

2. Union Budget 2025 Key Highlight: Taxation Reforms

Personal Income Tax Relief: In a significant move to boost the disposable income of the middle class, the nil personal income tax slab has been increased to ₹12 lakh. This adjustment is expected to enhance consumer spending and stimulate economic activity. No personal income tax payable upto income of Rs 12 lakh (i.e. average income of Rs 1 lakh per month other than special rate income such as capital gains) under the new regime. This limit will be Rs 12.75 lakh for salaried taxpayers, due to a standard deduction of Rs 75,000.
Income Tax Reforms: A major highlight of the budget is the overhaul of income tax slabs and the introduction of new tax regimes. The Finance Minister proposed a new tax regime with lower tax rates for individuals opting to forgo certain exemptions and deductions. This is designed to simplify tax filing and provide immediate relief. Additionally:
a. The nil personal income tax slab has been raised to ₹12 lakh.
b. Standard deduction for salaried employees has been increased from ₹50,000 to ₹75,000.
c. There are also enhanced tax deductions for contributions to family pension schemes and the new pension scheme, further promoting savings and financial security.
TCS section 206C(1H) i.e. TCS on Sale of Goods will be omitted from April 1, 2025. Only TDS on Purchase u/s 194Q will remain.
Customs Duty Adjustments: To support various sectors, the budget proposes reducing customs duties on marine products and critical minerals. Additionally, life-saving drugs have been exempted from customs duties, making healthcare more affordable.

3. Union Budget 2025 Key Highlight: Foreign Direct Investment (FDI) Initiatives

Insurance Sector Liberalization: The FDI limit in the insurance sector has been raised to 100%, aiming to deepen market penetration and enhance the availability of insurance products across the country.

4. Union Budget 2025 Key Highlight: Agricultural Development

National Mission for High-Yielding Crops: A new mission has been launched to promote high-yielding crop varieties, aiming to increase farm productivity and ensure food security.
Enhanced Credit for Farmers: The budget increases the limit for subsidized credit available to farmers, providing them with greater financial support to invest in modern farming techniques and equipment.
Developing agri-district Program: PM Dhan Dhanya Krishi Yogna to focus on 100 districts with low productivity. It will benefit around 1.7 crore farmers.

5. Union Budget 2025 Key Highlight: Infrastructure and Connectivity

Urban Challenge Fund: A key highlight of the Union Budget 2025 is the introduction of an Urban Challenge Fund with a corpus of ₹1 lakh crore. This fund aims to transform cities into growth hubs by providing financial support for urban infrastructure development, enhancing regional connectivity, and promoting sustainable urbanization. The initiative is expected to stimulate economic growth, improve living standards, and attract private investment in urban areas.
Infrastructure Development: Significant allocations have been made for infrastructure projects, including new power plants, airports, heritage routes, and road networks, targeting development in both rural and urban areas.
Regional Air Connectivity: To enhance regional connectivity, the budget proposes initiatives to improve air travel infrastructure, facilitating easier movement of goods and people across different parts of the country.

6. Union Budget 2025 Key Highlight: Manufacturing and Industry

National Manufacturing Mission: The government has introduced incentives under the National Manufacturing Mission to boost the manufacturing sector, aiming to make India a global manufacturing hub.
Support for State-Run Enterprises: In a strategic shift, the government plans to invest billions to revive several state-run companies, moving away from previous privatization plans. This includes a $1.5 billion rescue package for two state-owned firms, signaling a renewed focus on strengthening public sector enterprises.

7. Union Budget 2025 Key Highlight: Financial Sector Reforms

Credit Guarantees for MSMEs: To bolster employment and support small businesses, the budget enhances credit guarantees for micro, small, and medium enterprises (MSMEs), facilitating easier access to financing.
Financial Reforms: The budget outlines transformative reforms in taxation, power, urban development, mining, and the financial sector, aiming to create a more conducive environment for business and investment.

8. Union Budget 2025 Key Highlight: Sustainable Development

Policy for Critical Minerals Development: A new policy has been introduced to promote the sustainable development of critical minerals, ensuring their availability for key industries and reducing dependence on imports.

9. Union Budget 2025 Key Highlight: Social Welfare and Inclusion

Inclusive Development Programs: The budget includes measures to support the poor, youth, farmers, and women, aiming to promote inclusive development and reduce socio-economic disparities.

10. Union Budget 2025 Key Highlight: Education Sector Reforms

Expansion of Seats in IITs and Medical Colleges: In a significant move to increase educational opportunities, the budget announces an increase in the number of seats in IITs (Indian Institutes of Technology) and medical colleges across the country. This expansion aims to accommodate a growing number of students aspiring for higher education, ensuring that more youth can pursue their academic goals in top institutions.

The Union Budget 2025 reflects the government’s balanced approach to fostering economic growth while ensuring fiscal discipline. By focusing on key areas such as taxation, infrastructure, agriculture, and social welfare, the budget aims to set a strong foundation for India’s sustained development in the coming years. The tax reforms, especially the enhanced tax slabs and the introduction of a simplified tax regime, are expected to give the middle class a boost and catalyze consumption, making the overall economic environment more conducive for growth.

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As the Union Budget 2025 approaches, all eyes are on Finance Minister Nirmala Sitharaman to address key economic challenges while paving the way for sustained growth. With India poised to maintain its position as one of the fastest-growing economies globally, stakeholders from various sectors are voicing their expectations. Let us dive into the anticipated changes across sectors that could shape the financial landscape of India.

Note: The Budget will be out on February 1, 2025. Stay tuned to this space as we will update key highlights from the budget here!

Union Budget 2025: Income Tax Reforms

Taxpayers are eagerly anticipating relief through changes in income tax slabs and an increase in the standard deduction. A significant focus is on boosting disposable incomes to enhance consumption. Experts also expect simplification in filing processes, such as introducing pre-filled returns and digital tools, to promote tax compliance and reduce manual intervention. Enhanced exemptions for investments in insurance and mutual funds are also under consideration.

Union Budget 2025: Infrastructure and Capex

The government is likely to continue its emphasis on infrastructure development to stimulate economic growth. Increased allocation towards roads, railways, ports, urban transport, and smart cities is anticipated. Public-private partnership models are expected to be incentivized, with a focus on faster clearances and long-term funding support. The National Infrastructure Pipeline (NIP) might see enhanced allocations to meet its ambitious targets.

Union Budget 2025: Healthcare

Post-pandemic, there is a growing demand for increased healthcare spending. Stakeholders expect the government to expand the National Health Mission, incentivize private sector participation, and improve healthcare infrastructure in Tier 2 and Tier 3 cities. Enhanced allocations for research and development in pharmaceuticals and a focused push for digital health services under the Ayushman Bharat Digital Mission are also expected.

Union Budget 2025: Education and Skill Development

With the New Education Policy (NEP) laying the groundwork, stakeholders expect higher budgetary allocations for digital education, teacher training, and skill development programs. Initiatives to bridge the urban-rural education gap through increased funding for online learning tools and resources are anticipated. Vocational training and entrepreneurship promotion, particularly among women and marginalized communities, could also see greater focus.

Union Budget 2025: Agriculture and Rural Development

Farmers and rural communities expect policy measures that ensure fair crop pricing, enhanced subsidies for fertilizers, and improved irrigation facilities. Schemes promoting agri-tech adoption, farm mechanization, and organic farming could receive significant boosts. The expansion of Kisan Credit Cards and measures to improve rural storage infrastructure to reduce post-harvest losses are also on the radar.

Union Budget 2025 Key Expectations: Startups and MSMEs

Startups and MSMEs are looking for measures to ease access to credit, reduce compliance burdens, and enhance tax incentives. Policies supporting digital transformation, adoption of cutting-edge technology, and funding for startups in emerging areas such as green technology, AI, and blockchain are anticipated. The expansion of PLI (Production-Linked Incentive) schemes for MSMEs might also be announced.

Union Budget 2025: Green Energy and Sustainability

Given India’s commitment to achieving net-zero emissions by 2070, Budget 2025 is expected to focus on renewable energy initiatives. This includes increased funding for solar and wind energy projects, green hydrogen production, and electric vehicle (EV) adoption. Tax incentives and subsidies for EV manufacturing, charging infrastructure, and battery recycling are anticipated, along with a roadmap to promote clean energy jobs.

Union Budget 2025: Employment Generation

Employment creation remains a critical area of focus. The government is expected to introduce labor-intensive infrastructure projects and schemes to boost jobs in rural areas. Incentives for industries that adopt skill training programs and apprenticeship models could be introduced. Additionally, expansion of the MGNREGA scheme and targeted urban employment schemes are likely to be proposed.

Union Budget 2025: Real Estate and Housing

The real estate sector anticipates reforms in tax laws related to housing loans, an extension of Union Budget 2025 Key Expectations: incentives for affordable housing, and measures to boost rental housing. Developers are also seeking relaxation in GST rates on construction materials and simplified approval processes for affordable housing projects to increase supply.

Union Budget 2025: Defense

India’s defense budget is expected to see an increase, with a focus on modernization and indigenization of equipment under the ‘Make in India’ initiative. Enhanced allocations for research, development, and procurement of advanced technologies, including drones and AI-driven systems, are anticipated. Increased focus on cybersecurity and space defence might also be highlighted.

Union Budget 2025: Digital Economy and Technology

With the digital economy playing a pivotal role in growth, the budget may prioritize investments in 5G infrastructure, digital literacy programs, and cybersecurity measures. Initiatives to incentivize innovations in AI, blockchain, and cloud computing are expected. Special policies to support the gig economy and encourage digital payment adoption are also anticipated.

Union Budget 2025: Social Welfare

Measures to support marginalized communities, including enhanced funding for women’s empowerment, child nutrition programs, and affordable housing schemes, are expected. Special schemes to improve urban sanitation, water management, and welfare programs for senior citizens could be introduced.

Conclusion

The Union Budget 2025 holds the potential to address critical economic priorities while laying the foundation for a resilient and inclusive economy. By balancing fiscal prudence with growth-oriented measures, the government can set the stage for long-term prosperity. The diverse expectations across sectors underscore the importance of targeted reforms that can ensure sustained growth and equitable development for all. As the budget unveils, it will undoubtedly be a defining moment for India’s economic trajectory.