Decoding the Indian Union Budget 2025-26: Impact on Businesses, Industries, and Taxpayers

On February 1, 2025, the parliament was presented with the Union Budget for the fiscal year 2025–2026. The government's attempts to boost private sector investments, ensure inclusive development, boost household sentiments, boost growth, and increase the purchasing power of India's growing middle class all continue in the budget. In the Union Budget 2025–2026, Finance Minister Nirmala Sitharaman has set aside Rs 20,000 crore to support research, development, and innovation led by the private sector. A national framework for Global Capability Centers in Tier-II cities, an Export Promotion Mission, and the creation of Bharat Trade Net to facilitate international trade are some of the major projects.

The FY26 budget was more significant than an annual budget because it was the first full-year budget of NDA's new term. In this article, we will explore India budget for 2025-26 and look at its impact on businesses, taxpayers, and global trade data. The modified points from India's Hon. Finance Minister Nirmala Sitharaman's budget speech are included below.

Major Highlights of the Indian Union Budget 2025-26

1. Special Focus on the development of infrastructure

Infrastructure is one of Budget 2025's most important priority topics. To promote long-term growth and improve connections throughout the nation, the government has significantly increased funding for important infrastructure projects. Important points to note are:

• Boost to Rural Infrastructure: Investments in rural roads, sanitation, and water management have significantly increased to close the gap between rural and urban areas.
• Extension of the National Infrastructure Pipeline (NIP): To promote sustainable growth, an extension of the NIP is planned to incorporate undeveloped industries like green energy and electric mobility.
• Urban infrastructure and smart cities: As the population of cities increases, more money is being set aside for the modernization of cities through the use of smart utilities, technology, and public transportation.

2. Innovation & the Digital Economy

One of the main drivers of India's development is still the digital revolution. Recognizing the revolutionary potential of innovation and technology, Budget 2025 places a strong emphasis on the following:

• Rewards for Innovation and Startups: To support domestic entrepreneurs in biotech, AI, and other developing fields, several tax breaks, incentives, and streamlined regulations have been implemented.
• Increasing the Security of Cyberspace: a significant rise in investment in cybersecurity infrastructure, guaranteeing the safety of private information and digital assets for both consumers and enterprises.
• Digital Literacy: National investments are being made in digital literacy initiatives to help the next generation get ready for the digital economy and future employment.

3. Tax Reforms to Streamline the System

The planned tax system simplification is a long-awaited reform. The following programs are outlined in Budget 2025 to help individuals and businesses comply with tax laws:

• Individuals' Simplified Tax Slabs: More people are now in the 10% tax slab as a result of the restructuring of the tax brackets. a huge reprieve for taxpayers in the middle class.
• Tax Breaks for Eco-Friendly Investments: New tax breaks will be available to people and companies who invest in renewable energy projects, electric vehicles (EVs), and green technologies to comply with India's climate pledges.
• Eased Business Taxation: To increase India's appeal as an investment destination, tax credits for startups and small enterprises are planned, while the corporate tax rate is being reassessed.

4. Put Health and Education First

The government has realized that long-term economic success depends on a population that is healthier and more educated. As a result, the budget includes significant expenditure in the fields of education and health:

• National Health Mission Expansion: With an emphasis on digital health, preventive care, and healthcare access in underserved areas, the budget proposes initiatives to improve India's healthcare system.
• More money allocated to skill development: More funds are allocated to high-growth industries like artificial intelligence (AI), data science, and clean energy in recognition of the need to improve the workforce.

5. Assistance with Farmers and Agriculture

Budget 2025 stresses the need for future agricultural reforms, as India's agricultural sector continues to be the foundation of its economy:

• Support for Farmers' Direct Income: Under the PM-Kisan Yojana, the government plans to boost the direct payment of cash to farmers to raise agricultural revenue and enhance financial stability.
• Initiatives for Sustainable Agriculture: With tax breaks for farmers that use water-saving technologies, organic farming, and other environmentally friendly methods, there is a major focus on promoting sustainable farming practices.

6. Climate Action and Green Growth

Budget 2025 places a strong emphasis on sustainability through several green initiatives:

• Investment in Clean Energy: The government has set aside a large sum of money for projects involving solar, wind, and green hydrogen, among other renewable energy infrastructures.
• Carbon Reduction Goals: India reaffirms its aim to achieve net-zero emissions by 2070 and lays out specific measures to lower the carbon intensity of important sectors such as manufacturing, transportation, and electricity production.

7. Making Social Welfare Programs Stronger

Social welfare initiatives remain a key component in Budget 2025. Several programs are designed to directly assist underserved communities:

• Increased Funding for Women and Child Welfare: Programs that support women's health, gender equality, and the financial development of female entrepreneurs are given special funding.
• Programs for Financial Inclusion: With an emphasis on increasing rural and underserved groups' access to banking and credit services, the government seeks to improve financial inclusion.

8. MSME Sector Revitalization

The foundation of the Indian economy is made up of Micro, Small, and Medium-Sized Enterprises (MSMEs). The government is concentrating on the following to guarantee the expansion of this vital sector:

• Rapid Access to Credit: In addition to lowering interest rates, other programs will be introduced to make loans more cheap for MSMEs.
• Extension of the Credit Guarantee Scheme: More loans to MSMEs will be made without collateral thanks to the extension of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which will also result in lower interest rates.

9. International Trade and Investment

With more foreign investment, India hopes to establish itself as a major role in the world economy. The budget consists of:

• Attracting FDI: Measures have been taken to facilitate the establishment of companies in India by foreign investors, such as the easing of restrictions and incentives for sectors including manufacturing, technology, and renewable energy.
• Free commercial Agreements (FTAs): India's export potential is being increased by strategic attempts to strengthen commercial ties with important international partners.

New Tax Regime slab and rates for FY 2025–2026

The proposed revision of the tax slabs and rates under the new tax regime was included in the Union Budget 2025–2026. The updated rates will take effect on April 1, 2025, for the Financial Year 2025–2026. Here is an updated list of tax slabs, rates, cess, and surcharges that will be in effect for FY 2025–2026 and announced in Budget 2025, as there appears to be a lot of misunderstanding among taxpayers over the altered slabs and rates under the new regime.

The Union Budget 2025-2026 Expenses Allocated

• Defence - Rs 4,91,732 crore
• Rural Development - Rs 2,66,817 crore
• Home Affairs - Rs 2,33,211 crore
• Agriculture - Rs 1,71,437 crore
• Education - Rs 1,28,650 crore
• Health - Rs 98,311 crore
• Urban Development - Rs 96,777 crore
• IT and Telecom - Rs 96,298 crore
• Energy - Rs 81,174 crore
• Commerce and Industry - Rs 65,553 crore
• Social Welfare - Rs 60,052 crore
• Scientific Departments - Rs 55,679 crore

The Indian Budget 2025-26 Themes

1. The first budget theme is "Sabka Vikas," which promotes equitable development in all areas.
2. Zero poverty is a component of Viksit Bharat.

• 100% excellent education in schools. 
• Access to comprehensive, reasonably priced, and high-quality healthcare.
• Completely competent workers with fulfilling jobs.
• 70% of women work in the economy, and farmers contribute to our nation's status as the "food basket of the world."

3. With an emphasis on Garib, Youth, Annadata, and Nari, the suggested development initiatives include 10 major sectors.

• Promoting productivity and growth in agriculture.
• Developing Rural Resilience and Prosperity.
• Putting All People on the Same Inclusive Growth Path.
• Increasing production and advancing "Made in India."
• Assisting MSMEs.
• Facilitating development driven by employment.
• Investing in innovation, the economy, and people.
• Protecting Energy Sources.
• Fostering innovation and encouraging exports.

4. The Developmental Journey

• Four strong pillars for financial growth: Exports, MSME, Investment, and Agriculture
• Reforms are the fuel.
• Guiding principle: Being inclusive

5. Initiating transformative reforms in the following six areas is the goal of this budget:

• Taxes.
• Energy Sector.
• Urban Development.
• Mining.
• The financial sector.
• Reforms in Regulation.

Agriculture as the initial development engine

Inspired by the Aspirational Districts Program's success, the government would work with states to implement the "Prime Minister Dhan-Dhaanya Krishi Yojana." The initiative will cover 100 districts with below-average credit criteria, moderate crop intensity, and low production by combining current programs and customized approaches. It seeks to: 

• Increase agricultural output
• Implement sustainable agricultural methods and crop diversification.
• Increase post-harvest storage at the block and panchayat levels
• Upgrade irrigation infrastructure
• Make both short-term and long-term financing more accessible. 
• 1.7 crore farmers are expected to benefit from this scheme.

In collaboration with states, a comprehensive multi-sectoral initiative called "Rural Prosperity and Resilience" will be introduced. This will boost the rural economy and alleviate underemployment in agriculture through investment, technology, and skill development. The objective is to create enough possibilities in rural regions so that migration is a choice rather than a requirement. The program will target marginal and small farmers, landless families, young farmers, and rural women.

Exports as a Major Area

• The Ministries of Commerce, MSME, and Finance will work together to create an Export Promotion Mission with sectoral and ministerial goals. It will make it easier to obtain export finance, support for cross-border factoring, and assistance for MSMEs in addressing non-tariff barriers in foreign markets.
• BharatTradeNet (BTN), a digital public infrastructure for global commerce, would be established as a single platform for financing options and trade paperwork. The Unified Logistics Interface Platform will benefit from this. BTN will be in line with global standards.
• The development of native manufacturing capabilities for integration with international supply chains will receive assistance. Sectors will be determined using impartial standards. Senior officers and leaders from the industry will form facilitation groups to choose products and supply networks.
• This opens up a world of potential in Industry 4.0, which demands a high level of aptitude and abilities. The youth of India possess both. In order to take advantage of this opportunity for the benefit of young people, the government will assist the domestic electronic equipment business.
• To help states promote Global Capability Centers in developing tier 2 cities, a national framework will be developed. This will include recommendations for ways to improve infrastructure and talent availability, building-byelaw revisions, and industrial cooperation mechanisms.
• The government will make it easier to upgrade the facilities and storage for air freight, including valuable perishable horticultural products. Customs procedures and cargo screening will be simplified and made more user-friendly.

The fiscal policy

• The government will try to maintain a budget deficit each year so that the debt of the Central Government as a proportion of GDP continues to decline. The FRBM declaration has a detailed strategy for the next six years.     
• With net tax collections of INR 25.57 lakh crore, the revised estimate of total receipts other than lending is INR 31.47 lakh crore. The capital expenditure accounts for approximately INR 10.18 lakh crore of the revised estimate of INR 47.16 lakh crore.
• The fiscal deficit's revised estimate is 4.8% of GDP.
• The entire revenue (excluding borrowings) and total expenses for 2025–2026 are projected to be INR 34.96 lakh crore and INR 50.65 lakh crore, respectively. An estimated INR 28.37 lakh crore will be received in net tax revenues. According to estimates, the budget deficit is 4.4% of GDP.
• The expected net market borrowing from dated securities to finance the fiscal deficit amounts to INR 11.54 lakh crore. It is anticipated that tiny savings and other resources will provide balanced funding. It is expected that the gross market borrowings total INR 14.82 crore.

Indirect taxes

• Removing seven tariff rates was the finance minister's planned action. This is in addition to the seven tariff rates that were eliminated in the budget for 2023–2024. Only eight tariff rates, including the "zero" rate, will remain after this.
• Applying proper access to rationalize the customs tariff structure for industrial goods 
• To generally preserve the effective duty incidence, except for a small number of items where it will be somewhat lowered.

Relief on imports of Pharmaceuticals/Medicines

• Around 36 life-saving medications will be added to the list of medications that are completely exempt from Basic Customs Duty (BCD) to help patients, especially those with cancer, uncommon disorders, and other serious chronic illnesses. 
• Six life-saving medications will be eligible for a 5% customs tax reduction. Bulk medications used in the production of the aforementioned will likewise be subject to full exemption and concessional duty, respectively.
• If the medications are given to patients at no cost, certain medications and medications covered by pharmaceutical companies' Patient Assistance Program are completely exempt from BCD. Thirteen new patient assistance programs and 37 additional medications will be added.

Encouragement of Domestic Production and value-adding

• Complete exemption from Basic Exemption Duty (BCD) for cobalt waste and powder, lithium-ion battery scrap, lead, zinc, and twelve other essential minerals. 
• This will encourage more jobs for our young people and help ensure their availability for manufacturing in India.
• Two further shuttle-less loom types will be added to the list of entirely exempt textile machinery to encourage local manufacture of technical textile products, such as agro-textiles, medical textiles, and geotextiles, at competitive costs. 
• BCD will be lowered to 5% on Open Cell and other parts and raised from 10% to 20% on Interactive Flat Panel Displays (IFPD) to correct the inverted duty structure.

Exports Promotion

• The export period will be extended from six months to a year, with the option to prolong it by an additional three months if necessary, to ease the export of handicrafts. The list of duty-free inputs will also include nine goods.
• Wet blue leather is exempt from BCD to promote imports for employment and value addition in the country.
• To help small tanners export, crust leather is exempt from the current 20% export charge.
• BCD lowered its 30% tax on frozen fish paste (surimi) for the production and export of its analog goods to 5% to increase India's competitiveness in the international seafood market. 
• Additionally, the finance minister suggested lowering the BCD on fish hydrolysate used to make fish and shrimp feed from 15% to 5%.
• To encourage the growth of domestic MRO for ships and airplanes, the government increased the export period for foreign-origin items imported for repairs from six months to a year in the July 2024 Budget. Railway commodities will now be subject to similar regulations.

Facilitation of Trade

• There is now no deadline for completing Provisional Assessments under the Customs Act of 1962, which causes uncertainty and increases trade costs. 
• A two-year deadline, with the possibility of an additional year, has been suggested for completing the preliminary evaluation to facilitate business dealings.
• After the items have been cleared, a new clause will allow importers or exporters to voluntarily disclose significant facts and pay duty with interest but without penalty. Voluntary compliance will be encouraged by this.  This won't, however, be applicable in situations where the agency has already started an audit or investigation.
• The applicable regulations will increase the time restriction for the end-use of imported materials from six months to a year to help the industry better manage its imports. Given the price and supply uncertainties, this will offer operating flexibility. 
• Additionally, rather than filing monthly disclosures, these importers will now only be required to submit quarterly declarations.

A Closer Look at India’s Import-Export Trade in the Last 10 Years

Direct Taxes

• Only seagoing ships are currently eligible for the tonnage tax program. To encourage inland water transportation in the nation, it is suggested that inland vessels certified under the Indian Vessels Act, 2021, be eligible for the benefits of the current tonnage tax scheme.
• To make the benefit available to start-ups incorporated before April 1, 2030, it was suggested that the incorporation period be extended by five years.
• Ship-leasing units, insurance offices, and treasury centers of multinational corporations established in the IFSC will receive special incentives to draw in and encourage more activities there. 
• Infrastructure and other related industries are being invested in by Category I and Category II AIFs. It was suggested that these entities be given tax certainty on their securities gains.
• It was suggested that the investment date be extended by an additional five years, until March 31, 2030, to encourage financing from Sovereign Wealth Funds and Pension Funds to the infrastructure sector.

Conclusion: A Budget for Accessibility, Growth, and Sustainability

To conclude, India's future is fully envisioned in the Budget 2025. India Budget 2025-26 prioritizes not just promoting economic expansion but also making sure that it is sustainable and inclusive. This budget lays the groundwork for a more robust and resilient economy through social welfare, tax changes, green energy, and infrastructure development. This budget provides a plan that blends modernization with inclusivity as India negotiates the difficulties of the global economy, striking a careful balance between fostering innovation and upholding social welfare. Opportunities abound in the upcoming year as India forges ahead to become a major economic force in the world.

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Union Budget of India 2023