Union Budget 2025: Key announcements and what they mean for you

The Finance Minister (FM), Mrs Nirmala Sitharaman, presented her eighth successive budget under the Modi government. She highlighted four primary engines that drove economic growth and suggested reforms for each. These engines are –

1. Agriculture 
2. Micro, Small and Medium Enterprises (MSMEs)
3. Investment, including investing in people, the economy, and innovation
4. Exports

Mrs Sitharaman also highlighted the government’s vision of Viksit Bharat, which was the main inspiration behind the proposed reforms. Let’s check out the major highlights of the Union Budget 2025.

Key highlights of Union Budget 2025
 

The major segments highlighted in the Union Budget of India and the proposed reforms under each are as follows –

1. Changes in cess and tariffs

To enhance domestic manufacturing and exports and streamline the structure of custom tariffs, the FM proposed the following changes –

a.  Removal of seven tariff rates in addition to the seven rates removed in the Union Budget of 2023-24

b. Provision of only one cess or surcharge on 82 tariff lines

c. Exemption of Basic Customs Duty (BCD) on 12 critical minerals, lithium-ion battery waste, cobalt powder, and scrap

d. Exemption on 37 new medicines and 13 patient assistance programs

e. Concessional customs duty of 5% on six life-saving medicines

f.  No Basic Custom Duty (BCD) on Wet Blue leather

g.  Increase in BCD on flat panel displays from 10% to 20%; BCD on open cells and other LCD/LED components will stand at 5%

2. Changes in the financial sector

The following financial reforms were introduced in the budget –

a.  Increase in Foreign Direct Investment (FDI) in insurance companies from the existing 74% to 100%

b. Introduction of a revamped central KYC (Know Your Customer) registry, which will be tech-driven

c. Introduction of the Investment Friendliness Index (IFI) for Indian states to promote competitive cooperative federalism

d. The revised fiscal deficit for the financial year 2025 was determined at 4.8%, with a target of 4.4% for the financial year 2026

3. Reforms in infrastructure

To boost the infrastructural growth of the country, the following proposals were set forth –

a. Creation of an Urban Challenge Fund worth ₹1 lakh crore to aid in the transformation of cities to growth hubs, improve sanitation and water infrastructure, and promote innovative redevelopment

b. Provision of ₹1.5 lakh crore as interest-free loans for capital expenditure and other incentives

c. Completion of 40,000 affordable housing units by the financial year 2026 

d. Creation of a ₹15,000 crore SWAMIH Fund 2 for affordable housing purposes

e. Allocation of ₹10,000 crore for a 3-year list of Public-Private Partnership (PPP) projects to be proposed by infrastructure ministries

4.   Proposals for MSMEs

Emphasising MSMEs’s contribution to India’s growth story, the budget proposed various measures for boosting growth, such as –

a. Customised credit cards

b. Fund of funds for startups

c. Enhanced investment and turnover limits by 2.5X and 2X times, respectively

5.   Agriculture

Agriculture is the primary economic contributor of India. Hence, the FM proposed the following measures to boost agricultural activities –

a. Proposal of a new initiative for the agricultural segment called the Prime Minister Dhan-Dhaanya Krishi Yojana that will cover 100 districts and aim to enhance productivity, post-harvest storage, and the adoption of sustainable practices and crop diversification

b. Launch of a 6-year mission to achieve self-reliance in major pulses like tur, urad, and masoor varieties

c. Establishment of a Makhana Board in Bihar to minimise import dependence and boost domestic production of makhana

d. Increase in the credit limit under Kisan Credit Cards (KCC) from ₹3000 to ₹5000

6. People-focused reforms

Major proposals to support the citizens of the country include the following –

a. Emphasis on the Sashakt Anganwadi and Poshan 2.0 schemes that provide optimal nutrition to children, pregnant and lactating women, and adolescent girls

b. Infrastructural assistance to five Indian Institutes of Technology (IITs) established after 2014 to accommodate 6500 additional students

c. Establishment of five National Centres of Excellence for upskilling Indian youth

d.  Issuance of identity cards for registering gig workers on the e-Shram portal, which will benefit one crore gig workers

7.  Other reforms

Besides these key sectors, reforms were proposed in other sectors too. These include –

a. Revision of the capex for the financial year 2025 to ₹10.18 lakh crore

b. Development of 100 GigaWatt (GW) of nuclear power by 2047

c. Allocation of ₹20,000 crore for establishing Small Modular Reactors (SRMs) with the intention to develop at least 5 SRMs by 2033

d.  Proposal of a new initiative for the leather and footwear industry, aiming to create 22 lakh jobs, boost exports to ₹1.1 lakh crore, and generate a revenue of ₹400 crore

e.  Modification of the UDAN scheme to expand the airline network to 120 new destinations, accommodating more than four crore travellers

f. The facilitation of greenfield airports in Bihar, alongside the expansion of Patna and Bihta airports

8.  Changes in personal finance

One of the primary Union Budget expectations was tax relief, and the budget fulfilled it. The best Union Budget news was reserved for the last, which proposed a considerable reform in income tax slabs, signalling a reduction in tax liability.

While the income tax bill will be tabled later, the FM enhanced the tax-free income limit to ₹12 lakh from the current ₹7 lakh under the new regime. This increase will help taxpayers with an income of ₹12 lakh save ₹80,000 through tax rebates. For salaried individuals, adding the standard deduction of ₹75,000, the tax-free income limit is ₹12.75 lakh.

The tax slab rates under the new regime have also changed. They are as follows –

Other proposed changes in direct tax are as follows –

a. Increase in the Tax Deduction at Source (TDS) threshold limit for interest earned by senior citizens to ₹1 lakh from the existing ₹50,000

b.  Increase in the Tax Collection at Source (TCS) threshold limit under the Liberalised Remittance Scheme (LRS) to ₹10 lakh from the present ₹7 lakh

c. No TCS on remittances made for educational purposes if the remittance is sourced through a loan from a financial institution

d.  Higher TDS rates in the absence of PAN details submission

e. Increase in the TDS limit on rent to ₹6 lakh from the previous ₹2.40 lakh

Budget analysis and financial planning
 

The latest Union Budget updates are taxpayer-friendly and aim to promote consumption through a reduced tax liability. The reforms mentioned in the other economic sectors also look to promote the initiatives of Atmanirbhar and Viksit Bharat as envisioned by the Modi government.

If you want to capitalise on the new reforms and enhance your investments, choose IDFC FIRST Bank and get a range of services catering to your financial needs. Whether you want to open a savings account or invest in different avenues, IDFC FIRST Bank is there to help.

With the reduced tax liability proposed in the Union Budget and IDFC FIRST Bank as your partner, minimise tax liability and plan your finances better today!