Union Budget 2025: Key Highlights & Insights into New Income Tax Limit, Economic Growth, and Reforms

CA Tarun Garg | Updated on: Feb 1st, 2025 | 3 min read

Introduction

Finance Minister Nirmala Sitharaman’s presentation of the Union Budget 2025 in Parliament has sparked widespread discussion and analysis. This year’s budget is a comprehensive roadmap aimed at boosting India’s economic growth, empowering citizens, and fostering innovation across key sectors. With a strong focus on tax reforms, MSME support, agricultural advancements, technological innovation, and infrastructure development, the budget sets the stage for a sustainable and inclusive economic future. In this article, we’ll dive deep into the key highlights of the Union Budget 2025, with a special focus on the new income tax limit, economic growth strategies, and sector-specific reforms.

1. Tax Reforms & Reliefs for the Middle Class

One of the most talked-about aspects of the Union Budget 2025 is the new income tax limit, which aims to provide significant relief to the middle class. The revised tax structure is designed to simplify taxation, promote savings, and boost disposable income for individuals.

New Income Tax Slabs for 2025

The government has introduced a revised income tax structure to ease the burden on taxpayers. Here’s a breakdown of the new tax slabs:

₹0 – ₹4 lakh: No tax
₹4 – ₹8 lakh: 5% tax
₹8 – ₹12 lakh: 10% tax
₹12 – ₹16 lakh: 15% tax
₹16 – ₹20 lakh: 20% tax
₹20 – ₹24 lakh: 25% tax

Under the new income tax limit, individuals earning up to ₹12 lakh annually will not be taxed, providing substantial relief to middle-class families. This move is expected to increase disposable income, encourage savings, and stimulate consumption.

Tax Benefits for Senior Citizens

The budget also introduces enhanced tax benefits for senior citizens, who often face financial challenges during retirement. The tax deduction limit for senior citizens has been increased from ₹50,000 to ₹1 lakh, offering greater financial security and encouraging savings.

No Tax on Two Self-Occupied Properties

Another significant reform is the exemption of tax on two self-occupied properties. Previously, taxpayers could claim NIL annual value on only one self-occupied property. The new provision allows individuals to claim this benefit on two properties, providing relief to those with multiple residences. These tax reforms are expected to empower the middle class, promote financial well-being, and drive economic growth.

2. Economic Growth & MSME Support

Micro, Small, and Medium Enterprises (MSMEs) are the backbone of India’s economy, contributing 45% of the country’s exports. The Union Budget 2025 introduces several measures to support MSMEs, ensuring their growth and competitiveness in a globalized economy.

Increased Support for MSMEs

The budget outlines plans to streamline processes, increase access to finance, and improve market access for MSMEs. Key initiatives include:

Enhancement of MSME Classification Limit: More enterprises will now qualify for government benefits.
Investment-Friendly Index: A new index will be launched to help MSMEs attract investment by providing a transparent framework for assessing growth potential.

Support for Street Vendors

Street vendors, who form a crucial part of India’s informal economy, will receive UPI-linked cards with a ₹20,000 limit. This initiative aims to facilitate easier transactions and promote financial inclusion.

Gig Workers Welfare

Recognizing the growing contribution of gig workers to the economy, the government has announced plans to provide healthcare benefits and identity registration for 1 crore gig workers under the e-Shram portal. This move ensures better social security and financial protection for gig workers.

3. Farmers & Agriculture Sector Reforms

The agriculture sector, which employs a significant portion of India’s population, has received considerable attention in the Union Budget 2025. Several reforms have been introduced to enhance productivity, support farmers, and improve rural livelihoods.

PM Dhan Dhanya Krishi Yojana

A new initiative under the PM Dhan Dhanya Krishi Yojana will focus on improving agricultural productivity in 100 low-yield districts across India. This program aims to benefit 1.7 crore farmers and reduce regional disparities in agricultural growth.

Atmanirbharta in Pulses

The budget proposes a 6-year program to enhance the production of pulses such as tur, urad, and masoor dal. The Atmanirbharta in Pulses initiative aims to make India self-sufficient in pulses and reduce dependence on imports.

Increased Kisan Credit Card (KCC) Limit

Farmers relying on the Kisan Credit Card (KCC) scheme will benefit from an increased credit limit. The interest subvention scheme limit has been raised from ₹3 lakh to ₹5 lakh, providing farmers with easier access to credit and enabling them to invest in agricultural improvements.

Cotton Productivity Mission

A 5-year Cotton Productivity Mission will be launched to enhance the production of Extra Long Staple Cotton varieties. This initiative will benefit the textile sector and help India become a global leader in cotton production.

4. Technology, AI & Infrastructure Investments

The Union Budget 2025 emphasizes technological advancements and infrastructure development to drive economic growth and position India as a global leader in innovation.

AI Centers of Excellence

The budget allocates ₹500 crore for the establishment of 3 AI Centers of Excellence. These centers will promote research and innovation in artificial intelligence, fostering collaboration between government, industry, and academia.

EV Battery Manufacturing & Custom Duty Exemptions

To support the growth of the electric vehicle (EV) sector, the government has provided Custom Duty exemptions on key materials used in EV battery manufacturing, including cobalt, lithium, lead, and zinc. Additionally, exemptions have been introduced for 35 EV battery components and 28 mobile battery components, promoting the green energy transition.

Expansion of Education Infrastructure

The budget emphasizes the importance of skilling and education, with plans to establish 5 National Centers of Excellence for skill development. Additionally, the government aims to set up 50,000 Atal Tinkering Labs in government schools, empowering students to innovate and develop new technologies.

5. Healthcare & Essential Medicines

The Union Budget 2025 places a strong focus on healthcare and improving access to essential medicines for all citizens.

Tax Exemptions for Life-Saving Drugs

To make healthcare more affordable, the government has announced that 36 essential medicines will be fully exempt from Basic Customs Duty (BCD). Furthermore, 37 additional medicines and 13 patient assistance programs will be exempt from customs duties when supplied free of cost, ensuring that life-saving drugs reach those in need.

6. Infrastructure & Urban Development

The budget outlines an ambitious plan for infrastructure development, with several initiatives aimed at boosting tourism, improving connectivity, and developing urban areas.

Tourism Development

Fifty top tourist sites will be developed in partnership with states to boost India’s tourism industry. These initiatives aim to attract both domestic and international tourists, create jobs, and enhance the country’s global image.

Broadband Connectivity Expansion

The government has committed to expanding broadband connectivity in rural and remote areas. All government secondary schools and primary healthcare centers will receive broadband connectivity, ensuring that citizens across India have access to digital services.

7. Financial & Regulatory Reforms

The Union Budget 2025 introduces several financial and regulatory reforms to improve ease of doing business and promote investment.

New Income Tax Bill

A simplified income tax bill has been proposed to reduce litigation and provide greater clarity for taxpayers. This bill aims to streamline the tax filing process and create a more business-friendly tax environment.

FDI Reforms

The government has raised the Foreign Direct Investment (FDI) limit in the insurance sector from 74% to 100%, opening up new opportunities for foreign investors. Additionally, a forum will be established to facilitate the development of pension products in India.

Jan Vishwas Bill 2.0

The Jan Vishwas Bill 2.0 will decriminalize over 100 provisions to make it easier to do business in India. This initiative is designed to foster a more investor-friendly environment and reduce the burden of unnecessary regulations on businesses.

8. Fiscal Deficit & Borrowing Estimates

The fiscal deficit target for FY26 has been set at 4.8%, signaling the government’s commitment to fiscal discipline. Gross borrowing for the year is expected to be ₹14.82 lakh crore, with net borrowing at ₹11.54 lakh crore.

Conclusion: A Pro-Growth Union Budget for 2025

The Union Budget 2025 is a bold and progressive step towards promoting India’s economic growth and development. Through tax reliefs, MSME support, agricultural advancements, technological innovations, and infrastructure development, the government aims to empower citizens and industries alike. The focus on financial reforms, ease of doing business, and fiscal prudence positions India for sustainable economic growth in the years to come. Stay updated on the latest developments and expert insights into India’s economic policies and reforms!