Union Budget 2025-26: Tax Structure, Growth Plans, and Key Reforms

Meta Description: Explore the Union Budget 2025-26 highlights including tax slab changes, sectoral growth initiatives, and government reforms aimed at boosting the Indian economy. Discover expert financial advice with My Advisers, your Best Financial Advisor in India.

Fiscal Strategy Overview
Empowering Agriculture and Farmers
Boosting MSMEs for Economic Growth
Key Investments: Infrastructure, Innovation, and Skills
Export Promotion Measures
Financial Sector Reforms
Major Tax Changes Explained
The New Income Tax Bill 2025
Budget Expenditure Breakdown
Conclusion
FAQs

Fiscal Strategy Overview

The Union Budget 2025-26 was presented with the theme of inclusive growth, focusing on balanced development, especially for the middle class, farmers, women, and youth. Key fiscal indicators reflect a commitment to sustainable growth:

Fiscal Indicator	FY 2024-25 (Revised)	FY 2025-26 (Budget Estimates)
GDP Size (Current Prices)	₹324.11 trillion	–
Fiscal Deficit	4.8%	4.4%
Total Receipts (Excl. Borrowing)	₹31.47 trillion	₹34.96 trillion
Net Tax Receipts	₹25.57 trillion	₹28.37 trillion
Capital Expenditure	₹10.18 trillion	₹11.2 trillion
Total Expenditure	₹47.16 trillion	₹50.65 trillion
Gross Market Borrowing	₹12.44 trillion	₹14.82 trillion

This budget aims to strengthen economic growth by increasing capital spending and improving disposable incomes across the population.

Empowering Agriculture and Farmers

Recognizing agriculture as a foundation for the economy, the government introduced several initiatives to enhance productivity and income for farmers:

Prime Minister Dhan-Dhaanya Krishi Yojana: Focused on diversifying crops and improving irrigation and storage in 100 districts.
Aatmanirbharta Mission for Pulses: A six-year program to boost self-sufficiency in key pulses like Urad, Tur, and Masoor.
Kisan Credit Card (KCC) Limits Increased: Loan limits rose from ₹3 lakh to ₹5 lakh to support farmers’ needs.
Promotion of Horticulture and High-Yield Seeds: Special programs to enhance fruit, vegetable output, and seed quality.
Supporting Fisheries and Textile Sectors: Development of a Makhana Board in Bihar and increased cotton productivity.
Infrastructure Projects: Construction of urea plants and related facilities to strengthen supply chains.

These measures aim to improve rural prosperity while securing the livelihood of farmers.

Boosting MSMEs for Economic Growth

Micro, Small, and Medium Enterprises (MSMEs) received notable support to enhance their role in exports and employment:

Revised MSME Classification: Updated turnover and investment limits to better define micro, small, and medium enterprises.
Entrepreneurship Scheme: Targeting 5 lakh new entrepreneurs from SC/ST and women categories with financial and training support.
Credit Access Expansion: Term loans of up to ₹20 million available over five years.
National Manufacturing Mission: Reinforces the ‘Make in India’ goal, including special focus on toy production and climate-friendly manufacturing.
Skill Development: Preparing a workforce ready for emerging jobs with clean tech focus.
Credit Card Facilities: Introduction of credit cards tailored for micro-enterprises to improve working capital.

These steps are intended to strengthen small businesses and integrate them with global value chains.

Key Investments: Infrastructure, Innovation, and Skills

Investment priorities in Budget 2025-26 include three main areas:

Investment in People

Broadband connectivity under BharatNet for rural health centers and schools.
50,000 Atal Tinkering Labs for government schools to foster innovation.
A dedicated ₹500 crore Centre of Excellence in AI focusing on education.
Five National Centres of Excellence to deliver advanced technical and manufacturing skills.
Extended healthcare coverage for gig workers via PM Jan Arogya Yojana.
Digital ID cards for gig workforce registration on the e-shram portal.

Investment in the Economy

A three-year public-private partnership (PPP) project pipeline led by infrastructure ministries.
₹1 trillion Urban Challenge Fund for water, sanitation, and urban growth.
₹1.5 trillion loan facilities to states focused on capital expenditure.
Second Asset Monetisation Plan targeting ₹10 trillion for new projects over five years.

Investment in Innovation

The Gyan Bharatam Mission to digitize and preserve over 10 million manuscripts.
A National Digital Repository for Indian knowledge systems.
₹20,000 crore allocated to research and development in private companies.
National Geospatial Mission to support urban planning.

These efforts target building a future-ready economy through technology, infrastructure, and skills enhancement.

Export Promotion Measures

The budget plans a concerted push to boost India’s export capabilities, led by Commerce, MSME, and Finance ministries. Key initiatives include:

Developing the BharatTradeNet (BTN), a platform to simplify trade and finance for exporters.
Supporting electronics manufacturing to align with Industry 4.0 standards.
Improving air cargo infrastructure with a focus on high-value and perishable horticulture produce.
Formulating a National Framework to strengthen Global Capability Centres (GCCs), especially in Tier 2 cities.

With these, the government aims to expand India’s footprint in global trade.

Financial Sector Reforms

The Union Budget introduces reforms to expand financial services, attract investments, and ease compliance:

Increasing foreign direct investment (FDI) in insurance companies from 74% to 100%, on the condition that premiums are invested domestically.
Forming a high-level committee to review regulations and licenses in the non-financial sector.
Promoting cooperative federalism through state investment indices.
Strengthening the Financial Stability and Development Council (FSDC) for better regulation and response.
Facilitating business operations via the Jan Vishwas Bill 2.0, which decriminalizes over 100 legal provisions.

These reforms will create a more investor-friendly and streamlined regulatory environment.

Major Tax Changes Explained

The budget brings revisions in direct and indirect taxes to simplify compliance and ease taxpayer burden.

Direct Tax Changes

TDS (Tax Deducted at Source) rates reduced with increased exemption thresholds.
TDS exemption raised from ₹50,000 to ₹1 lakh.
TDS threshold for salaried individuals increased from ₹2.4 lakh to ₹6 lakh.
Liberalized remittance limits under LRS, increasing thresholds from ₹7 lakh to ₹10 lakh.
Removal of TCS (Tax Collected at Source) on the sale of goods and specific high-value transactions.
Higher TDS rates applicable only where PAN details are unavailable.
Penalties for late TCS filings reduced.
Extended income tax return filing window from 24 to 48 months with graduated exemption limits.

Indirect Tax Changes

Amendments in GST definitions and procedures for better clarity.
Exemption from service tax on weather-based crop insurance.
Rationalized customs duties with reduced rates on industrial goods and social welfare surcharge exemptions on select tariff lines.
Full basic customs duty (BCD) exemption on 36 essential drugs with concessional rates for others.
Increased BCD on Interactive Flat Panel Displays from 10% to 20%.
Exemptions on open-cell TV parts and tax breaks on leather products to boost local manufacturing.
Reduced BCD on marine products.

These changes aim to foster ease of doing business and encourage domestic production.

The New Income Tax Bill 2025

The government has introduced the Income Tax Bill 2025, designed to simplify tax laws by cutting down the length of the existing legislation by about half and using clearer language. The reform expects to reduce tax disputes and make compliance straightforward, improving transparency around tax obligations.

Budget Expenditure Breakdown

Important allocations for FY 2025-26 include:

Interest Payments: ₹12.76 lakh crore, a 25.2% increase.
Central Sector Schemes: ₹16.22 lakh crore, up 7.2%.
Centrally Sponsored Schemes: ₹5.42 lakh crore, a rise of 30.5%.
Pension Payments: ₹2.77 lakh crore, marginal growth of 0.6%.
Capital Expenditure: ₹11.21 lakh crore, accounting for 3.1% of GDP.

These figures underline the government’s focus on development and fiscal discipline.

Conclusion

The 2025-26 Union Budget focuses on sustainable development through targeted investments, reforms, and tax simplifications. It supports agriculture, MSMEs, infrastructure, and exports while enhancing financial sector regulation. The tax reforms provide relief and clarity, aiding taxpayers in planning their finances effectively. For personalized advice and support in navigating these financial changes, connect with My Advisers—the Best Financial Advisor in India. Whether you look for loan solutions or investment options, Contact Us for Free Financial Consultation to achieve your financial goals with confidence.

FAQs

What is the total estimated fiscal deficit for 2025-26?

The fiscal deficit for 2025-26 is planned at 4.4% of GDP, reflecting the government’s focus on fiscal prudence.

Which sectors receive the highest boost in this budget?

Agriculture, MSMEs, infrastructure, technology, and export-oriented industries are key beneficiaries.

How does the budget support small businesses?

By revising MSME classification, expanding credit availability, and encouraging entrepreneurship among women and marginalized groups.

What are the significant tax changes introduced?

Increased TDS thresholds, simplification of direct and indirect taxes, and longer return filing periods.

Pro Tips:

Keep track of changes in tax slabs to optimize your tax planning.
Utilize government schemes for MSMEs and agriculture to expand your business.
Leverage digital platforms for ease of financial transactions and compliance.

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