Union Budget 2025-26: Key Highlights, Reforms, and Economic Impact

 The Union Budget 2025-26, presented by Finance Minister Nirmala Sitharaman on February 1, 2025, aims to drive economic growth, provide relief to taxpayers, and boost key sectors such as agriculture, infrastructure, healthcare, and innovation. This budget plays a crucial role in shaping India’s economic roadmap while addressing pressing issues such as employment generation, fiscal consolidation, and sustainable development.

Taxation Reforms: Relief for Middle-Class and Businesses

One of the most anticipated announcements in the union budget 2025 was the revision of the income tax structure. The government has made key changes to support the salaried class and businesses:

  • Increased Income Tax Exemption Limit: Individuals earning up to ₹12 lakh annually are now exempt from income tax under the new tax regime. This move significantly benefits the middle class by enhancing disposable income.
  • Revised Tax Slabs: The new tax slabs provide a progressive reduction in tax rates, making compliance simpler. However, the old tax regime remains unchanged for those who prefer deductions.
  • Higher TDS Limits: The TDS limit on interest income for senior citizens has been raised from ₹50,000 to ₹1 lakh. Similarly, the TDS threshold on rent payments has increased from ₹2.4 lakh to ₹6 lakh annually.
  • Simplified Tax Filing: The deadline to file updated income tax returns has been extended from two to four years, allowing taxpayers more flexibility.
  • National Savings Scheme Withdrawals: Withdrawals made after August 29, 2024, are now tax-free, encouraging long-term savings.

These reforms aim to simplify the tax system, reduce the compliance burden, and put more money in the hands of consumers, thereby driving consumption and economic growth.

Agriculture and Rural Development: Strengthening Farmer Welfare

The government has introduced new schemes and initiatives to support farmers and rural communities:

  • Prime Minister Dhan-Dhaanya Krishi Yojana: A flagship program that offers ₹5 lakh short-term loans to farmers, fishermen, and dairy farmers.
  • Mission for Self-Reliance in Pulses: A six-year plan to boost production of Tur, Urad, and Masoor to reduce import dependency.
  • Bihar’s Makhana Board: To enhance production, branding, and exports of makhana, which has significant market potential.

By investing in agricultural self-sufficiency and credit availability, the government aims to improve rural livelihoods and enhance food security.

Infrastructure and Industrial Growth: Building a Stronger India

Infrastructure development is a key pillar of Budget 2025, with significant allocations toward transport, logistics, and energy:

  • Smart Cities and Urban Development: Increased funding for metro rail expansions, affordable housing, and clean energy projects.
  • National Highway Development: Major investment in road infrastructure to improve connectivity and boost economic activity.
  • Renewable Energy Expansion: Boost for solar, wind, and green hydrogen initiatives to support India’s sustainability goals.
  • Make in India Push: Custom duty exemptions on LED/LCD TV components, lithium-ion batteries, and capital goods for the electric vehicle industry.

These initiatives are expected to create jobs, attract foreign investment, and drive industrial growth.

Research, Innovation, and Digital Economy

To strengthen India’s position as a technology and innovation hub, the budget introduces key initiatives:

  • ₹20,000 Crore R&D Fund: A dedicated fund to support private sector-led research, development, and innovation.
  • 10,000 Research Fellowships: Under the Prime Minister Research Fellowship, students in IITs and IISc will receive funding to advance technology research.
  • Second National Gene Bank: Housing 10 lakh germplasm lines to ensure future food and nutritional security.

These measures aim to make India a leader in technological advancements, contributing to both domestic and global markets.

Healthcare Sector: Expanding Accessibility and Affordability

The healthcare sector receives a major boost through various incentives and tax exemptions:

  • Life-Saving Drugs Exempted from Customs Duty: 36 critical medicines are now tax-free, reducing treatment costs.
  • Expanded Pharmaceutical Production: ₹2,445 crore allocated under the PLI scheme to promote local API and MedTech manufacturing.
  • New Patient Assistance Programs: Introduction of 37 medicines and 13 support programs to make healthcare more affordable.

By prioritizing healthcare affordability and local manufacturing, the government aims to strengthen the healthcare ecosystem.

Export and Trade Promotion

The budget includes trade-friendly policies to boost India’s exports and simplify global trade processes:

  • Duty Exemptions for Key Sectors:
    • Full exemption on wet blue leather to promote domestic manufacturing.
    • 10-year exemption on shipbuilding materials to support the Maintenance, Repair, and Overhaul (MRO) sector.
  • Faster Trade Facilitation:
    • Defined time limits for finalizing provisional assessments.
    • Voluntary declarations allowed without penalties, only with interest.

These steps enhance India’s global competitiveness and encourage more exports.

Social Welfare and Employment Generation

The government has introduced several social welfare schemes to improve living standards and create employment opportunities:

  • Increased MNREGA Funding: Additional funds allocated to boost rural employment under the Mahatma Gandhi National Rural Employment Guarantee Act.
  • Women and Child Welfare Initiatives: Special incentives for women entrepreneurs and self-help groups.
  • Startup India Support: Increased financial aid and tax breaks for new businesses and MSMEs.

By focusing on employment generation and social security, the budget aims to ensure inclusive growth.

Conclusion

The Union Budget 2025-26 reflects a forward-looking approach, balancing fiscal consolidation with growth-oriented reforms. 

Overall, the budget sets a positive tone for economic revival, fostering sustainable growth and global competitiveness. While some challenges remain, such as inflation control and fiscal discipline, the government’s roadmap indicates a promising future for India’s economy.

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