STATE TIMES NEWS
NEW DELHI: Finance Minister Nirmala Sitharaman on Saturday announced significant income tax cuts for the middle class and unveiled a blueprint for next generation reforms for Viksit Bharat as she treaded a fine line between fiscal prudence and providing a thrust to growth.
Individuals earning up to Rs 12 lakh in a year will not have to pay any taxes after she raised the exemption threshold from Rs 7 lakh. An additional Rs 75,000 standard deduction is available for the salaried class.
Presenting her eighth straight budget, she also altered tax slabs for people earning above this threshold to help save up to Rs 1.1 lakh in taxes for those with income up to Rs 25 lakh in a year.
The raising of the rebate leads to 1 crore people not having to pay any tax, she said.
The overall tax slab regig will benefit 6.3 crore people, or more than 80 per cent of taxpayers.
“The new structure will substantially reduce taxes on the middle class and leave more money in their hands, boosting household consumption, savings and investment,” Sitharaman said presenting what was dubbed as ‘reformist’ budget for the next fiscal in Lok Sabha.
The Budget for April 2025 to March 2026 fiscal (FY26) proposed to raise foreign investment limit in insurance sector to 100 per cent from current 74 per cent and continued spending spree on infrastructure while raising allocations for social sectors as well as providing for measures for poor, youth, farmers and women.
All this she did while managing to stick to the fiscal consolidation roadmap, projecting a fiscal deficit of 4.4 per cent of the GDP in FY26 as against an estimated 4.8 per cent in the current year ending March 31.
Sitharaman’s budget has proposals aimed at boosting both consumption and investment, which in turn are expected to give a flip to domestic economic activity, protecting the growth outlook amidst global uncertainties. While maintaining the thrust on infrastructure development, it also continued to provide increasing support to the MSME and the agricultural sector.
Also announced were duty cuts on intermediaries and certain life saving drugs.
To balance the revenue lost, she budgeted a modest increase in capital spending at Rs 11.21 lakh crore in the next financial year compared to a lowered Rs 10.18 lakh crore in current fiscal. Besides, an increase in dividend expected from the Reserve Bank and other government-owned financial institutions will also help to contain the losses.
The budget comes against the backdrop of the Indian economy growing at its weakest pace since pandemic and rising geopolitical risks particularly with the new US President Donald Trump threatening to impose widespread tariffs including on India.
The 6.4 per cent GDP growth estimated for the current fiscal and 6.3 to 6.8 per cent in the next are well below the 8 per cent growth needed to meet the ambitious goal of making India a developed nation by 2047.
“Our endeavour will be to keep the fiscal deficit each year such that the central government debt remains on a declining path as a percentage of the GDP,” she said, projecting debt at 50 per cent of GDP by March 2031.
Other measures include a national mission to push high-yielding crops with a special focus on pulses and cotton production, hike in the limit of subsidised credit to farmers to Rs 5 lakh from Rs 3 lakh, missions to push manufacturing and exports, a new policy for labour intensive sectors like leather and footwear and a scheme to make India a global hub for toy manufacturing.
The finance minister also announced a social security cover for nearly 1 crore gig workers and a Rs 10,000 crore fund of funds for startups.
Another major announcement was setting a target of at least 100 gigawatt of electricity from nuclear energy by 2047 and amendment to nuclear liability regulations to allow private sector investment.
Sitharaman also announced reduction in duties on a raft of goods including open cells, while fully exempting critical minerals such as cobalt, scraps of lithium-ion battery, lead, zinc and a few others from import duty.
She proposed a hike in the threshold of tax collected at source on remittances under the RBI’s Liberalised Remittance Scheme from Rs 7 lakh to Rs 10 lakh, benefiting the travel and foreign exchange sectors. Students and individuals seeking medical treatment will also benefit from this.
Rationalising TDS provisions, the finance minister increased the thresholds for non deduction across various TDS provisions broadly ranging from Rs 5,000 to Rs 50,000. The threshold for TDS on rent has been increased from Rs 2.40 lakh to Rs 6 lakh.
That apart, omissions of higher TDS/TCS rates are now applicable for non-filers.
She said the government aims to initiate “transformative reforms” across six domains, including taxation and financial sector, in Union Budget 2025. She said the government’s development track record of the past 10 years and structural reforms have drawn global attention.
A Viksit Bharat will have zero poverty, quality education, high-quality, affordable and comprehensive healthcare, she said and added that the Budget’s focus is to take everyone together on inclusive growth path.
“… this Budget aims to initiate transformative reforms across six domains during the first five years. These will augment our growth potential and global competitiveness. The domains are taxation, power sector, urban development, mining, financial sector and regulatory reforms… agriculture as the first engine,” Sitharaman said.
Asserting that the Budget’s focus is to take everyone together on inclusive growth path, she said the proposed development measures span 10 broad areas, focusing on ‘garib’ youth, ‘anna daata’ and ‘nari’, spurring agricultural growth and productivity, building rural prosperity and resilience.
SUMMARY OF UNION BUDGET 2025-26
- No income tax on average monthly income of upto Rs 1 lakh; to boost middle class household savings & consumption
- Salaried class to pay nil income tax upto Rs 12.75 lakh per annum in new tax regime
- Union Budget recognises 4 engines of development – agriculture, MSME, investment and exports
- Benefitting 1.7 crore farmers, ‘prime minister Dhan-Dhaanya Krishi Yojana’ to cover 100 low agricultural productivity districts
- Mission for Aatmanirbharta in pulses” with a special focus on Tur, Urad and Masoor to be launched
- Loans upto Rs. 5 lakhs through KCC under modified interest subvention scheme
- FY-25 estimated to end with fiscal deficit of 4.8%, target to bring it down to 4.4% in fy-26
- Significant enhancement of credit with guarantee cover to MSMES from Rs 5 cr to Rs 10 cr
- A national manufacturing mission covering small, medium and large industries for furthering “make in India”
- 50,000 Atal tinkering labs in government schools in next 5 years
- Centre of excellence in artificial intelligence for education, with a total outlay of Rs 500 crore
- PM Svanidhi with enhanced loans from banks, and upi linked credit cards with Rs 30,000 limit
- Gig workers to get identity cards, registration on e-shram portal & healthcare under PM Jan Arogya Yojana
- Rs 1 lakh crore urban challenge fund for ‘cities as growth hubs’
- Nuclear energy mission for R&D of small modular reactors with an outlay of Rs 20,000 crore
- Modified Udan scheme to enhance regional connectivity to 120 new destinations
- Rs 15,000 crore Swamih fund to be established for expeditious completion of another 1 lakh stressed housing units
- Rs 20,000 crore allocated for private sector driven research development and innovation initiatives
- Gyan Bharatam Mission for survey and conservation of manuscripts to cover more than one crore manuscripts
- FDI limit enhanced for insurance from 74 to 100 per cent
- Jan Vishwas Bill 2.0 to be introduced for decriminalising more than 100 provisions in various laws
- Updated income tax returns time limit increased from two to four years
- delay in TCS payment decriminalised
- TDS on rent increased from Rs 2.4 lakh to 6 lakh
- BCD exempted on 36 lifesaving drugs and medicines for treating cancer, rare and chronic diseases
- BCD on IFPD increased to 20% and on open cells reduced to 5%
- BCD on parts of open cells exempted to promote domestic manufacturing
- To boost battery production, additional capital goods for EV and mobile battery manufacturing exempted
- BCD exempted for 10 years on raw materials & components used for ship building
- BCD reduced from 30% to 5% on frozen fish paste and 15% to 5% on fish hydrolysate