The Union Budget 2025-26 Highlights

The Union Budget 2025-26 Highlights

By CA Mohan Patel

The Union Budget 2025-26 presented by Finance Minister Nirmala Sitharaman, introduces comprehensive reforms in direct and indirect taxation, along with various schemes and incentives aimed at stimulating economic growth and supporting diverse sectors.

Direct Tax Reforms:

1. Personal Income Tax:
   • Revised Tax Slabs: The tax-free income threshold has been raised to ₹1.2 million per annum, up from ₹700,000. Additionally, tax rates have been adjusted to benefit all taxpayers, with the maximum rate of 30% now applicable to incomes of ₹2.4 million and above.
2. Senior Citizens:
   • Interest Income Deduction: The limit for tax deduction on interest income has been doubled from ₹50,000 to ₹100,000, providing additional relief to senior citizens.
3. Tax Deducted at Source (TDS):
   • Rent Payments: The annual limit for TDS on rent has been increased from ₹240,000 to ₹600,000, simplifying compliance for tenants and landlords.

4. New Income Tax Bill:
   • A new Income Tax Bill, modelled on the Direct Tax Code, will be introduced to simplify tax compliance and make the Income Tax Act more understandable, enhancing readability and removing duplication of laws.

Indirect Tax Reforms:

1. Customs Duty Adjustments:
   • Critical Minerals: Customs duties have been removed on waste and scrap of critical minerals, including antimony, cobalt, tungsten, copper, lithium-ion batteries, lead, zinc, and cobalt powder, to secure the availability of these materials for manufacturing in India.
   • Smartphone Components: Import taxes on key components for mobile phone manufacturing, such as printed circuit board assemblies, camera module parts, and USB cables, have been eliminated to boost local production.
2. Goods and Services Tax (GST):
   • Simplification Efforts: The government continues its efforts to simplify the GST structure, aiming to reduce compliance burdens and enhance the ease of doing business.

Key Schemes and Incentives:

1. Agriculture:
   • Pulses and Cotton Missions: A six-year mission to boost pulses production and a five-year mission for cotton production have been launched to enhance agricultural output.
   • PM Dhan-Dhaanya Krishi Yojana: This new scheme aims to assist 1.7 crore farmers across 100 districts with low productivity, focusing on enhancing agricultural output and farmers’ income.
2. Manufacturing:
   • National Manufacturing Mission: A National Manufacturing Mission will be established to provide policy support and further the ‘Make in India’ manufacturing program. Additionally, the credit guarantee cover for small and medium enterprises has been enhanced to ₹100 million, and a fund of funds with a government contribution of ₹100 billion will be set up for startups.
3. Digital Economy and Innovation:
   • Incentives for Start-ups: The budget proposes tax reliefs, grants, and simplified regulations to encourage start-ups in emerging sectors such as artificial intelligence and biotechnology.
   • Cybersecurity Investment: A significant increase in spending is allocated for cybersecurity infrastructure to protect sensitive data and digital assets for businesses and consumers.
4. Infrastructure Development:
   • Interest-Free Loans to States: The government will provide ₹1.5 trillion in 50-year interest-free loans to states for infrastructure development.
   • Urban Challenge Fund: An Urban Challenge Fund worth ₹1 trillion will be established to promote sustainable urbanization.
   • National Infrastructure Pipeline (NIP) Expansion: The NIP is set to include new sectors like electric mobility and green energy, promoting sustainable development.
   •   Smart Cities and Urban Infrastructure: Increased funding is allocated for the modernization of cities through technology, smart utilities, and public transportation systems.
5. Financial Sector:
   • Insurance Sector FDI: The Foreign Direct Investment limit in the insurance sector will be raised to 100% from the current 74% to deepen market penetration.
   • Tax Incentives for Green Investments: New tax deductions are introduced for individuals and businesses investing in green technologies, renewable energy projects, and electric vehicles, aligning with India’s climate commitments.

These initiatives reflect the government’s commitment to fostering economic growth, technological advancement, and sustainable development across various sectors. These comprehensive reforms and initiatives in the Union Budget 2025-26 aim to enhance economic growth, simplify tax compliance, and support various sectors across the economy.                                                         

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