The Union Budget 2025-26, presented by Finance Minister Nirmala Sitharaman, outlines a roadmap for India’s economic growth with a strong emphasis on infrastructure, investment, and social welfare. This budget aims to strike a balance between fiscal consolidation and economic expansion while addressing key sectors such as agriculture, MSMEs, healthcare, and innovation.
1. Economic Outlook and Fiscal Deficit
The government has projected a fiscal deficit target of 4.4% of GDP, reflecting a commitment to fiscal discipline while ensuring adequate public expenditure. The capital expenditure outlay has been increased to ₹11.21 lakh crore, focusing on infrastructure and public investment to spur economic growth.
2. Infrastructure and Investment Boost
- Highways and Railways: A significant allocation has been made for national highway expansion and railway modernization.
- Green Energy Initiatives: Investments in renewable energy projects, including solar and wind energy, have been ramped up to support India’s net-zero goals.
- Urban Development: Smart city initiatives and metro rail projects receive continued support to enhance urban mobility.
3. Support for Agriculture and Rural Development
- Increased Credit for Farmers: The government has raised the agricultural credit target to ₹22 lakh crore, ensuring greater financial support for farmers.
- PM-KISAN Scheme Expansion: Additional benefits have been introduced under the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme.
- Irrigation and Water Resources: Major irrigation projects have received increased funding to enhance agricultural productivity.
4. MSME and Startups
- Credit Guarantee Scheme: An additional infusion into the MSME credit guarantee scheme to ease access to finance.
- Tax Relief for Startups: Startups registered under the Startup India Initiative continue to enjoy tax exemptions and incentives.
- Ease of Doing Business: Simplified regulatory frameworks and reduced compliance burdens for micro and small enterprises.
5. Healthcare and Education
- Medical Infrastructure: More AIIMS and medical colleges have been announced to improve healthcare accessibility.
- Pharma Sector Growth: Strengthening domestic pharmaceutical production and reducing dependency on imports.
- Higher Education: A special focus on research and innovation hubs in universities to promote skill development.
6. Digital and Tech Innovations
- AI and Digital Transformation: Increased investment in artificial intelligence, blockchain, and quantum computing.
- 5G Expansion: Faster rollout of 5G networks and digital infrastructure to enhance connectivity.
- Cybersecurity Initiatives: Strengthening cybersecurity measures to protect digital assets and infrastructure.
7. Taxation and Relief Measures
- Income Tax Relief: The government has provided relief in income tax slabs for middle-class taxpayers.
- Corporate Tax Adjustments: Reforms to attract foreign direct investment (FDI) and promote domestic industries.
- GST Rationalization: Simplified GST structures for businesses to improve tax compliance.
8. Women Empowerment and Social Welfare
- Women’s Self-Help Groups (SHGs): Enhanced financial assistance and skill development programs.
- Housing for All: Additional funds allocated for affordable housing schemes.
- PM Garib Kalyan Yojana: Strengthened social security schemes for the underprivileged.
Revised Tax Structure
| 0-4 lakh rupees | Nil |
| 4-8 lakh rupees | 5 percent |
| 8-12 lakh rupees | 10 percent |
| 12-16 lakh rupees | 15 percent |
| 16-20 lakh rupees | 20 percent |
| 20- 24 lakh rupees | 25 percent |
| Above 24 lakh rupees | 30 percent |
- TDS/TCS rationalization for easing difficulties
- Rationalization of Tax Deduction at Source (TDS) by reducing the number of rates and thresholds above which TDS is deducted.
- The limit for a tax deduction on interest for senior citizens doubled from the present Rs 50,000 to Rs 1 lakh.
- The annual limit of Rs 2.40 lakh for TDS on rent increased to Rs 6 lakh.
- The threshold to collect tax at source (TCS) on remittances under RBI’s Liberalized Remittance Scheme (LRS) increased from Rs 7 lakh to Rs 10 lakh.
- The provisions of the higher TDS deduction will apply only in non-PAN cases.
- Decriminalization for the cases of delay of payment of TCS up to the due date of filing statement.
- Reducing Compliance Burden
- Reduction of compliance burden for small charitable trusts/institutions by increasing their period of registration from 5 years to 10 years.
- The benefit of claiming the annual value of self-occupied properties as nil will extend for two such self-occupied properties without any condition.
- Ease of Doing Business
- Introduction of a scheme for determining the arm’s length price of international transactions for a block period of three years.
- Expansion of the scope of safe harbor rules to reduce litigation and provide certainty in international taxation.
- Exemption of withdrawals made from Nthe ational Savings Scheme (NSS) by individuals on or after the 29th of August, 2024.
- Similar treatment to NPS Vatsalya accounts as is available to normal NPS accounts, subject to overall limits.
- Employment and Investment
Tax certainty for electronics manufacturing Schemes
- Presumptive taxation regime for non-residents who provide services to a resident company that is establishing or operating an electronics manufacturing facility.
- Introduction of a safe harbor for tax certainty for non-residents who store components for supply to specified electronics manufacturing units.
Tonnage Tax Scheme for Inland Vessels
The benefits of the existing tonnage tax scheme will extend to inland vessels registered under the Indian Vessels Act, 2021 to promote inland water transport in the country.
- Extension for incorporation of Start-Ups
Extension of the period of incorporation by 5 years to allow the benefit available to start-ups incorporated before 1.4.2030.
- Alternate Investment Funds (AIFs)
Certainty of taxation on the gains from securities to Category I and Category II AIFs which are undertaking investments in infrastructure and other such sectors.
- Extension of investment date for Sovereign and Pension Funds
Extension of the date of making investments in Sovereign Wealth Funds and Pension Funds by five more years, to 31st March, 2030, to promote funding from them to the infrastructure sector.
INDIRECT TAX
Rationalization of Customs Tariff Structure for Industrial Goods
Union Budget 2025-26 proposes to:
- Remove seven tariff rates. This is over and above the seven tariff rates removed in the 2023-24 budget. After this, there will be only eight remaining tariff rates including the ‘zero’ rate.
- Apply appropriate cess to broadly maintain effective duty incidence except on a few items, where such incidence will reduce marginally.
- Levy not more than one cess or surcharge. Therefore Social Welfare Surcharge on 82 tariff lines that are subject to a cess, exempted.
Revenue of about INR 2600 crore in indirect taxes will be forgone.
Relief on import of Drugs/Medicines
- 36 lifesaving drugs and medicines fully exempted from Basic Customs Duty (BCD).
- 6 lifesaving medicines to attract concessional customs duty of 5%.
- Full BCD exemption for specified drugs and medicines under Patient Assistance programs run by pharmaceutical companies. 13 new patient assistance programs will have 37 more medicines.
Support to Domestic Manufacturing and Value addition
- Critical Minerals :
- Cobalt powder and waste, the scrap of lithium-ion batteries, Lead, Zinc, and 12 more critical minerals are fully exempted from BCD.
- Textiles:
- Two more types of shuttle-less looms fully exempted textile machinery.
- BCD rate on knitted fabrics revised from “10% or 20%” to “20% or ` 115 per kg, whichever is higher.
- Electronic Goods:
- BCD on Interactive Flat Panel Display (IFPD) increased from 10% to 20%.
- BCD reduced to 5% on Open Cells and other components.
- BCD on parts of Open Cells exempted.
- Lithium Ion Battery:
- 35 additional capital goods for EV battery manufacturing and 28 additional capital goods for mobile phone battery manufacturing exempted.
- Shipping Sector:
- Exemption of BCD on raw materials, components, consumables or parts for the manufacture of ships extended for another ten years.
- The same dispensation to continue for ship breaking.
- Telecommunication:
- BCD reduced from 20% to 10% on carrier-grade ethernet switches.
Export Promotion
- Handicraft Goods:
- The period for export is extended from six months to one year, further extendable by another three months, if required.
- Nine items were added to the list of duty-free inputs.
- Leather sector:
- BCD on Wet Blue leather is fully exempted.
- Crust leather is exempted from 20% export duty.
- Marine products:
- BCD reduced from 30% to 5% on Frozen Fish Paste (Surimi) for the manufacture and export of its analog products.
- BCD was reduced from 15% to 5% on fish hydrolysate for the manufacture of fish and shrimp feeds.
- Domestic MROs for Railway Goods:
- Railways MROs benefit similar to the aircraft and ships MROs in terms of import of repair items.
- The time limit extended for the export of such items from 6 months to one year and made further extendable by one year.
Trade facilitation
- The time limit for Provisional Assessment:
- For finalizing the provisional assessment, a time limit of two years is fixed, and extendable by a year.
- Voluntary Compliance:
- A new provision was introduced to enable importers or exporters, after clearance of goods, to voluntarily declare material facts and pay duty with interest but without penalty.
- Extended Time for End Use:
- The time limit for the end-use of imported inputs in the relevant rules extended from six months to one year.
- Such importers file only quarterly statements instead of monthly statements.
Reference
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