Budget Highlights 2025-26: Income Tax and Key Announcements

On February 1, 2025, Finance Minister Nirmala Sitharaman presented the Union Budget for the fiscal year 2025-26, marking her eighth consecutive budget presentation. This year's budget highlights 2025-26 introduce comprehensive reforms across key sectors, including tax policies, infrastructure, healthcare, and agriculture. Aimed at bolstering economic growth, creating jobs, and enhancing social welfare, the budget reflects the government's commitment to strengthening India's self-reliance and fiscal stability while fostering inclusive development to benefit all sectors of society. Here are the key highlights of the budget.

Union Budget 2025 Key Highlights

Here are the important topics discussed by the Finance minister in the February Budget:

Tax Reforms

One of the most anticipated aspects of this budget was personal income tax relief. As part of the budget highlights income tax changes, the government has significantly reduced the tax burden on individuals, ensuring higher disposable income for the middle class.

Under the new tax regime, individuals earning up to Rs.1 lakh per month (Rs.12.75 lakh annually) will pay zero tax, thanks to revised rebates and deductions. This move aims to stimulate consumer spending and household savings, ultimately fueling economic growth.

The updated budget 2025 income tax slabs are:

The total tax benefit resulting from the revised slab rates and rebate can be better understood with examples:

• A taxpayer in the new tax regime earning Rs.12 lakh annually will receive a tax benefit of Rs.80,000, effectively eliminating their tax liability under the existing rates.

• An individual with an annual income of Rs.18 lakh will save Rs.70,000 in taxes, which accounts for 30% of their previously payable tax.

• A taxpayer earning Rs.25 lakh per year will enjoy a tax relief of Rs.1,10,000, reducing their tax burden by 25% compared to the current tax structure.

Additionally, the TDS threshold for senior citizens has been doubled from Rs.50,000 to Rs.1 lakh, offering greater financial security. Homeowners also benefit from a raised rental TDS exemption, now set at Rs.6 lakh annually. The government has also eased restrictions on self-occupied properties, allowing taxpayers to declare multiple homes without additional tax liabilities.

Agriculture and Rural Development

Recognizing the importance of agriculture in India's economy, the budget introduces a series of pro-farmer initiatives aimed at improving productivity, ensuring financial stability, and strengthening the rural economy.

The PM Dhan-Dhaanya Krishi Yojana is a major step toward achieving self-sufficiency in agricultural production, covering 100 districts and benefiting 1.7 crore farmers. Additionally, the government has expanded the Kisan Credit Card (KCC) scheme, offering enhanced short-term loans of up to Rs.5 lakh for 7.7 crore farmers, fishermen, and dairy farmers.

To address India’s dependency on imports for pulses, a six-year mission focused on pulses such as Tur, Urad, and Masoor has been launched. This program will develop climate-resistant seeds, enhance protein content, and improve post-harvest management to ensure stable income and price assurance for farmers.

MSMEs and Entrepreneurs

India’s MSMEs are the backbone of employment generation and economic expansion. This budget prioritizes credit access, employment growth, and innovation within the MSME sector.

A new credit card scheme for micro-enterprises has been introduced, offering a Rs.5 lakh limit to small businesses, with 10 lakh such cards to be issued in the first year. Additionally, MSME classification criteria have been expanded, increasing investment and turnover thresholds by 2.5x to encourage business growth.

The government has also announced a Rs.2 crore loan scheme for 5 lakh first-time women, SC, and ST entrepreneurs over the next five years. The footwear and leather industries will also receive special attention, targeting Rs.4 lakh crore in revenue and 22 lakh new jobs.

To position India as a global leader in toy manufacturing, the government is promoting sustainable, high-quality, and innovative toy production clusters, strengthening the ‘Made in India’ brand.

Education, Innovation and Technology

In a push to position India as a global leader in AI and technological innovation, the government has allocated Rs.500 crore for a Centre of Excellence in Artificial Intelligence (AI). Additionally, 50,000 Atal Tinkering Labs will be set up in government schools over the next five years, fostering STEM education and entrepreneurship among students.

A Rs.20,000 crore R&D fund has also been introduced to drive private-sector-led innovation in various industries, encouraging Indian startups and businesses to compete globally in emerging technology markets.

Additionally, all rural secondary schools and primary healthcare centers will be equipped with broadband connectivity, ensuring that even the most remote areas have access to digital education and telemedicine services.

Infrastructure and Urban Development

The government has announced a massive Rs.1.5 lakh crore capital expenditure package, offering 50-year interest-free loans to states to develop urban and rural infrastructure projects.

The UDAN scheme is being expanded to improve regional connectivity, with plans for 120 new destinations and an expected passenger count of 4 crore over the next 10 years.

A Rs.25,000 crore Maritime Development Fund has also been introduced to enhance long-term financing for port infrastructure and logistics, making India a global hub for trade and shipping.

To fund future projects, the government has launched an Asset Monetization Plan worth Rs.10 lakh crore, ensuring reinvestment in new infrastructure projects without increasing the fiscal deficit.

Exports, Trade and Financial Sector Reforms

To boost exports and enhance India’s global trade competitiveness, the government has launched BharatTradeNet, a new digital trade infrastructure platform aimed at streamlining export documentation and trade financing.

The Export Promotion Mission will ensure easier access to export credit while supporting MSMEs in overcoming global trade barriers. Special warehousing facilities for air cargo will be developed, particularly for high-value perishable horticultural products, enhancing India’s position as a leading exporter of agricultural goods.

The FDI limit for the insurance sector has been raised from 74% to 100%, opening doors for greater foreign investments in India’s financial sector.

Healthcare and Social Security

Recognizing the importance of affordable healthcare, the government has introduced major social security measures for informal workers, gig economy professionals, and low-income citizens.

The PM Jan Arogya Yojana will now extend health insurance coverage to gig workers, ensuring better medical benefits and social security. The PM SVANidhi scheme will be revamped to offer higher loan limits and UPI-linked credit cards for street vendors and small businesses.

Additionally, Day Care Cancer Centres will be set up in every district hospital, improving access to advanced medical treatment across India.

Conclusion

The 2025 budget highlights a strategic blueprint focused on economic expansion, social welfare, and technological advancement. By lowering taxes, strengthening MSMEs, modernizing infrastructure, and boosting exports, the government has laid a strong foundation for sustainable development.

With a focus on fiscal discipline, financial empowerment, and long-term economic stability, this budget ensures that India moves closer to its vision of becoming a developed nation.