Union Budget 2025-26: Key Highlights & Tax Proposals

The Budget 2025-26 focuses on accelerating growth, ensuring inclusive development, invigorating private sector investments, uplifting household sentiment, and boosting spending power. The vision for a Viksit Bharat (Developed India) drives the government’s policy approach, emphasizing structural reforms, regional balance, and economic competitiveness.

Budget Theme & Economic Strategy

• India remains the world’s fastest-growing major economy, with increased global investor confidence.
• The budget is structured around four key growth engines: 
  • Agriculture
  • MSMEs
  • Investments
  • Exports
• Reforms serve as the fuel for sustained growth, with a focus on inclusivity.
• The government identifies six priority transformation areas: Taxation, Power, Urban Development, Mining, Financial Sector, and Regulatory Reforms.

Key Budgetary Allocations & Policy Announcements

1. Agriculture & Rural Development

• Prime Minister Dhan-Dhaanya Krishi Yojana: Supports 100 underperforming districts with better irrigation, crop diversification, storage, and credit availability. This will likely to help 1.7 crores farmers. 
• Mission for Aatmanirbharta in Pulses: A 6-year plan to boost self-sufficiency in Tur, Urad, and Masoor dal.
  • Development and commercial availability of climate resilient seeds
  • Enhancing protein content
  • Increasing productivity
  • Improving post-harvest storage and management, assuring remunerative prices to farmers.
• Comprehensive Program for Fruits & Vegetables: Improves production, processing, and pricing.
• Makhana Board in Bihar: Enhances makhana production, processing, value addition and marketing.
• Mission for Cotton Productivity: Boosts yield, sustainability, and textile sector linkages.
• Enhanced Credit via KCC: Facilitate short-term loans for 7.7 crores farmers, fishermen, and dairy farmers by increasing their loan limits from Rs. 3 lakhs to Rs. 5 lakhs.
• A National Mission on High Yielding Seeds will be launched, aimed at 
  • Strengthening the research ecosystem, 
  • Targeted development and propagation of seeds with high yield, pest resistance and 
  • Climate resilience, and commercial availability of more than 100 seed varieties released since July 2024. 
• Urea Plant in Assam: A new 12.7 lakh metric ton capacity plant will be set up to support self-sufficiency.
• India Post as a Rural Economic Catalyst: Expanded role in credit, digital inclusion, and logistics.

2. MSMEs & Entrepreneurship

• Revised MSME Classification: To support the growth of MSMEs, improve their economies of scale, facilitate technological advancements, and enhance access to capital, the investment and turnover thresholds for MSME classification will be increased by 2.5 times and 2 times, respectively. 
• Credit Guarantee Enhancements: 
  • Micro & Small Enterprises: Increased from Rs. 5 crores to Rs. 10 crores leading to additional credit of Rs. 1.5 Lakhs crores in the next 5 years.
  • Start-ups: Coverage doubled to Rs. 20 crores.
  • Exporter MSMEs: New Rs. 20 crore term loan support.
• Credit Cards for Micro Enterprises: Rs. 5 lakh limits for Udyam-registered businesses. In the first year, 10 lakh such cards will be issued.
• Fund of Funds for Start-ups: Rs. 10,000 crore additional allocation.
• Support for First-time Entrepreneurs: Loans up to Rs. 2 crores for 5 lakhs first-time entrepreneurs including women, and SC/ST entrepreneurs. 
• Sectoral Focus: 
  • Focus Product Scheme for Footwear & Leather: Employment potential 22 lakh jobs, generate a turnover of Rs. 4 Lakh crores and exports of over Rs. 1.1 lakh crore. This scheme will support design capacity, component manufacturing, and machinery required for production of non-leather quality footwear, besides the support for leather footwear and products.
  • Toy Industry: Cluster-based development for "Made in India" toys.
  • Food Processing: Establishment of National Institute of food technology in Bihar to drive agro-processing. And this will also enhance income for farmers and skilling, entrepreneurship and employment opportunities for youth. 
  • Manufacturing Mission: Focuses on Make in India, Clean Tech (EV batteries, solar PV, wind turbines, etc.).

3. Investments in Infrastructure & Human Capital

Investing in People

• Atal Tinkering Labs: 50,000 new school labs to encourage innovation in the next 5 years.
• Broadband in Rural Schools & PHCs: Bharat Net project expansion.
• Higher Education & Medical Expansion: 
  • 6,500 new IIT seats in post-2014 IITs.
  • 10,000 new medical seats in 2025, aiming for 75,000 in 5 years.
• Healthcare Expansion: 
  • 200 Day Care Cancer Centres in 2025-26, covering all districts in 3 years.
  • Urban Livelihood Support: Revamp of PM SVANidhi with higher loans & UPI-linked credit cards.
  • Gig Worker Welfare: PM-JAY health coverage for 1 crore workers.
• Centre of Excellence in Artificial Intelligence for education with a total outlay of Rs. 500 crores.

Investing in the Economy

• Public-Private Partnerships (PPP): Each infrastructure ministry prepares a 3-year project pipeline.
• Rs. 1.5 lakh crore State Capex Support: 50 years of Interest-free loans to states for capital expenditure and incentives for reforms.
• Jal Jeevan Mission Extended to 2028: Ensuring 100% tap water coverage.
• Power Sector Reforms: Incentivize distribution reforms and augmentation of intra-state transmission. Additional borrowing of 0.5 per cent of GSDP will be allowed to states, for implementing reforms.
• Nuclear Energy Mission: Rs. 20,000 crores for Small Modular Reactors (SMRs); target 100 GW nuclear power by 2047.
• Tourism Boost: 
  • 50 top tourist destinations for redevelopment.
  • Special focus on Buddhist circuit & medical tourism.
• Maritime Development Fund: For long-term financing for the maritime industry, a fund with a corpus of Rs. 25,000 crore will be set up. This will be for distributed support and promoting competition. This will have up to 49 percent contribution by the Government, and the balance will be mobilized from ports and the private sector.
• UDAN - Regional Connectivity Scheme: a modified UDAN scheme will be launched to enhance regional connectivity to 120 new destinations and carry 4 crore passengers in the next 10 years.  The scheme will also support helipads and smaller airports in hilly, aspirational, and North East region districts. 
• Tourism for employment-led growth: The top 50 tourist destination sites in the country will be developed in partnership with states through a challenge mode. Land for building key infrastructure will have to be provided by states.

Investing in Innovation

• Rs. 20,000 crore allocations for private-sector-led R&D.
• Deep Tech Fund of Funds to support start-ups.
• Gene Bank for Crops Germplasm: The 2nd Gene Bank with 10 lakh germplasm lines will be set up for future food and nutritional security.
• National Geospatial Mission: Digital mapping for land records & urban planning.

4. Export Promotion & Trade Facilitation

• Export Promotion Mission: MSME support for credit access & trade compliance.
• BharatTradeNet: A digital trade infrastructure for global exports.
• Air Cargo Infrastructure: Enhanced warehousing & customs efficiency.
• National Framework for GCCs: Boosting Global Capability Centres in Tier 2 Cities.
• India Post to be transformed into a public logistics organization, which will act as a catalyst for the rural economy.

5. Tax Reforms & Fiscal Policy

New Income Tax Slabs (2025-26)

• Tax-Free Income: Up to Rs. 12 lakhs for individuals, Rs. 12.75 lakhs for salaried taxpayers.
• Homeowners can now claim two houses as self-occupied without incurring additional tax burden
• Revenue of ~1lakh crore in direct taxes forgone by the government due to such reforms.
• These tax changes would give the consumption sector a boost as disposable income would increase. 

TDS & TCS Reforms

*Effectively making it tax-free

Indirect Tax Reforms

• The government has exempted customs duty on 28 capital goods and machinery used in the production of lithium-ion batteries for mobile phones.  This exemption also applies to other critical components used in mobile phone manufacturing.
• The government has also exempted customs duty on 35 capital goods for li-on battery production used in EVs and reduced duties on bikes having engine capacity over 1600cc to 30% from 50% earlier, while duties on SKD and CKD cars have been reduced to 20% and 10% respectively.
• The government is forgoing revenue of about Rs. 2600 crores in indirect taxes due to such reforms.

Fiscal Targets

Conclusion

The Budget 2025-26 is a growth-oriented blueprint, balancing fiscal prudence with expansionary policies. It reinforces India’s competitive edge, supports manufacturing, innovation, and infrastructure, and ensures direct benefits for the middle class and businesses. With a boost to consumption, positive developments in power, healthcare and aviation sector are to be monitored. This sets India on a robust path toward Viksit Bharat 2047.