Key Income Tax Reforms & Major Announcements in Union Budget 2025

The Union Budget for the financial year 2025-26 was unveiled today by Finance Minister Nirmala Sitharaman, marking her eighth budget presentation and the first under Prime Minister Narendra Modi’s third-term administration. The budget aims to drive economic transformation with major reforms in taxation, infrastructure, financial regulations, and more.

Income Tax Reforms: Big Relief for Middle-Class Taxpayers

One of the most significant announcements in Union Budget 2025 was the increase in the income tax exemption limit. Under the new tax regime, individuals earning up to ₹12 lakh annually will pay no income tax, a substantial relief for the middle class. The tax slabs have been revised across the board, with individuals earning over ₹24 lakh per annum being subject to a 30% tax rate. Additionally, the tax return filing limit has been extended from 2 years to 4 years.

The Finance Minister emphasized the government’s commitment to a taxpayer-friendly system by implementing faceless assessments and quicker return processing. Nearly 99% of tax returns are now self-assessed, reinforcing a “trust first, scrutinize later” approach.

Capital Expenditure and Infrastructure Boost

The revised capital expenditure (capex) for FY25 stands at ₹10.18 lakh crore, focusing on infrastructure modernization and economic expansion. A major initiative is the introduction of a ₹1 lakh crore Urban Challenge Fund aimed at urban transformation, improved sanitation, and innovative redevelopment projects. The government has also allocated ₹1.5 lakh crore in interest-free loans for capital expenditure to support state infrastructure projects.

The budget outlines the completion of 40,000 affordable housing units in FY26 and the establishment of SWAMI Fund 2, worth ₹15,000 crore, to promote affordable housing.

Customs and Tariff Reforms

To encourage domestic manufacturing and exports, the government has announced a streamlined customs tariff structure. Seven more tariff rates have been removed, leaving only eight key rates, including a zero rate. The Basic Customs Duty (BCD) on various critical components has been revised:

• Exemption on cobalt powder and lithium-ion battery waste
• BCD on frozen fish paste reduced from 30% to 5%
• BCD on wet blue leather fully extended, crust leather exempted from 20% duty

Financial Reforms and FDI Policy Updates

The government is raising the Foreign Direct Investment (FDI) cap in insurance from 74% to 100% for firms that invest their entire premium collections within India. Additionally, a revamped Central KYC Registry will be launched to enhance regulatory compliance and ease of doing business.

An Investment Friendliness Index for states will be introduced in 2025 to foster competitive federalism, while the Financial Stability and Development Council (FSDC) will assess the effectiveness of financial regulations.

Agriculture and MSME Support

The budget has a strong focus on agriculture, with the launch of the Han Dhanya Krishi Yojana, targeting 100 districts with low productivity. Key initiatives include crop diversification, better irrigation, and improved credit access for farmers. The government is also launching a six-year mission to achieve self-reliance in pulses production, with a special emphasis on tur and masoor.

For MSMEs, the government is enhancing the investment and turnover limits to boost growth. Customized credit cards for MSMEs and a fund of funds for startups will be introduced to improve capital accessibility.

Nuclear Energy and Renewable Power Investments

A new Nuclear Energy Mission has been announced, targeting 100 GW of nuclear power generation by 2047. Amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act will facilitate private sector participation. The government has earmarked ₹20,000 crore for research and development of Small Modular Reactors (SMRs), with a goal of having at least five operational by 2033.

Kisan Credit Card Expansion and Interest Subvention Scheme

The Kisan Credit Card (KCC) scheme will now cover 7.7 crore farmers, fishermen, and dairy farmers, offering short-term credit access. The loan limit under KCC-backed borrowing has been increased from ₹3,000 to ₹5,000, providing enhanced financial support to agricultural workers.

Boost for Leather, Footwear, and Toy Manufacturing

A new initiative aims to enhance productivity in India’s footwear and leather sector, creating 22 lakh jobs and generating ₹400 crore in exports. The government is also launching a scheme to establish India as a global hub for toy manufacturing, focusing on developing clusters, skills, and sustainability.

Conclusion

Budget 2025 lays out a roadmap for India’s economic growth, emphasizing tax relief, infrastructure development, financial reforms, and strategic investments in key sectors. With a strong push for inclusive development, the government aims to drive sustainable growth while ensuring ease of living for its citizens. As more details unfold, stakeholders across industries will be keenly watching the implementation of these ambitious measures.