India Union Budget 2025-26: Key Announcements and Impact

The Union Budget for 2025-26 was presented by Finance Minister Nirmala Sitharaman today, outlining the government's financial plan and economic roadmap for the coming fiscal year. This budget is particularly significant as it aims to balance fiscal discipline with economic growth while addressing key concerns of taxpayers, businesses, and various sectors of the economy.

Tax Reforms and Relief Measures

Personal Income Tax Adjustments

One of the most awaited announcements was in the domain of personal income tax. The tax exemption threshold has been raised from ₹8 lakh to ₹12 lakh, a move expected to provide relief to the middle class and boost household savings and consumption. This measure aligns with the government’s objective of increasing disposable income and stimulating economic activity.

Additionally, the government has maintained the simplified tax regime introduced earlier, while ensuring that taxpayers benefit from streamlined compliance procedures. The reduction in tax burden is expected to increase spending power, thereby driving demand in key consumer-driven industries.

Changes in TDS and TCS Regulations

The Finance Minister also announced key modifications in Tax Deducted at Source (TDS) and Tax Collected at Source (TCS):

• The TDS exemption limit for senior citizens on interest income has been doubled from ₹50,000 to ₹1 lakh. This step is designed to benefit retirees who rely on interest earnings for their sustenance.

• The annual TDS limit on rental income has been increased from ₹2.4 lakh to ₹6 lakh, easing compliance burdens for landlords and property owners.

• Tax rebates for home loan interest payments have been extended, encouraging homeownership among the middle class and first-time buyers.

Sector-Specific Allocations and Support

Agriculture and Rural Development

Boost to Pulses and Cotton Production

To address India’s dependence on imports and ensure food security, a six-year program has been introduced to promote the domestic production of pulses and cotton. Under this initiative, state agencies will procure pulses at guaranteed prices, providing much-needed support to farmers and enhancing agricultural sustainability.

National High-Yield Crop Program

In response to concerns about erratic weather patterns and decreasing arable land, the government has launched a national mission to develop high-yielding seed varieties. This program aims to improve agricultural productivity and sustainability, ensuring food security for the growing population.

Healthcare Sector Investments

The government has announced a significant boost in healthcare expenditure, with increased funding for public hospitals, rural health initiatives, and new AI-based diagnostic tools. The following measures were introduced:

• Expansion of Ayushman Bharat to cover more low-income families.

• Increased investment in vaccine research and medical infrastructure.

• Strengthening of digital health records and telemedicine services to improve access in rural areas.

Education and Skill Development

To address India’s growing need for a skilled workforce, the budget has earmarked additional funds for:

• Expansion of vocational training programs under Skill India.

• Development of digital learning initiatives for students in remote areas.

• Scholarships for STEM education to encourage innovation and research.

Economic Growth and Fiscal Management

Fiscal Deficit Reduction Target

The government has set an ambitious fiscal deficit target of 4.4% of GDP for FY2025-26, a reduction from the revised estimate of 4.8% for the current fiscal year. This move reflects the administration’s commitment to fiscal consolidation while maintaining adequate public expenditure for economic growth.

Capital Expenditure Allocation

Capital expenditure continues to be a priority, with an allocation of ₹11.21 lakh crore for infrastructure development in FY2025-26, a marginal increase from the previous year’s ₹11.11 lakh crore. This investment is expected to drive growth in sectors such as transport, energy, and digital infrastructure.

Infrastructure Development

The government has announced massive infrastructure projects aimed at modernizing transportation and connectivity. Some key initiatives include:

• Expansion of highways and expressways under the Bharatmala project.

• Strengthening of railway corridors to boost freight and passenger movement.

• Increased focus on urban metro networks and smart city projects.

• Investments in renewable energy grids to support sustainable urbanization.

Support for Key Sectors

Clean Technology Manufacturing

To strengthen India’s position in clean energy and sustainable industries, the government has announced support measures for clean technology manufacturing. Key sectors benefiting from this initiative include:

• Solar PV cells

• Electric vehicle (EV) batteries

• Wind turbine components

The policy aims to enhance domestic value addition, create employment opportunities, and reduce reliance on imports.

Support for Gig Economy Workers

Recognizing the growing workforce in the gig economy, the government has introduced measures to formalize employment in this sector. The new initiatives will provide gig workers with access to healthcare benefits, insurance coverage, and welfare programs, ensuring better financial security for millions of workers in app-based and freelance employment roles.

Startups and Digital Economy

To further India’s leadership in the global digital economy, the budget provides significant support for:

• Easier financing options for startups, including tax exemptions for new enterprises.

• Expansion of 5G and AI research initiatives.

• Strengthening cybersecurity measures to protect digital assets.

• Special incentives for fintech innovations to promote cashless transactions.

Public and Expert Reactions

The budget has received mixed reactions from various stakeholders:

• Industry Leaders: Many business groups have welcomed the budget’s focus on infrastructure and tax relief, considering it a step towards economic stability and growth.

• Economists: Some analysts have praised the government’s fiscal discipline, while others believe more aggressive stimulus measures were needed for MSMEs.

• Farmers’ Associations: While supportive of procurement policies, some groups have raised concerns over climate change-related challenges that may still impact agriculture.

Challenges and Future Outlook

While the budget outlines an optimistic vision for India’s future, certain challenges remain:

• Inflation Control: The government must balance spending with inflationary pressures to avoid economic overheating.

• Job Creation: While capital expenditure and digital investments are promising, job growth in traditional manufacturing sectors needs attention.

• Execution Efficiency: Many ambitious programs depend on timely implementation and bureaucratic efficiency to ensure real impact.

Conclusion

The Union Budget 2025-26 reflects a strategic approach to balancing economic growth with fiscal prudence. With substantial tax relief, strong capital expenditure, and targeted support for agriculture, clean energy, and the gig economy, the budget is poised to drive India’s development while addressing key economic challenges.

As the nation moves forward, these measures are expected to have a lasting impact on the financial well-being of individuals and businesses alike. Whether the ambitious targets set by the government are met will depend on policy execution and global economic trends. However, the framework provided in this budget presents a hopeful outlook for India’s future.