Union Budget 2025

February 3, 2025

The Union Budget for 2025-26 was presented by Finance Minister Nirmala Sitharaman on February 1, 2025. This budget aims to drive economic growth through four primary engines – agriculture, micro, small and medium enterprises (MSMEs), investments, and exports. The government has prioritised reforms across various sectors, focusing on inclusivity and sustainable development, with the ultimate goal of achieving a Viksit Bharat (Developed India) by 2047.

Agriculture Initiatives

The budget emphasises enhancing agricultural productivity and self-sufficiency. Key initiatives include:

Self-Sufficiency in Pulses: A 6-year ‘Mission for Aatmanirbharta (self-reliance) in Pulses’ was announced, with a special emphasis on tur/arhar (pigeonpea), urad (black gram) and masoor (red lentil).
Boost to Makhana Cultivation: Bihar to get a Makhana Board, with FPOs (Farmer Producer Organizations) helping 10 lakh people involved in the industry. It will help boost the production, processing and marketing of makhana (fox nuts).
‘Rural Prosperity and Resilience’ program to provide skill training, investments, and technology for better rural job opportunities. It will be launched in collaboration with states.
High-Yielding Seeds Mission:
- Research & development of high-yield, pest-resistant, and climate-resilient seeds.
- Commercial availability of 100+ new seed varieties developed since July 2024.
Mission for Cotton Productivity: A 5-year plan to support cotton farmers in achieving sustainability and productivity. It will also help promote extra-long (ELS) cotton varieties.
Fisheries Development: Sustainable fishing projects, especially in Andaman & Nicobar and Lakshadweep.
India Post as a Rural Economy Catalyst: India Post & India Post Payments Bank to become a major logistics network.
Kisan Credit Card (KCC) Loan Limit Increased: From ₹3 lakh to ₹5 lakh under the Modified Interest Subvention Scheme.
New Scheme: PM Dhan Dhanya Krishi Yojana (PMDDKY):

- The Scheme combines existing farming schemes and work together with State governments.
- It will focus on 100 districts that have low farm output, average crop variety, and below-average farming conditions.
- Objectives include:

1. 1. Increase farm production
  2. Encourage farmers to grow different crops using eco-friendly methods
  3. Improve storage facilities for crops at the village and district level
  4. Enhance irrigation systems
  5. Make loans easily available for farmers

- This program is expected to benefit 1.7 crore farmers across India.

New Urea Plant in Assam: Annual production capacity of 12.7 lakh tonnes. This will be the 7th new urea plant since 2019.

Support for MSMEs

Higher Investment & Turnover Limits: MSME classification investment & turnover limits increased to 2.5 and 2 times respectively.
Credit Access Enhanced:

1. Micro & Small Enterprises: Credit guarantee increased from ₹5 crore to ₹10 crore.
2. Startups: Guarantee increased from ₹10 crore to ₹20 crore.
3. Exporter MSMEs: Term loans up to ₹20 crore.

Customized Credit Cards: MSMEs to get ₹5 lakh Udyam credit cards (10 lakh cards in first year).
Startup Fund of Funds Expanded:

1. Additional ₹10,000 crore
2. Govt-backed Alternate Investment Funds (AIFs) have committed ₹91,000 crore to startups.

New Scheme for Women, SC/ST Entrepreneurs: ₹2 crore term loans for first-time business owners.
National Action Plan for Toys: ‘Make in India’ focus to make India a global toy hub.
National Manufacturing Mission:

1. Make in India support for MSMEs & large enterprises.
2. Focus on clean tech manufacturing (solar panels, EV batteries, wind turbines, etc.).
3. The mission will also help reduce China’s strong control over clean technology. Right now, China makes 80% of the world’s batteries and produces 80% of the key parts needed for solar cells.

Investments

Jal Jeevan Mission Extended: 100% water supply coverage till 2028.
Urban Challenge Fund:
- ₹1 lakh crore fund to improve cities.
- Covers ‘Cities as Growth Hubs’, Creative Redevelopment, Water & Sanitation.
Nuclear Energy Mission:
- Develop at least 100 GW of nuclear capacity by 2047.
- Encourage private companies to invest in nuclear energy by changing laws like the Atomic Energy Act and the Civil Liability for Nuclear Damage Act.
- Launch at least five small modular reactors (SMRs) by 2033. These are compact, safer, and will help in expanding nuclear power generation.
Shipbuilding Development:
- Revised Shipbuilding Financial Assistance Policy will provide subsidies for ships built in India from 2024 to 2034. The government has set aside about ₹18,000 crore for this, and the subsidy will be based on either the agreed price or the fair value of the ship.
- The ₹25,000 crore Maritime Development Fund will offer long-term, low-cost financial support for building ships in India and other ocean-related projects.
- Shipbuilding Clusters to improve technology & infrastructure.
Regional Air Connectivity (UDAN Scheme):
- 120 new destinations.
- Helipads & small airports for hilly & North East regions.
Deep Tech Fund of Funds:
- Investments in next-gen startups.
- 10,000 PM Research Fellowships in IITs/IISc.
National Geospatial Mission:
- Digital mapping infrastructure for better planning & governance.
Gyan Bharatam Mission:
- It supports the digitization & preservation of Indian manuscripts.
- To support this new initiative, the government has increased the budget for the National Manuscripts Mission (NMM) from ₹3.5 crore to ₹60 crore.

Export Promotion

Exports

Export Promotion Mission:

- ₹2,250 crore allocated to boost exports.
- Support for export credit, cross-border factoring, and easing non-tariff measures for MSMEs.
- Commerce, MSME, and Finance Ministries will jointly drive this initiative.

BharatTradeNet:
- A unified digital platform for trade documentation & finance.
- It will be developed in line with the international best practices to ensure ease of doing businesses
GCC National Framework

- National Framework was announced for creating Global Capability Centres (GCCs) in emerging Tier-II cities.
- It will focus on improving talent availability, infrastructure, and collaboration with industries to attract more back-office operations outside metro cities like Bengaluru and NCR.
- India currently has over 1,700 GCCs, which make up 17% of such centres worldwide. Majority of these centres are located in large cities, employing around 1.9 million professionals.

Better Air Cargo Infrastructure:
- Faster customs clearance for perishable goods.

Tax Reforms

Taxpayers

Income Tax Exemption: No tax on income up to ₹12 lakh. With a standard deduction, salaried individuals can remain tax-free up to ₹12.75 lakh.
Rebate and Tax Savings: A rebate of ₹60,000 and changes in tax slabs could result in savings of up to ₹1.1 lakh.
Extended Filing for Returns: Updated tax returns can be filed up to 48 months from the end of the assessment year.
No Deemed Rent for Two Self-Occupied Homes: There will be no deemed rent for two self-occupied house properties.
Increased Threshold for TCS: The threshold for Tax Collected at Source (TCS) on overseas remittances has been raised to ₹10 lakh. No TCS will be applied on remittances for education from loans.
TDS on Rent: Tax Deducted at Source (TDS) on house rent will apply only for rents above ₹6 lakh a year, compared to the earlier ₹2.4 lakh.
Tax Exemption for Senior Citizens: Withdrawals from National Small Savings (NSS) accounts by senior citizens after August 29, 2024, will be tax-exempt.

Additional Tax on Updated Returns: If updated returns are filed after 24 months and up to 36 months, an additional tax of 60% on the total tax and interest will be applicable. After 36 months, it will be 70% with interest.

Investors

NPS Deduction: Payments to the NPS Vatsalya scheme will be eligible for a ₹50,000 deduction, similar to the NPS scheme under the old tax regime.
TDS on Bank Interest for Senior Citizens: TDS on bank interest for senior citizens will apply only if it exceeds ₹1 lakh. For others, the threshold is increased to ₹50,000.
TDS on Dividend Income: TDS on dividend income will apply if the income exceeds ₹10,000.

Consumers

Customs Duty on Life-saving Drugs: No basic customs duty on 36 life-saving drugs for cancer and rare diseases. Customs duty is also exempted on 37 more medicines and 13 patient assistance programs, provided they are given free to patients.
Reduced Customs Duty: Basic customs duty (BCD) on goods imported for personal use has been reduced from 38.5% to 20%. Duty on imported jewelry articles has been reduced from 25% to 20%.
Lower Customs Duty on Furniture: Customs duty on the import of furniture, mattresses, and bedding articles has been reduced from 27.5% to 25%.

Business People

Startups: Startups incorporated before April 1, 2030, will get a 10-year tax holiday. A ₹10,000 crore fund of funds will support startups.
TDS on Sale of Goods: Only 0.1% TDS on the sale of goods exceeding ₹50 lakh. No Tax Collected at Source (TCS).
Decriminalization of TCS Default: TCS payment defaults will no longer be a criminal offense.
Reduced Duty on Components for EVs and Phones: Basic customs duty on components used to make LCD/LED panels and capital goods for EV and mobile phone batteries has been reduced.
Scheme for Non-Leather Footwear and Leather Products: A scheme will support manufacturing capacity, component production, and machinery for non-leather footwear and leather products.
Provisional Assessments: The time limit for finalizing provisional assessments of import/export bills will be two years, extendable by another year.
Voluntary Declaration for Tax: Importers and exporters can voluntarily declare facts and pay tax without penalty after clearing goods.

Loss Carry Forward for Amalgamated Companies: Amalgamated companies can carry forward losses only for 8 years.
Upfront Payment for Penalty Appeals: Businesses must deposit 10% of the penalty upfront when appealing to the appellate commissioner.

Social Sector Allocation

Education Budget: The education sector received ₹1.28 lakh crore in the 2025-26 Budget, an increase from ₹1.14 lakh crore in revised estimates for 2024-25. This is part of a consistent rise in education spending from ₹97,000 crore in 2022-23.
Rural Development: The allocation for rural development increased to ₹2.66 lakh crore in 2025-26, compared to ₹2.65 lakh crore in Budget estimates for 2024-25 and ₹1.90 lakh crore in revised estimates for 2024-25.
Health Budget: Health allocation increased to ₹98,311 crore in 2025-26, up from ₹88,032 crore in revised estimates for 2024-25. It was ₹89,287 crore in Budget estimates for 2024-25.
Social Services Expenditure Growth: Social services expenditure (SSE) has been increasing over the years. It rose from 23.3% of total government expenditure in FY21 to 26.2% in FY25. In FY24, SSE increased by 21%, and in FY25, it grew by another 10%. Over five years from FY21 to FY25, SSE grew at a Compound Annual Growth Rate (CAGR) of 15%.
Total Social Sector Spending: The total social sector spending by central and state governments was ₹14.8 lakh crore in FY21. It is expected to rise to ₹25.7 lakh crore in FY25.

Challenges

1. Implementation Gaps: Despite rising allocations, there are significant gaps between budget estimates and revised estimates, showing the need for better implementation and improved absorption capacities.
2. Education Funding: Even though the education budget has increased, the funding for education remains around 2.7-2.9% of GDP, which is lower than the global benchmark of 4-6% set by UNESCO.
3. Health Funding: While health spending has grown to 1.9% of GDP, it still falls short of the 2.5% target set by the National Health Policy 2017.

Gender Budgeting

Women were one of the four key focus groups in the Budget 2025-26, along with the poor, youth, and farmers.
Since 2005-06, the government releases the Gender Budget Statement (GBS) along with the Union Budget. This is not a separate budget for women but a reporting tool showing allocations for women and girls in existing schemes. The GBS has three parts: Part A (100% allocation for women), Part B (30-99% allocation for women), and Part C (1-29% allocation for women).
Increased Allocation for Women:
1. The total allocation for women and girls in the GBS for 2025-26 is ₹4.49 lakh crore, a 37% increase from the previous year (2024-25).
2. The proportion of total government expenditure dedicated to women’s schemes has risen from 5% in FY 2019-20 to 9% in FY 2025-26.
Issues in Allocation and Implementation:
1. While overall funding for women has increased, Part A allocations (which fully fund women-focused schemes) have remained stagnant over time.
2. This could either reflect a greater gender focus in Part B and C schemes or suggest arbitrary or misallocated funds for women and girls.
Examples of Key Schemes:
1. Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS): Guarantees at least one-third of its budget for women, and historically, about half of the workers have been women. For FY 2025-26, 47% of the total MGNREGS budget is allocated to women.
2. Jal Jeevan Mission (JJM): Aimed at providing functional tap connections to rural households, reducing the burden on women who traditionally fetch water. In FY 2025-26, 31% of JJM’s allocation is for women, but this is a decline from the previous years, suggesting less focus on women in the long term.
3. Pradhan Mantri Awaas Yojana-Grameen (PMAY-G): Ensures that rural houses are built in women’s names, but only 23% of houses have been allotted to women, showing a gap between goals and implementation.
4. Mission Saksham Anganwadi and Poshan 2.0: Focuses on health and nutrition for women and children, with some inconsistencies in how the scheme is reported in the GBS.
Self-Help Groups (SHGs) Empowerment: The government’s support for women’s self-help groups has increased, with the National Rural Livelihoods Mission (NRLM) moving to Part A of the GBS in FY 2024-25, indicating better prioritization of women-focused schemes.

Challenges

1. Ambiguity in Reporting: The way ministries report gender-focused schemes in the GBS is unclear. Some allocations appear arbitrary or inconsistent, making it difficult to track actual progress toward empowering women.
2. Need for Gender Audits: Simply reporting allocations for women is not enough. The government should conduct regular gender audits across ministries to ensure effective implementation of women-centered schemes and reflect a true commitment to empowering women.

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