Union Budget 2025 Updates: Key Announcements, Economic Insights, and Sectoral Highlights

The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman on February 1, 2025, marks her record-setting eighth consecutive budget. This budget is pivotal as it comes at a time when India is navigating global economic uncertainties, moderate GDP growth projections, and the need for structural reforms to achieve long-term goals like “Viksit Bharat” by 2047. With a focus on fiscal prudence, boosting domestic consumption, and addressing the needs of the middle class, the budget has introduced significant measures across taxation, infrastructure, healthcare, education, and agriculture.
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Category | Key Announcements | Impact |
---|---|---|
Income Tax | No tax on income up to ₹12 lakh; Increased standard deduction in new regime | Relief for middle-class taxpayers; Increased disposable income |
Agriculture | PM Dhan Dhanya Krishi Yojana; Establishment of Makhana Board in Bihar | Boosts rural economy; Supports farmers |
Healthcare | Duty exemptions on 36 life-saving drugs | Reduces healthcare costs |
Education | Internet connectivity in schools; AI Centre with ₹500 crore allocation | Enhances digital education; Promotes research |
Infrastructure | Capital expenditure target at ₹11.1 lakh crore; Expanded Udan Scheme | Accelerates infrastructure development |
Startups & MSMEs | New Fund of Funds with ₹10,000 crore; Enhanced credit guarantee for MSMEs | Encourages entrepreneurship |
Climate Change | Renewable energy incentives; Increased funding for conservation initiatives | Supports India’s net-zero emissions goal |
Key Highlights of Union Budget 2025.
- Income Tax Reforms:
- No income tax for individuals earning up to ₹12 lakh annually under the new tax regime.
- Standard deduction increased to ₹75,000 in the new tax regime (the old regime remains at ₹50,000).
- Rebate under Section 87A increased to ₹25,000 for taxpayers earning up to ₹7 lakh annually in the new tax regime.
- Agriculture and Rural Development:
- Introduction of the PM Dhan Dhanya Krishi Yojana targeting 100 low-productivity districts.
- Establishment of a Makhana Board in Bihar to enhance fox nut production and processing.
- Launch of a six-year program for self-reliance in pulses like tur, urad, and masoor.
- Healthcare:
- Exemption of basic customs duty on 36 life-saving drugs and medicines.
- Concessional duty rates introduced for six essential drugs used for chronic illnesses like cancer and rare diseases.
- Education:
- Internet connectivity extended to all government schools.
- Addition of 10,000 medical seats next year, with plans for 75,000 new seats over five years.
- Establishment of a Centre for Excellence in Artificial Intelligence (AI) with an outlay of ₹500 crore.
- Infrastructure Development:
- Capital expenditure allocation increased to ₹11.1 lakh crore for FY25.
- Expansion of the Udan Scheme to cover an additional 120 destinations.
- Startups and MSMEs:
- Launch of a new Fund of Funds (FoF) with a contribution of ₹10,000 crore for startups.
- Enhanced credit guarantee cover for MSMEs to promote entrepreneurship.
- Climate Change and Renewable Energy:
- Incentives introduced for renewable energy projects as part of India’s net-zero emissions commitment by 2070.
- Increased funding allocated for water conservation and waste management initiatives.
- Economic Projections:
- GDP growth forecasted between 6.3% and 6.8% for FY26, with nominal GDP growth expected at 10.1%.
- Moderate inflation supporting economic stability.
These highlights underscore the Union Budget 2025’s focus on empowering the middle class, fostering rural development, enhancing healthcare accessibility, transforming education, and promoting sustainable growth through climate-friendly initiatives.
New Tax Regime: Income Tax Slabs and Rates Proposed.
Annual Income (₹) | Tax Rate (%) |
---|---|
0 – 4,00,000 | Nil |
4,00,001 – 8,00,000 | 5% |
8,00,001 – 12,00,000 | 10% |
12,00,001 – 16,00,000 | 15% |
16,00,001 – 20,00,000 | 20% |
20,00,001 – 24,00,000 | 25% |
Above 24,00,000 | 30% |
Old Tax Regime: Income Tax Slabs and Rates.
The old tax regime remains unchanged for FY 2025-26. It continues to provide various exemptions and deductions but with higher tax rates compared to the new regime:
Annual Income (₹) | Tax Rate (%) |
---|---|
Up to 2,50,000 | Nil |
2,50,001 – 5,00,000 | 5% |
5,00,001 – 10,00,000 | 20% |
Above 10,00,000 | 30% |
Key Highlights of Changes in the New Tax Regime.
- No Tax on Income up to ₹12 Lakh:
- Individuals earning up to ₹12 lakh annually are fully exempt from paying taxes under the new regime.
- For salaried individuals eligible for a standard deduction of ₹75,000, the exemption limit increases to ₹12.75 lakh.
- Introduction of a New Tax Slab (25%):
- A new tax slab of 25% has been introduced for incomes between ₹20 lakh and ₹24 lakh.
- Simplified Structure:
- The new regime offers more tax slabs with lower rates but fewer exemptions compared to the old regime.
- Tax Savings Examples:
- A taxpayer earning ₹12 lakh saves ₹80,000 in taxes under the new regime.
- A taxpayer with an income of ₹18 lakh saves ₹70,000 compared to previous rates.
- For incomes of ₹25 lakh annually, savings amount to ₹1.1 lakh.
Comparison Between New and Old Tax Regimes.
The table below compares key features of the two regimes:
Feature | New Tax Regime | Old Tax Regime |
---|---|---|
Exemption Limit | ₹12 lakh (₹12.75 lakh for salaried) | ₹2.5 lakh |
Standard Deduction | ₹75,000 | ₹50,000 |
Number of Slabs | Seven | Four |
Maximum Tax Rate | 30% | 30% |
Exemptions/Deductions Allowed | Limited | Extensive |
- Enhanced disposable income for middle-class taxpayers.
- Simplified compliance due to fewer exemptions and deductions.
- Encourages consumption and savings by reducing tax liabilities.
The revised income tax structure reflects the government’s commitment to easing the financial burden on taxpayers while promoting economic growth through increased household spending and investments.
Focus Areas of Union Budget 2025.
Middle-Class Empowerment.
The budget places significant emphasis on empowering India’s middle class by easing their financial burden through tax reforms. The increase in the tax exemption limit under the new regime is expected to enhance disposable income and stimulate consumption.
Rural Development.
With schemes like the PM Dhan Dhanya Krishi Yojana and targeted agricultural programs, the government aims to uplift rural livelihoods and ensure food security, enhancing the economic viability of rural regions.
Healthcare Accessibility.
The exemption of customs duties on key life-saving drugs confirms the government’s commitment to making healthcare more affordable and accessible, particularly during times of heightened global health challenges.
Education Transformation.
Efforts to integrate digital resources into the education system, including internet connectivity for all government schools and the establishment of an AI Centre, are poised to transform the learning landscape for future generations.
Green Economy.
The budget emphasizes environmentally sustainable growth by introducing incentives for renewable energy projects. This move aligns with India’s long-term commitments toward achieving net-zero emissions by 2070, bolstered by increased investments in water conservation and waste management.
Frequently Asked Questions (FAQs).
What is the Union Budget?
The Union Budget is an annual financial statement presented by the Finance Minister that outlines the government’s revenue and expenditure plans for the upcoming fiscal year.
Who presented the Union Budget 2025?
Finance Minister Nirmala Sitharaman presented her eighth consecutive budget on February 1, 2025.
What are the key changes in income tax this year?
The new tax regime exempts individuals earning up to ₹12 lakh annually from paying income tax and increases the standard deduction to ₹75,000.
How does this budget address climate change?
The budget introduces incentives for renewable energy projects and allocates additional funding for water conservation and waste management, reinforcing India’s commitment to net-zero emissions by 2070.
What are the major allocations for education?
The government has allocated funds for internet connectivity in all government schools and has established a Centre for Excellence in AI with a budget of ₹500 crore, along with plans to add thousands of medical seats over the next five years.
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