The Union Budget 2025 has introduced several significant policy and regulatory changes that may impact businesses across various sectors. We highlight key elements of the budget which has implications on the businesses and the economy.
DIRECT TAXES
- INCOME TAX
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- New Income Tax bill to be introduced by the Government. The new Income-Tax Bill to be clear and direct in text so as to make it simple to understand for taxpayers and tax administration, leading to tax certainty and reduced litigation.
- There will be no income tax payable up to the income of ₹ 12 lakhs (i.e., average income of ₹ 1 lakh per month other than special rate income such as capital gains) under the new regime. This limit will be ₹ 12.75 lakhs for salaried taxpayers, due to a standard deduction of ₹ 75,000.
- Revised tax rate structure is as follows:
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Total Income Rate of tax Upto ₹ 4,00,000 Nil From ₹ 4,00,001 to 8,00,000 5 per cent From ₹ 8,00,001 to 12,00,000 10 per cent From ₹ 12,00,001 to 16,00,000 15 per cent From ₹ 16,00,001 to 20,00,000 20 per cent From ₹ 20,00,001 to 24,00,000 25 per cent Above ₹ 24,00,000 30 per cent
- EASE OF DOING BUSINESS
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- Introduction of a scheme for determining arm's length price of international transaction for a block period of three (3) years. This is expected to benefit Global Capability Centres (GCCs) and MNC service providers.
- Expansion of scope of safe harbour rules to reduce litigation and provide certainty in international taxation.
- EMPLOYMENT AND INVESTMENT
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- Tax certainty for electronics manufacturing schemes by prescribing presumptive taxation regime for non-residents who provide services to a resident company that is establishing or operating an electronics manufacturing facility and introduction of a safe harbour for tax certainty for non-residents who store components for supply to specified electronics manufacturing units.
- Tax benefits under Start-Up India programme extended by 5 years to April 1, 2030, hence any start-up incorporated before said date eligible for benefits.
- Category I and Category II AIFs, undertaking investments in infrastructure and other such sectors will get certainty of taxation on gains from securities.
- The government has extended the special tax exemption for global Sovereign Wealth Funds (SWFs) and Pension Funds investing in India's infrastructure sector for five more years, until March 31, 2030. The scheme, launched in 2020 and initially set to expire in 2025, provides exemptions on dividends, interest income, and long-term capital gains from such investments.
- RATIONALIZATION OF TDS/TCS FOR EASING DIFFICULTIES
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- Reduction in number of rates and thresholds for TDS.
- Tax deduction limit for senior citizens doubled from ₹ 50,000 to ₹ 1 lakh.
- The annual limit of ₹ 2.40 lakhs for TDS on rent increased to ₹ 6 lakhs.
- The threshold to collect tax at source (TCS) on remittances under RBI's Liberalized Remittance Scheme (LRS) is proposed to be increased from ₹ 7 lakhs to ₹ 10 lakhs.
- TCS on any transaction relating to sale of goods is omitted.
- The provisions of the higher TDS deduction will now apply on any transaction relating to sale of goods only in non-PAN cases.
- The delay for payment of TCS up to the due date of filing such statements is decriminalized.
- REDUCING COMPLIANCE BURDEN
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- Reduced compliance for small charitable trusts/institutions by increasing their period of registration from 5 years to 10 years.
- Taxpayers to be allowed to claim the annual value of 2 self-occupied properties (previously 1) without any conditions.
INDIRECT TAXES
- RATIONALISATION OF CUSTOMS TARRIF STRUCTURE
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- Removal of 7 tariff rates.
- Apply not more than one cess or surcharge, so 82 tariff lines have been exempted from Social Welfare Surcharge.
- Apply equivalent cess to maintain effective duty incidence on most items and lower cess on certain items.
- TRADE FACILITATION
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- Time limit for Provisional Assessment for finalising the provisional assessment, time-limit of two years fixed, extendable by a year.
- A new provision introduced to enable importers or exporters, after clearance of goods, to voluntarily declare material facts and pay duty with interest but without penalty.
- Time limit for the end-use of imported inputs in the relevant rules extended from six months to one year. Such importers to file only quarterly statements instead of a monthly statement.
SECTOR SPECIFIC ANNOUNCEMENTS
- AGRICULTURE
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- Under the Prime Minister Krishi Yojana, the government will launch an agricultural district programme in partnership with states. This will target 100 districts with low productivity, moderate crop intensity, and below-average credit parameters.
- 5-year mission to facilitate improvements in productivity and sustainability of cotton farming.
- Implementing the National Mission for Edible Oilseed.
- Government will launch a 6-year mission aimed at achieving self-reliance in pulses, with a special focus on tur and masoor.
- Kisan Credit Cards (KCC) will continue to facilitate short-term loans for 7.7 crore farmers, fishermen, and dairy farmers. Additionally, the loan limit under the modified interest subvention scheme will be increased from ₹ 3,000 to ₹ 5,000 for loans taken through the KCC, providing greater financial support for agricultural production.
- Makhana Board in Bihar to be set to enhance the production, processing, value addition, and marketing of Makhana, and organization of Farmer Producer Organizations (FPOs).
- National Mission on High Yielding Seeds will be launched, aimed at strengthening the research ecosystem, targeted development and propagation of seeds with high yield, pest resistance and climate resilience, and commercial availability of more than 100 seed varieties.
- Government had reopened three dormant urea plants in the Eastern region. To further augment urea supply, a plant with annual capacity of 12.7 lakh metric tons will be set up at Namrup, Assam.
- India Post with 1.5 lakh rural post offices, complemented by the India Post Payment Bank and a vast network of 2.4 lakh Dak Sevaks, will be repositioned to act as a catalyst for the rural economy.
- MSME
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- For MSME classification investment and turnover limits have been enhanced to 2.5 and 2 times respectively. New limits are:
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₹ in Crores Investment Turnover Current Revised Current Revised Micro Enterprises 1 2.5 5 10 Small Enterprises 10 25 50 100 Medium Enterprises 50 125 250 500 - To improve access to credit, the credit guarantee cover will be enhanced:
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₹ in Crore Credit guarantee cover Current Revised Micro and Small Enterprises 5 10 Startups 10 20 Exporter MSMEs For Term Loans Up To ₹ 20 Crores - Introduction of customized Credit Cards with a 5 lakh limit for micro enterprises registered on Udyam portal. In the first year, 10 lakh such cards will be issued.
- For 5 lakh first-time entrepreneurs, including women, Scheduled Castes and Scheduled Tribes, a new scheme, to be launched, to provide term loans up to ₹ 2 crore during the next 5 years.
- New Fund of Funds, with expanded scope and a fresh contribution of another 10,000 crore will be set up.
- New Focus Product Scheme for Footwear & Leather Sectors.
- Establishment of a National Institute of Food Technology in Bihar.
INVESTMENTS
A. HUMAN RESOURCES
- The Saksham Anganwadi and Poshan 2.0 programme: to provides nutritional support to children, pregnant women and lactating mothers, and adolescent girls in aspirational districts and the north-east region.
- Expansion of Capacity in IITs.
- Fifty thousand Atal Tinkering Labs will be set up in Government schools.
- Broadband connectivity to be provided to all government secondary schools and primary health centres in rural areas.
- Day Care Cancer Centres in all District Hospitals.
- Bhartiya Bhasha Pustak Scheme: to provide digital form Indian language books for school and higher education.
- 5 National Centres of Excellence for skilling to be set up with global expertise and partnerships.
- Centre of Excellence in Artificial Intelligence for education with a total outlay of ₹ 500 crores.
- 10,000 additional seats with the goal of adding 75,000 seats in the next 5 years.
- PM SVANidhi: To be revamped with enhanced loans from banks, UPI linked credit cards and capacity building support.
- Social security scheme for gig workers.
B. INFRASTRUCTURE
- Support to States for Infrastructure: With an outlay of ₹ 1.5 lakh crores, 50-year interest free loans to states for capital expenditure and incentives for reforms.
- Jal Jeevan Mission: To achieve 100 % coverage, the mission extended till 2028 with an enhanced total outlay.
- Power Sector Reforms: Incentivize distribution reforms and augmentation of intra-state transmission. Additional borrowing of 0.5 % of Gross State Domestic Product (GSDP) to states, contingent on these reforms.
- Asset Monetization Plan 2025-30: launched to plough back capital of ₹ 10 lakh crores in new projects.
- Urban Challenge Fund ₹ 1 lakh crores to implement the proposals for 'Cities as Growth Hubs', 'Creative Redevelopment of Cities' and 'Water & Sanitation'.
- Maritime Development Fund with a corpus of ₹ 25,000 crores for long-term financing with up to 49% contribution by the government.
- Nuclear Energy Mission for Viksit Bharat: Amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act will be taken up for active partnership with the private sector.
- UDAN: Regional connectivity to 120 new destinations and carry 4 crore passengers in the next 10 years.
- Future needs of Bihar: Greenfield airports, Financial support for the Western Koshi Canal ERM Projects.
- SWAMIH Fund-2 ₹ 15,000 crore for expeditious completion of one lakh dwelling units through blended finance.
- Tourism for employment-led growth: Top 50 tourist destination sites to be developed in partnership with states
- Introducing streamlined e-visa facilities
- Intensive skill-development programmes for our youth
- Performance-linked incentives to states
- MUDRA loans for homestays
- Ease of travel and connectivity to tourist destinations
C. INNOVATION
- PM Research Fellowship To provide ten thousand fellowships for technological research in IITs and IISc.
- A Deep Tech Fund of Funds will also be explored to catalyse the next generation startups as a part of this initiative. Gene Bank for Crops Germplasm The 2nd Gene Bank with 10 lakh germplasm lines to be set up for future food and nutritional security.
- Gyan Bharatam Mission Documentation and conservation of our manuscript heritage to cover more than 1 crore manuscripts. National Digital Repository of Indian knowledge systems for knowledge sharing to be set up.
- Research, Development & Innovation allocating ₹ 20,000 crores to implement private sector driven Research, Development and Innovation initiative.
- National Geospatial Mission To develop foundational geospatial infrastructure and data. Using PM Gati Shakti, facilitation of modernization of land records, urban planning, and design of infrastructure projects.
D. EXPORTS
- Sectoral and ministerial targets to facilitate easy access to export credit, cross-border factoring support, and support to MSMEs to tackle non-tariff measures in overseas markets.
- A digital platform, 'Bharat Trade Net' (BTN) for international trade will be set-up as a unified platform for trade documentation and financing solutions.
- A national framework as guidance to states for promoting Global Capability Centres (GCCs) in tier 2 cities.
- To facilitate upgradation of infrastructure and warehousing for air cargo including high value perishable horticulture produce.
FINANCIAL SECTOR REFORMS AND DEVELOPMENT
- Grameen Credit Score' framework to serve the credit needs of SHG members and people in rural areas.
- NaBFID to set up a 'Partial Credit Enhancement Facility' for corporate bonds for infrastructure.
- Revamped Central KYC registry to be rolled out in 2025.
- Rationalisation of requirements and procedures for speedy approval of company mergers.
- FDI limit for the insurance sector will be raised from 74 to 100 per cent.
REGULATORY REFORMS
- High Level Committee for Regulatory Reforms will be set up for a review of all non-financial sector regulations, certifications, licenses, and permissions.
- Investment Friendliness Index of States will be launched in 2025.
- Financial Stability and Development Council (FSDC) mechanism to evaluate impact of the current financial regulations.
- Jan Vishwas Bill 2.0 to decriminalize more than 100 provisions in various laws.
FISCAL POLICY
- Government's 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. The roadmap for the next 6 years has been detailed in the FRBM statement.
- The Revised Estimate of the fiscal deficit is 4.8% of GDP.
- In F.Y. 2025-26, the total receipts other than borrowings and the total expenditure are estimated at ₹ 34.96 lakh crore and ₹ 50.65 lakh crore respectively. The net tax receipts are estimated at ₹ 28.37 lakh crore.
- The fiscal deficit is estimated to be 4.4% of GDP.
- Capex Expenditure of ₹11.21 lakh crore (3.1% of GDP) earmarked in F.Y. 2025-26.
Originally published Feb 12
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