Budget 2025

Introduction

The 2024 interim budget had been a receiver of ridicule and crude jokes earlier however it has now been brilliantly rectified by the Finance Minister of India, Nirmala Sitharaman, in the year 2025-2026 budget.

The income tax regime has been remodeled; customs are simplified, and the government is opening their wallets to the MSMEs and the Startups of India. The government is also set to shift their focus on Taxation, power, Financial Sector, Mining and Agriculture.

With the standards set so high by the new budget scheme, Indians especially those belonging to the middle class are holding immense hope for greater disposable income and ultimately a more secure future.

Understanding budget can be little tricky. If you want to understand the budget, you can seek advice of a tax lawyer. They can help you understand the budget in simpler manner.

This article aims to walk through the Budget and dive into important topics that is going to change the daily life of Indians.

Income Tax

There has been a lot of positive cheer regarding the new income tax regime, rightfully so, as this new order has simplified and reduced taxes.

The income tax is payable based on which tax slab the income of an individual falls into. Earlier individuals earning up to 7 lakhs were exempted from paying tax. Now people earning up to 12 lakhs rupees annually are exempted from paying any income tax.

The following table shows the proposed tax slab:

In this system, people earning 4-8 lakhs will be saving 20,000 INR annually, taxpayers in the next segment will save 40,000 INR and 12-16 lakh slab will be saving 45,000 INR.

Additionally, tax deduction limit for elderly taxpayers have been doubled from 50,000 INR to 1 lakh INR, giving further relief to them.

Further, the Finance Minister has also promised to introduce a Income Tax Bill this year to simplify the tax rates further.

This change has been done to increase the disposable income of the middle-class to motivate them to increase consumption which would ultimately lead to growth in business and startups making the GDP of India sore high.

Customs

India has revised the customs tariff rates in the Budget of 2025-2026, we have a cascading tariff system at present which makes it unnecessarily complicated and a lengthy process.

The new system exempts 7 additional tariffs on industrial goods. Furthermore, it is also excluding 36 lifesaving drugs from BCD or Basic Customs Duty, this is huge for the pharmaceutical industry since it would lower cost dramatically and increase affordability.

Full exemptions are also enjoyed by critical minerals and capital goods used for battery production for Electronic Vehicles and Mobile Phones. This is going to promote complete digitalization of India, and with the growth of EV vehicles significant recovery of air pollution is also expected.

MSMEs

MSMEs are set to see a great change this year because the classification of MSME has been modified allowing significantly higher investments and turnover limits. This has allowed enterprises to play big and not remain in a box just to fall under the benefits of MSMEs.

Earlier an enterprise investing up to 1 crore and earning up to 5 crores in turnover was classified as a micro enterprise, whereas in the revised system investment up to 2.5 crores and turnover up to 10 crores now falls into that category.

Similarly, an enterprise with 10 crore investment and 50 crore turnover was considered to be a small enterprise that number now has been raised to 25 crores in investment and 100 crores in turnover.

Medium enterprise was earlier considered one with investment of 50 crores and turnover of 250 crores, which has now been revised to 125 crores in investments and 500 crores in turnover.

Why the MSME Definition New Criteria Was Introduced in Budget 2025

• Promoting Modernisation and Expansion:
  This increase will allow enterprises to invest more in plant & machinery or any equipment while still not falling out of MSME’s limits, through this government aims to encourage modernisation, technology adoption, and infrastructure improvements.

• Global Competitiveness:
  With a higher turnover cap (₹500 crore) the latest classifications enable MSMEs to scale production and tap global markets without losing the perks of being an MSME.

• Employment Generation:
  MSMEs are prime engines for job creation, especially in semi-urban and rural areas. Larger brackets permit them to hire more staff, contributing to a more dynamic workforce.

Startups

As the world is moving to become a global economy, we can see a growth of innovation and new entrepreneurship opportunities for India. This has surged a wave of startups in India however this is faced with the reality of limited funds. 

The new Budget has introduced a ray of hope in the entrepreneurship world, with a raging 10,000 crore rupees being allocated for AIF or Alternative Investment Funds. This amount will be used to invest in such innovative startups through the Fund of Funds which is administered by the Small Industries Development Bank of India.

The funding that is being moved to the startups and MSMEs will positively affect the blooming economy of India. Coupled with the slashed income taxation brought this year the people of India are to see opportunities to invest their extra disposable income to gain long term benefits which the nation as a whole will enjoy through higher GDP.

FDI limit in insurance sector removed

FDI stands for Foreign Direct Investment which is how a foreigner can buy assets in India to directly control it. The Budget 2025 is exceeding the limit of FDI in the insurance sector to 100%, which means a greater and more secure opportunity for foreigners to invest in India’s insurance Sector.

Further an additional relaxation is also offered to foreign re-insurers by lowering of net-owned funds by them from INR 50 billion to INR 10 billion.

The government’s long-term aim has been to provide quality insurance to all its citizens, which has been difficult so far but by making this move, we hope to attract more foreign capital in Indian eco-system and enhance competition and increase over-all growth of India’s Insurance sector.

AI And Skill Centers

The government is aiming to create a brand-new Centre of Excellence in Artificial Intelligence (AI) for education. This will aim to improve AI education and research done on it at university level. The Centre will also deliver industry-focused training and certification skills all in step to build India’s very own functional AI model.

This will be one of the most prominent steps India has taken to match step with the global trends in accordance with India’s vision of ‘Make in India, Make for the World.’

Agriculture

According to current surveys India’s agriculture sector provides 18.2% share in the GDP and employment for 42.3% of the total population. However, if we zoom out of the numbers placed on a paper and look directly at the grassroot condition. Most of India’s farmers are smallholder farmers and with lack of machinery, quality seeds, and traditional irrigation methods they rarely survive the cropping season. They are often debt trapped and this has led to a rise in suicide rate among farmers.

Keeping this in mind the Budget 2025 has introduced two major solutions for this problem. Firstly, the Government is planning to give out short -term loan in low interest rates through Kisan Credit Card which will help farmers stir safe from local loan sharks.

Secondly, the government plans to distribute high-yielding seeds, these seeds are weather resistant and produce large amounts of crops, giving the farmers a better output from there small plots.

India produces 80% of the world’s cotton however per Hectare production is low in comparison to other nations such as China, this is because we lack technology that cultivate such high yielding crops. The government thus plans to boost cotton productivity by modernizing farming and making high yielding seeds available to farmers in Bihar.

Lastly with the growth of makhana demand globally, India plans to capture the market by setting up a ‘Makhana Board’ in Bihar which will research and plan ways to grow, store and market makhana effectively.

All in all, we can expect immense growth opportunity for the most prominent sector of India.

Infrastructure

India is also planning to shift their focus on infrastructure building this means better road connectivity, better bridges, and stronger public assets.

The Central Government is providing a 50-year interest-free loan of 1.5 lakh crore rupees to the states for infrastructure building. This will be added to states capital expenditure once approved. The government is also adding fund of 10 lakh crore to AMP, Asset Monetization Plan to reinvest in infrastructure projects.

Government schools are to receive 50,000 ATLs or Atal tinkering Labs to foster STEM learning and upskilling youth to promote technological advancement.

BharatNet is a program that is to be launched in Budget 2025 to launch broadband connectivity to rural hospitals and government schools, this is aim to bridge the gap between urban-rural digital divide to improve e-governance, education and tele-medicine.

A National Framework for Global Capability Centres (GCCs) will be launched to promote Tier-2 cities as global IT and R&D hubs. 

The government has allocated huge amounts for infrastructure for this year in various sectors.

Effect of Budget 2025

The general effect that the population can look forward to is better disposable income at hand that they can use to invest in growing MSMEs, startups and public assets as infrastructure is going to see a boom.

India is aiming to prioritize taxation, power, urban development, mining and the financial sectors, which are great areas to invest in right now. As India opens doors for foreign investment and customs are seeing a pretty concession, we can welcome oversees money to grow India’s receipts.

Critical Analysis

Critiquing the Budget 2025 it is contended that there is an immense focus on Bihar and a lot of investments is directed to it in lieu of the Bihar elections and the other states have been discriminated against.

West Bengal MP, Abhishek Banerjee has claimed the same and that “West Bengal has gotten nothing since BJP has come into power.” This has raised a question if there is a special favor that rests upon Bihar and discredit towards other equally needful states of India.

Secondly, while the government is celebrating a lower fiscal deficit 4.4%, it is not addressed that the government income has taken a hit and therefore there is a cut in the spending. The Budget 2025 fails to address the measures it is going to take to tackle this problem.

In the long run, this method of lowering fiscal deficit is not helpful for the economy, and this is going to pose problems for maintenance of the infrastructures and assets built by the government. Furthermore, if the government fails to increase receipts, then government upkeep will be next compromised.

Conclusion

Overall, the Budget 2025 though is bringing a lot of blessings to the economy and promises is not shielded from scrutiny.

While it is focusing on tackling the grievances of middle-class of India through the new taxation system and ushering in foreign support through investments and custom concessions, there is serious problem that looms behind the curtain of benefits, the government income has severely reduced. The government needs to focus on overall health of the economy in its next revised budget and not just band-aid solutions for long-term growth.

However, there is a due cheer for the citizens of India as the government has shifted their focus to actual grievances of the people and has taken significant steps to improve the quality of life of the common man.  

A good tax lawyer can help you solve your issues related to income tax return and related cases. If you find the new tax regime difficult to understand, you must take professional advice to avoid any confusion.

FAQs

To claim benefit of NIL tax liability, what are the steps required to be taken?

Ans. The benefit of such Nil tax liability is available only in the new tax regime. This New tax regime is the default regime. To avail the benefit of rebate allowable under proposed provisions of new tax regime, only return is to be filed otherwise no other step is required to be taken.

What are the new timelines for filing updated returns?

A revised return can be filed until December 31 of the assessment year.  However, updated returns (for additional income disclosure) can now be filed up to 48 months from the end of the relevant assessment year, instead of the previous 24 months.  

Can a taxpayer file an updated ITR after filing a revised ITR?

Yes, a taxpayer can still file an updated return for any previous year within the 48-month window.  

Is the standard deduction available under both tax regimes?

- New tax regime: Rs 75,000 standard deduction.  

- Old tax regime: Rs 50,000 standard deduction. 

Kisan Credit Cards (KCC) and agricultural reforms  

- The loan limit under KCC has been increased from Rs 3 lakh to Rs 5 lakh under the Modified Interest Subvention Scheme.  

- This benefits 7.7 crore farmers, fishermen, and dairy farmers by improving access to short-term credit.