Taxation & Compliance
Posted on Feb 3, 2025
Union Budget 2025: A Comprehensive Overview
The Union Budget 2025-26, presented by Finance Minister Nirmala Sitharaman on February 1, 2025, emphasises inclusive growth under the theme "Sabka Vikas," aiming for balanced development across all regions. The budget outlines transformative reforms in taxation, power, urban development, mining, and the financial sector to enhance India's growth potential and global competitiveness.
Key Highlights of the Union Budget 2025-26
Tax Reforms
Income Tax Relief for the Middle Class: The budget introduces a complete tax rebate for individuals with an annual income of up to ₹12.75 lakh, effectively exempting those with an average monthly income of up to ₹1 lakh from paying income tax.
Updated Income Tax Return (ITR) Filing: The time limit for filing updated ITRs has been extended from two to four years, providing taxpayers with a more extended period to rectify any omissions or errors.
Four Engines of Development
The budget identifies four primary engines driving India's journey toward becoming a developed nation:
Agriculture: Introduction of the 'Prime Minister Dhan-Dhaanya Krishi Yojana' to enhance productivity in 100 low-agricultural productivity districts. Additionally, the 'Mission for Aatmanirbharta in Pulses' focuses on self-sufficiency in pulses like Tur, Urad, and Masoor.
Micro, Small, and Medium Enterprises (MSMEs): Significant enhancement of credit with a guarantee cover to MSMEs from ₹5 crore to ₹10 crore. A National Manufacturing Mission covering small, medium, and large industries is also proposed to further the 'Make in India' initiative.
Investment: The budget allocates ₹20,000 crore for private sector-driven research, development, and innovation initiatives, aiming to foster a culture of innovation and entrepreneurship.
Exports: To boost exports, the budget proposes various measures, including enhancing regional connectivity through a modified UDAN scheme, aiming to connect 120 new destinations.
Social Welfare Initiatives
Support for Farmers: Loans of up to ₹5 lakh through the Kisan Credit Card (KCC) under a modified interest subvention scheme are introduced to support farmers financially.
Empowerment of Gig Workers: Gig workers are set to receive identity cards, registration on the e-Shram portal, and healthcare benefits under the PM Jan Arogya Yojana, recognising their contribution to the economy.
Urban Development: A ₹1 lakh crore Urban Challenge Fund is established to develop cities as growth hubs, promoting sustainable urbanisation.
Technological and Educational Advancements
Artificial Intelligence in Education: A Centre of Excellence in Artificial Intelligence for Education is proposed, with a total outlay of ₹500 crore, to integrate AI into the educational sector.
Atal Tinkering Labs: The budget plans to establish 50,000 Atal Tinkering Labs in government schools over the next five years to foster innovation and creativity among students.
Energy and Infrastructure
Nuclear Energy Mission: A Nuclear Energy Mission for research and development of Small Modular Reactors (SMRs) is set up with an outlay of ₹20,000 crore, aiming to operationalise five indigenously developed SMRs by 2033.
Shipbuilding Industry Support: The Shipbuilding Financial Assistance Policy is revamped, and large ships above a specified size are included in the infrastructure harmonised master list to boost the shipbuilding industry.
Fiscal Management
Fiscal Deficit Reduction: The fiscal deficit is estimated to be 4.4% of GDP for FY 2025-26, with gross market borrowings projected at ₹14.82 lakh crore. Capital expenditure is earmarked at ₹10.18 lakh crore, accounting for 3.1% of GDP.
Conclusion: Key Takeaways from the Union Budget 2025-26
Tax Relief: Significant income tax exemptions for the middle class to boost household savings and consumption.
Agricultural Development: Initiatives to enhance productivity and self-sufficiency in key crops.
MSME Support: Increased credit guarantees and a focus on manufacturing to strengthen the MSME sector.
Investment in Innovation: Substantial allocation for research and development to foster innovation.
Social Welfare: Measures to support farmers, gig workers, and urban development.
Technological Advancement: Investment in AI and educational infrastructure to prepare for the future.
Energy and Infrastructure: Focus on nuclear energy and shipbuilding to strengthen infrastructure.
Fiscal Prudence: Commitment to reducing the fiscal deficit while maintaining substantial capital expenditure.
The Union Budget 2025 presents a forward-looking roadmap for India’s economic growth, balancing fiscal prudence with strategic investments across key sectors. With a strong emphasis on tax relief, infrastructure development, technology advancement, and social welfare, the budget aligns with the vision of making India a developed and self-reliant economy.
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