The much-awaited Union Budget 2025 by Finance Minister Nirmala Sitharaman, was presented on February 1, 2025, which focused on a new landmark for India's economic trajectory to make growth all-inclusive, which is aimed at empowering the poor, the youth, the farmer, and women. In a bid to strengthen long-term sustainable growth through taxation, infrastructure, agriculture, and digitalisation, this budget comes with a strong reform measure in these key sectors. Read on to find out the major highlights and key takeaways from Budget 2025.
Budget 2025: Download Budget 2025
Click on the link to download Finance Bill 2025: Download here
Click on the link to download the Budget 2025 speech: Download here
1. Direct Tax Proposals
Introduction of a New Tax Bill
A new Income Tax Bill will be introduced next week, which aims to replace the existing Income Tax Act of 1961. This bill is designed to simplify tax compliance and reduce the complexity of current tax laws by up to 60%.
Changes in Tax Structure Under the New Regime
Under the New tax regime, the tax structure is revised as follows:
Income Tax Slabs
Tax Rate
Upto Rs. 4,00,000
NIL
Rs. 4,00,001 - Rs. 8,00,000
5%
Rs. 8,00,001 - Rs. 12,00,000
10%
Rs. 12,00,001 - Rs. 16,00,000
15%
Rs. 16,00,001 - Rs. 20,00,000
20%
Rs. 20,00,001 - Rs. 24,00,000
25%
Above Rs. 24,00,000
30%
Increase in Rebate u/s 87A
Under the new tax regime, the rebate has been significantly increased from Rs. 25,000 to Rs. 60,000. This means that individuals with an income of up to Rs. 12,00,000 will now be eligible for a complete tax rebate, resulting in zero tax liability.
Rationalisation of TDS/TCS for Easing Difficulties
The Union Budget 2025 proposed the rationalisation of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) to ease compliance challenges for taxpayers especially for middle-income earners. The government has raised the threshold limits across various TDS sections, aiming to simplify the tax process. The proposed changes are as follows:
Section
Present
Proposed
193 - Interest on
securities
NIL
10,000
194A - Interest other than
Interest on securities
(i) 50,000/- for senior
citizen;
(ii) 40,000/- in case of
others
when payer is bank,
cooperative society and
post office
(iii) 5,000/- in other
cases
(i) 1,00,000/- for senior
citizen
(ii) 50,000/- in case of
others
when payer is bank, cooperative
society and post
office
(iii) 10,000/- in other cases
194 – Dividend, for an individual shareholder
5,000
10,000
194K - Income in respect of units of a mutual fund
5,000
10,000
194B - Winnings
from lottery, crossword puzzle Etc. &
194BB - Winnings from horse race
Aggregate of amounts
exceeding 10,000/-
during the financial year
10,000/- in respect of a
single transaction
194D - Insurance commission
15,000
20,000
194G - Income by way of
commission, prize etc. on lottery tickets
15,000
20,000
194H - Commission or
brokerage
15,000
20,000
194-I - Rent
2,40,000 (in a financial year)
6,00,000 (in a financial year)
194J - Fee for professional or technical services
30,000
50,000
194LA - Income by way of enhanced compensation
2,50,000
5,00,000
206C(1G) – Remittance under LRS and overseas
tour program package
7,00,000
10,00,000
Note:
The Tax Collected at Source (TCS) will be removed on remittances made for educational purposes when these remittances are financed through loans from specified financial institutions (Section 80E).
The Tax Collected at Source (TCS) on the purchase of goods will be removed, effective from April 1, 2025.
The higher TDS rate will apply in cases where taxpayers do not provide PAN.
Extension of Time-Limit for ITR-U
The deadline for taxpayers to file updated income tax returns has been extended from 2 years to 4 years from the end of the relevant assessment year. This will make compliance with tax provisions voluntary by giving more time for tax filing and rectifying tax returns with ease, consequently ensuring a clean and efficient taxing process. The additional tax has to be paid while filing the ITR-U. The amount of additional tax that has to be paid is as follows:
ITR-U filed within
Additional Tax
12 months from the end of the relevant AY
25% of additional tax (tax + interest )
24 months from the end of the relevant AY
50% of additional tax (tax + interest )
36 months from the end of the relevant AY
60% of additional tax (tax + interest )
48 months from the end of the relevant AY
70% of additional tax (tax + interest )
Introduction of the Arm's Length Price Scheme
The government announced a scheme to determine the arm's length price of international transactions over a block period of three years. This approach is designed to simplify transfer pricing regulations and offer an alternative to the annual examination process typically required for such transactions. Furthermore, the government has announced an expansion of safe harbour rules, which are intended to minimize litigation and enhance clarity in international taxation matters.
Withdrawal of Amount from NSS - Exempt
Withdrawals from National Savings Scheme (NSS) accounts will be exempt from tax starting August 29, 2024. This tax relief is especially significant for senior citizens.
Extension of Tax Benefits Under 80CCD(1B) to Contributions Made to NPS Vatsalya Accounts
The same tax benefits available for NPS contributions under Section 80CCD(1B) will now apply to contributions made to NPS Vatsalya accounts, allowing an additional Rs. 50,000 deduction over the Rs. 1.5 lakh limit.
Insertion of Section 44BBD
A new provision, Section 44BBD, is proposed to be inserted in the Income Tax Act for the Financial Year 2025-2026. This section introduces a presumptive taxation scheme specifically for non-residents who provide services or technology to Indian companies engaged in electronics manufacturing. Under this provision, 25% of the amounts paid or payable to non-residents, or received or receivable by them for providing such services or technology, will be considered as their gross receipts for tax purposes. The main objective of this provision is to incentivise the growth of the Indian electronics sector by facilitating the infusion of advanced technology and services from international providers. This move aligns with India’s focus on strengthening its electronics manufacturing ecosystem and attracting global expertise to drive innovation and growth.
2. Indirect Tax Proposals
Rationalisation of Customs Tariff and Duty Inversion:
Removal of 7 more tariff rates over and above the 7 tariff rates that were removed in 2023-24 budget, leaving only 8 rates, including ‘zero’ rate.
Only one cess or surcharge per item to be levied; exempting Social Welfare Surcharge on 82 tariff lines with cess.
Healthcare Relief – Duty Exemptions on Medicines:
36 lifesaving drugs/medicines to be granted a full Basic Customs Duty (BCD) exemption, in a bid to provide relief to patients, particularly those suffering from cancer, rare diseases and other severe chronic diseases; 6 lifesaving medicines to be granted a concessional 5% customs duty. Full exemption and concessional duty on the bulk drugs for manufacturing the former.
BCD exemption for patient-assistance programmes run by pharmaceutical companies, provided the medicines are supplied free of cost to patients; 37 new medicines and 13 additional programmes to be added.
Boosting Domestic Manufacturing – Key Customs Proposals for Certain Industries:
Critical minerals: Full BCD exemption on 25 critical minerals that are not available domestically. Cobalt powder, lithium-ion battery scrap, lead, zinc, and 12 more critical minerals are fully exempt to support domestic manufacturing and job creation.
Textiles: Full exemption on two additional types of shuttle-less looms for technical textiles; Revised BCD on knitted fabrics: Now 20% or ₹115/kg, whichever is higher.
Electronics: To rectify inverted duty structure, BCD on Interactive Flat Panel Display (IFPD) increased from 10% to 20% and reduced to 5% on open cell and other components; Open cell components on LCD/LED TVs will now stand fully exempted from BCD to boost domestic manufacturing.
Lithium-Ion Battery: BCD on 35 capital goods for EV battery manufacturing to be exempted along with 28 additional capital goods for mobile phone battery manufacturing.
Shipping: BCD exemption on raw materials, components, consumables for shipbuilding for another 10 years; Same benefit to be extended to shipbreaking to boost competitiveness.
Telecommunication: BCD to be reduced from 20% to 10% on carrier grade ethernet switches to make it at par with non-carrier grade ethernet switches.
Export Promotion Initiatives - Handicrafts, Leather, Marine, and MRO
Handicrafts: Export time extended from 6 months to 1 year, with an additional 3-month extension, if needed; 9 more duty-free inputs added to the list.
Leather: Full BCD exemption on Wet Blue leather to boost domestic production and jobs; Export duty exemption of 20% on crust leather to support small tanners.
Marine products: BCD on Frozen Fish Paste (Surimi) cut from 30% to 5% to enhance exports; BCD on fish hydrolysate reduced from 15% to 5% for shrimp and fish feed production.
Railway MROs: Extended time limit for the repair of foreign-origin railway goods from 6 months to 1 year, with a 1-year further extension option (same as aircraft and ships).
Key Customs Reforms for Trade Facilitation
New time limit for provisional assessment: A new time limit of two years (extendable by one year) to be introduced to finalise provisional assessments.
Voluntary compliance initiative: Importers/exporters can soon voluntarily declare material facts post-clearance and pay duty with interest but without penalty. However, this will not apply in cases where audit or investigation proceedings have already been initiated.
Extended time for end-use compliance: Time limit for utilising imported inputs extended from six months to one year. Further, quarterly reporting will replace monthly statements, reducing administrative burden.
Amendments in Section 107 and 112 of the CGST Act, 2017
Section 107(6) is being amended to provide for 10% mandatory pre-deposit of penalty amount for appeals before Appellate Authority in cases involving only demand of penalty without any demand for tax.
Section 112(8) is amended to provide for 10% mandatory pre-deposit of penalty amount for appeals before Appellate Tribunal in cases involving only demand of penalty without any demand for tax.
Insertion of a new section 122B of the CGST Act, 2017
A new Section 122B is being inserted to provide penalties for contraventions of provisions related to the Track and Trace Mechanism provided under section 148A.
Amendments in Section 34 of the CGST Act, 2017
The Finance Minister amended the Proviso to sub-section (2) to explicitly provide for the requirement of reversal of corresponding input tax credit in respect of a credit-note. It means if the supplier issues a credit note for reducing their tax liability, the recipient must reverse the corresponding ITC, if already availed. Now businesses should enhance systems/processes to monitor credit note-related ITC reversals efficiently.
Amendments in Section 38 of the CGST Act, 2017
Section 38(1) is being amended to omit the expression "autogenerated" indicating that the ITC statement i.e. GSTR-2B may no longer be entirely system-generated. Businesses now might need to validate and reconcile invoices and ITC through Invoice Management System (IMS) rather than relying solely on system-generated data. Also, a new clause (c) to sec 38(2) is added, allowing the government to specify additional details in the ITC statement through rules.
3. Highlights of Various Sectors
Agriculture
The National Mission on High-Yielding Seeds will be launched to drive research and commercial availability of over 100 climate-resilient and pest-resistant seed varieties released since July 2024.
A comprehensive programme for farmers to promote efficient supplies, processing, production, and remunerative prices will be launched in partnership with states. Appropriate institutional mechanisms will also be set up for implementation and the participation of Farmer Producer Organisations (FPO) and cooperatives.
The government will launch the Prime Minister Dhan-Dhaanya Krishi Yojana in 100 low-productivity districts to boost agriculture, irrigation and storage. The initiative will benefit 1.7 crore farmers.
A Makhana Board will be established in Bihar to enhance production, processing, and marketing. Farmer Producer Organisations will class farmers and ensure access to government benefits.
A new framework will enable sustainable fisheries development in India’s Exclusive Economic Zone, focusing on the Andaman & Nicobar and Lakshadweep Islands.
To boost urea supply, the government will set up a new plant with a 12.7 lakh metric ton annual capacity in Namrup, Assam. It has also reopened 3 dormant urea plants to support Atmanirbharta in urea production.
The loan limit under the Modified Interest Subvention Scheme for Kisan Credit Cards (KCC) will increase from Rs. 3 lakh to Rs. 5 lakh, supporting 7.7 crore farmers, fishermen, and dairy farmers.
A new 5-year ‘Mission for Cotton Productivity’ will be introduced to facilitate productivity and sustainability of cotton farming. It will also promote extra-long staple cotton varieties.
The government is set to launch a 6-year initiative, Mission for Aatmanirbharta in Pulses, specifically targeting Tur, Urad, and Masoor pulses. Central agencies (NAFED and NCCF) will procure these pulses from registered farmers.
MSMEs
Finance Minister Nirmala Sitharaman stated that MSMEs are the second engine of growth, while 5.7 crore MSMEs constitute 36% of manufacturing and 45% of exports, employing 7.5 crore people.
The classification limit of MSMEs is revised and increased. The new classification is as follows:
Micro enterprises are those in which the investment does not exceed Rs. 2.5 crore, and the turnover does not exceed Rs. 10 crore.
Small enterprises are those in which the investment does not exceed Rs. 25 crore, and the turnover does not exceed Rs. 100 crore.
Medium enterprises are those in which the investment does not exceed Rs. 125 crore, and the turnover does not exceed Rs. 500 crore.
There has been a significant enhancement in credit availability, which is as follows:
Micro and Small enterprises credit guarantee cover will be enhanced to Rs. 10 crore from the present Rs. 5 crore. The benefit will accrue over the next 5 years, translating to an additional Rs. 1.5 lakh crore in credit.
The credit guarantee cover for startups will be enhanced to Rs. 20 crore from the present Rs. 10 crore, with the guarantee fee being moderated to 1% for loans in 27 focus sectors providing for Atmanirbhar Bharat.
Credit guarantee is increased for term loans up to Rs. 20 crore for well-run exporter MSMEs.
Credit cards with a Rs. 5 lakh limit will be introduced for micro-enterprises registered on the Udyam portal. In the first year, 10 lakh cards will be issued.
A new Fund of Funds will be set up with expanded scope and a fresh contribution of Rs. 10,000.
A new scheme will be introduced for 5 lakh women, Scheduled Castes and Scheduled Tribes first-time entrepreneurs. This scheme will provide term loans up to Rs. 2 crore for the next 5 years. Online capacity building for managerial skills entrepreneurship will also be organised.
A focus product scheme will be implemented to support the production of non-leather quality footwear. It will facilitate 22 lakh jobs, with a turnover of Rs. 400 crore of revenues and Rs. 1.1 lakh crore in exports.
A new scheme will be implemented to make India a global hub for toys. The scheme will focus on developing skills and clusters and create a manufacturing ecosystem with sustainable toys representing the 'Made in India' brand.
A National Institute of Food Technology, Entrepreneurship, and Management will be established in Bihar to boost food processing activities in the entire Eastern region.
A National Manufacturing Mission will be established to cover small, medium, and large industries. This mission will support ‘Make in India’ by executing roadmaps, providing policy support, and providing a governance and monitoring framework for central ministries and states.
A Mission to support Clean Tech manufacturing will be set up to improve domestic value addition and build our ecosystem for EV batteries, solar PV cells, electrolyzers, motors and controllers, wind turbines, very high voltage transmission equipment and grid scale batteries.
Investments
Investment in People
Saksham Anganwadi & Poshan 2.0 to deliver improved nutrition to 8 crore children, 1 crore pregnant women, and 20 lakh adolescent girls. 50,000
Atal Tinkering Labs to be set up in government schools in the next 5 years for curiosity and innovation.
Broadband connectivity to be provided in all government secondary schools and rural primary health centres under the BharatNet project.
Bharatiya Bhasha Pustak Scheme to offer digital books for school and higher education in Indian languages.
5 National Centres of Excellence for Skilling to be launched with global partnerships for ‘Make for India, Make for the World’ manufacturing. A Rs. 500 crore AI Centre of Excellence will be set up to focus on education.
IIT infrastructure expansion to add 6,500 seats in 5 IITs set up after 2014, along with additional facilities at IIT Patna.
10,000 medical seats to be added next year, with a goal of 75,000 seats in 5 years. Daycare Cancer Centres to be established in all district hospitals, with 200 centres to be initiated in 2025-26.
A new scheme for the socio-economic upliftment of urban workers will be launched to improve their incomes, sustainable livelihoods, and quality of life.
Gig workers to be issued identity cards, e-Shram registration, and PM Jan Arogya Yojana health cover.
PM SVANidhi scheme to be overhauled with increased loans, Rs. 30,000 UPI-linked credit cards, and capacity-building support.
Investment in Economy
States are proposed to receive 50-year interest-free loans with an outlay of Rs. 1.5 lakh crore for capital expenditure and incentives for reforms.
Second Asset Monetization Plan (2025-30) to unlock Rs. 10 lakh crore for new projects.
Jal Jeevan Mission to be extended till 2028 with an increased total outlay.
Rs. 1 lakh crore Urban Challenge Fund to implement the proposals for ‘Creative Redevelopment of Cities’, ‘Cities as Growth Hubs’ and ‘Water and Sanitation’ announced in the previous Budget.
Nuclear Energy Mission to develop 100 GW of nuclear energy by 2047, with Rs. 20,000 crore allocated for Small Modular Reactors (SMRs) to be operational by 2033.
Maritime Development Fund to provide long-term finance for the sector with a size of Rs. 25,000 crore.
The Shipbuilding Financial Assistance Policy will be revamped to include Credit Notes for shipbreaking in Indian yards and changes in the Shipbuilding Clusters.
A modified UDAN Scheme will be launched to connect 120 new destinations, carrying 4 crore additional passengers in 10 years.
Greenfield airports will be developed in Bihar. Along with that, there will be an expansion of Patna and Bihta airports.
Western Koshi Canal ERM project that will benefit 50,000 hectares of land under cultivation in Bihar.
SWAMIH (Special Window for Affordable and Mid-Income Housing) Fund 2, which has a size of Rs. 15,000 crore, will fasten the completion of 1 lakh pending housing units.
Top 50 tourist destinations to be developed in association with states.
The FDI limit in the insurance sector is raised from 74% to 100% for companies that invest the entire premium within India.
NaBFID to launch 'Partial Credit Enhancement Facility' for supporting corporate bonds for infrastructure projects.
Revamped Central KYC Registry will be launched in 2025 for seamless processing of the KYC.
The existing Bilateral Investment Treaties (BIT) model of 2024, signed between two countries is now being updated to the effect of long-term foreign investment through 'First Develop India' approach.
A High-Level Committee for Regulatory Reforms would be formed for the review of regulations of non-financial sectors, certifications, licenses, and permissions.
Jan Vishwas Bill 2.0 will be introduced for the decriminalization of more than 100 legal provisions.
The following measures to be taken for employment-led growth:
Organising intensive skill-development programmes for youth, including in Institutes of Hospitality Management
Providing MUDRA loans for homestays
Improving ease of connectivity and travel to tourist destinations
Providing performance-linked incentives to states for effective destination management
Introducing streamlined e-visa facilities and visa-fee waivers for certain tourist groups
Investment in Innovation
Rs. 20,000 crore allocated for private sector-led Research, Development & Innovation.
10,000 fellowships to be provided in the next 5-years under the PM Research Fellowship scheme for technological research in IITs and IISc.
A National Geospatial Mission to be launched to develop foundational geospatial data and infrastructure.
Gyan Bharatam Mission to be undertaken for survey, documentation, and conservation of over 1 crore manuscripts.
Second Gene Bank with 10 lakh germplasm lines to be set up for future food and nutritional security.
Exports
The export Promotion Mission will be set up to facilitate easy access to cross-border factoring support, export credit, and support for MSMEs to tackle non-tariff measures in overseas markets.
A platform for digital public infrastructure, ‘BharatTradeNet’ (BTN), will be launched to ease documentation and financing in trade, complementing the Unified Logistics Interface Platform. This will align with international norms.
The government will identify key sectors to integrate with global supply chains and develop domestic manufacturing capacities. Facilitation groups comprising senior officials and industry representatives will support select products and supply chains.
A guidance framework will be implemented to attract GCCs (Global Capability Centres) to tier-2 cities through enhancing talent and infrastructure.
Infrastructure and warehousing for air cargo, especially high-value perishable horticulture products, will be modernised. Cargo screening and customs procedures will be streamlined to improve efficiency and user-friendliness.
The new tax regime rates for FY 2025-26 are as follows:
Income Tax Slabs
Tax Rate
Upto Rs. 4,00,000
NIL
Rs. 4,00,001 - Rs. 8,00,000
5%
Rs. 8,00,001 - Rs. 12,00,000
10%
Rs. 12,00,001 - Rs. 16,00,000
15%
Rs. 16,00,001 - Rs. 20,00,000
20%
Rs. 20,00,001 - Rs. 24,00,000
25%
Above Rs. 24,00,000
30%
Does an income of up to Rs. 12,00,000 have zero tax liability?
Yes, under the new tax regime, individuals with a taxable income of up to Rs. 12,00,000 can claim a tax rebate of Rs. 60,000, resulting in zero tax liability.
What is the update on the standard deduction in Budget 2025?
The standard deduction has not changed in the Budget 2025. It remains the same, Rs. 50,000 under the old regime and Rs. 75,000 in the new regime.
Which sectors will benefit from the budget in 2025?
The Budget 2025 has provided benefits and launched various new schemes to boost agriculture, startups, industry, MSMEs, education, medical and logistics.
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