The Union Budget 2025 was presented by Finance Minister Nirmala Sitharaman on February 1, 2025, marking the second full budget of the Modi government’s second term. The budget outlined significant tax reforms, enhanced capital expenditures, and industry-friendly policies to boost economic growth. It focused on providing relief to the middle-class taxpayers, bolstering infrastructure development, and increasing funding for key sectors, including healthcare, energy, and startups.
Income Tax Reforms: Major Relief for the Middle Class
The most noteworthy highlight of Budget 2025 was the revision of tax slabs under the new tax regime, providing significant relief to salaried individuals. The government increased the tax exemption limit from ₹7 lakh to ₹12 lakh under the new regime. This move is expected to encourage higher disposable income and improve purchasing power among the salaried class, leading to increased consumption and economic growth.
Revised Tax Slabs Under the New Regime
Income Slabs (₹) | Tax Rate (%) |
---|---|
0 – 4 Lakh | Nil |
4 – 8 Lakh | 5 |
8 – 12 Lakh | 10 |
12 – 16 Lakh | 15 |
16 – 20 Lakh | 20 |
20 – 24 Lakh | 25 |
Above 24 Lakh | 30 |
This is a substantial shift from the previous tax structure, which had a higher tax burden on individuals earning between ₹7 lakh and ₹12 lakh. With this move, the government aims to provide relief to the middle-income group and encourage higher consumer spending.
Other Tax Announcements:
- Senior Citizens’ Benefits: The tax exemption threshold for senior citizens has been increased from ₹50,000 to ₹1,00,000, ensuring better financial security for retirees.
- Education Loan Tax Benefits Extended: The deduction tenure for education loan interest payments has been increased beyond the previous 8-year limit, making it more affordable for students to finance their education.
- Capital Gains Taxation Remains Unchanged: While other reforms were introduced, no changes were made to capital gains taxation, providing stability for long-term investors.
Fiscal Policy and Economic Outlook
Finance Minister Sitharaman reiterated the government’s commitment to fiscal consolidation while ensuring continued growth through infrastructure and industry support. The focus remains on reducing the fiscal deficit while maintaining public investments to sustain economic momentum.
Key Fiscal Estimates
Revised Estimates for FY 2024-25:
- Total Receipts (excluding borrowings): ₹31.47 lakh crore
- Net Tax Receipts: ₹25.57 lakh crore
- Total Expenditure: ₹47.16 lakh crore
- Capital Expenditure: ₹10.18 lakh crore
- Revised Fiscal Deficit: 4.8% of GDP
Budget Estimates for FY 2025-26:
- Total Receipts (excluding borrowings): ₹34.96 lakh crore
- Net Tax Receipts: ₹28.37 lakh crore
- Total Expenditure: ₹50.65 lakh crore
- Revised Fiscal Deficit: 4.4% of GDP
This indicates a commitment to reducing the fiscal deficit while maintaining robust spending on capital projects and social welfare programs. The government aims to enhance infrastructure and industrial growth without burdening the economy with excessive debt.
Boost for Startups, MSMEs, and Women Entrepreneurs
The budget has introduced several key initiatives to support startups, MSMEs, and women entrepreneurs:
- Fund of Funds for Startups:
- A fresh ₹10,000 crore contribution has been allocated to an Alternative Investment Fund (AIF) to support Indian startups, providing capital for innovative enterprises.
- Support for MSMEs:
- The turnover threshold for MSMEs has been increased by up to 2.5 times, allowing them greater flexibility and tax benefits, encouraging small businesses to scale operations.
- Women Entrepreneurs:
- A new term loan policy has been introduced, offering up to ₹2 crore in funding to first-time women entrepreneurs from SC/ST categories over the next five years. This aims to increase women’s participation in business and financial independence.
Infrastructure and Energy Investments
The Union Budget 2025 significantly focuses on infrastructure development and energy security, ensuring long-term economic sustainability.
Major Infrastructure Announcements:
- ₹20,000 crore allocated for nuclear energy research and reactor development to ensure India’s energy security.
- Increased budget for road and railway projects, prioritizing urban connectivity and freight corridors, which will reduce logistics costs and enhance trade efficiency.
- A new Smart Cities initiative has been introduced with greater emphasis on sustainable urban planning, ensuring cleaner and more efficient cities.
Energy Sector Reforms:
- The government has introduced policies to incentivize renewable energy adoption, including a ₹10,000 crore allocation for solar and wind energy projects.
- Subsidies for electric vehicles (EVs) and green hydrogen production have been extended to accelerate India’s transition to a low-carbon economy.
Healthcare and Pharmaceuticals
Key Announcements in the Healthcare Sector:
- 36 life-saving drugs added to the fully exempt list from basic customs duties, making essential medicines more affordable.
- 6 more essential medicines now attract concessional duties of 5%, further reducing healthcare costs.
- Increase in healthcare infrastructure investment, focusing on rural and semi-urban hospitals to bridge the gap in healthcare accessibility.
- A proposal for a 50% incentive on CAPEX costs for hospitals with more than 100 beds, encouraging private-sector investment in healthcare infrastructure.
- Potential reduction in GST on health insurance premiums to 5%, making insurance more affordable and increasing penetration.
Foreign Direct Investment (FDI) and Trade Policy
To boost foreign investments and enhance India’s attractiveness as a global manufacturing hub, the government has:
- Increased the FDI cap for insurance companies from 74% to 100%, provided that the entire premium collection is invested in India.
- Introduced additional tax incentives for foreign businesses setting up manufacturing plants in India.
- Export promotion measures, focusing on automobile, textile, and electronic components to increase global competitiveness.
Stock Market Reaction to Budget 2025
The Indian stock market reacted positively to the budget announcements, especially in key sectors such as infrastructure, energy, and pharmaceuticals.
Nifty 50 and Sensex Performance on Budget Day:
- Nifty 50 opened higher at 23,528.60, reflecting strong investor confidence.
- Sensex gained 136.44 points, closing at 77,500.57 before experiencing intraday volatility.
- Sectoral gains were observed in railways, defense, and agriculture stocks, which received significant budget allocations.
Conclusion: A Budget for Growth and Stability
The Union Budget 2025 is designed to boost economic growth while ensuring financial stability. With tax relief for middle-class taxpayers, increased investments in startups and infrastructure, and measures to enhance healthcare accessibility, the budget is positioned as a progressive and inclusive policy framework.