The Union Budget 2025-26, presented by Finance Minister Nirmala Sitharaman on February 1, 2025, has introduced significant changes in taxation, economic reforms, and fiscal policies aimed at fostering growth and empowering the middle class. The budget prioritizes “Viksit Bharat” (Developed India), with a clear focus on increasing disposable income, improving investment prospects, and facilitating ease of doing business. This blog explores the key highlights, the new tax slabs, and crucial income tax reforms introduced in Budget 2025-26.
Budget 2025-26: Key Highlights
The government has structured the budget around four major engines of economic growth: Agriculture, MSMEs, Investment, and Exports. Each sector has received tailored incentives and policy support to accelerate development and economic resilience.
1. Agriculture as the 1st Engine
The agricultural sector remains a priority in Budget 2025, with numerous schemes introduced to enhance productivity and self-sufficiency.
- Prime Minister Dhan-Dhaanya Krishi Yojana: A scheme targeted at improving agricultural productivity in 100 low-productivity districts.
- Mission for Aatmanirbharta in Pulses: A six-year program aimed at making India self-reliant in pulses, focusing on Tur, Urad, and Masoor.
- National Mission on High Yielding Seeds: Encouraging the development of climate-resilient, pest-resistant, and high-yielding seeds.
- Farm Credit Target Increase: The agriculture credit target has been raised to ₹25 lakh crore, ensuring better financing for farmers.
2. MSMEs as the 2nd Engine
Micro, Small, and Medium Enterprises (MSMEs) form the backbone of India’s economy, providing employment and boosting exports.
- Revised MSME Classification: Investment and turnover limits for MSMEs have been increased to 2.5 and 2 times, respectively.
- Enhanced Credit Guarantee Scheme: Credit guarantee cover for micro and small enterprises has been doubled from ₹5 crore to ₹10 crore.
- Customized Credit Cards for Micro Enterprises: A ₹5 lakh-limit credit card will be introduced for micro-enterprises registered on the Udyam portal.
- Ease of Compliance: Simplified regulations and reduced compliance burdens will facilitate ease of doing business.
3. Investment as the 3rd Engine
Investment in infrastructure and innovation is a cornerstone of Budget 2025-26.
- Saksham Anganwadi and Poshan 2.0: Strengthening nutritional support for children, pregnant women, and lactating mothers.
- Atal Tinkering Labs Expansion: 50,000 new innovation labs will be set up in government schools.
- National Centres of Excellence for Skilling: Five centers will be established to train youth in cutting-edge manufacturing skills for “Make in India, Make for the World”.
- Green Energy Investment: ₹2 lakh crore allocated for renewable energy projects, promoting sustainable economic growth.
4. Exports as the 4th Engine
To enhance India’s global trade, the budget has introduced reforms that facilitate export growth.
- Export Promotion Mission: A focused mission to improve access to export credit and tackle non-tariff barriers.
- BharatTradeNet: A digital infrastructure for international trade documentation and financing solutions.
- PLI Scheme Expansion: The Production Linked Incentive (PLI) scheme extended to new sectors, increasing export competitiveness.
New Tax Regime 2025: Key Changes
One of the most significant announcements in Budget 2025-26 is the restructuring of the income tax slabs under the new tax regime. The new slabs simplify taxation while offering substantial relief to the middle class.
New Tax Slabs for FY 2025-26
| Income Slab (₹) | 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% |
Key Features of the New Tax Regime
- No Tax up to ₹12 Lakhs: Individuals earning up to ₹12 lakhs will not have to pay any income tax, thanks to a new rebate.
- Rebate for Income up to ₹12 Lakhs: A full tax rebate for individuals in this bracket ensures that no tax is payable.
- Standard Deduction Increased: Salaried employees will now get a standard deduction of ₹75,000, increasing their tax-free income threshold to ₹12.75 lakhs.
Old Tax Regime vs New Tax Regime
- Deductions & Exemptions: The old regime allows deductions (e.g., 80C, 80D, HRA), while the new regime offers lower tax rates but fewer deductions.
- Rebate: The new regime provides a rebate up to ₹12 lakhs, making it appealing for the middle-income group.
- Flexibility: Taxpayers can evaluate which regime benefits them the most based on their expenses and investments.
TDS and TCS Reforms
- Higher TDS Thresholds: The limit for TDS on interest for senior citizens is increased from ₹50,000 to ₹1 lakh.
- TDS on Rent: The annual threshold for TDS on rent has been increased from ₹2.4 lakh to ₹6 lakh.
- Education Loan TCS Removal: No TCS on remittances for education loans taken from approved institutions.
Fiscal Deficit and Economic Outlook
The government aims to balance growth and fiscal discipline, reducing the fiscal deficit from 4.8% in 2024-25 to 4.4% in 2025-26. This reflects a commitment to fiscal consolidation while promoting economic expansion.
Conclusion
Budget 2025-26 is designed to empower the middle class, drive economic growth, and promote investment. The introduction of a simplified tax regime, higher rebates, and sectoral growth initiatives makes it an inclusive and forward-thinking budget. Taxpayers must evaluate whether the new tax regime or old tax regime benefits them the most, considering deductions and tax savings.
The reforms in TDS, MSME credit, investment in agriculture, and export promotion set the stage for a resilient economy, ensuring India progresses towards “Viksit Bharat” in the coming years.
Read more about the Budget 2025-26 here
