Every Indian waits for this day of the year. Union Budget for the financial year 2025-26 was presented in the parliament by Finance Minister Nirmala Sitharaman on February 01. The budget continues to focus on the government’s efforts to accelerate growth, secure inclusive development, invigorate private sector investments, uplift household sentiments, and enhance the spending power of India’s rising middle class, the hospitality and tourism sector is looking forward to policy measures that could unlock growth opportunities, addressing long-standing challenges, Industry leaders call for critical reforms, including infrastructure status for smaller hotel and convention projects, tax rationalization, and streamlined compliance frameworks.
Key Highlights and Takeaways from the Budget Day
Income Tax
The new Income Tax Bill was announced this week. No Income Tax payable up to ₹12 Lakh under the new regime. Tax slabs will be changed across the board. A salaried class with a salary over ₹24 lahks will pay 30 per cent tax. The tax return filing limit will also be increased to 4 years from 2 years. The Finance Minister also highlighted the government’s decade-long efforts in implementing tax reforms aiming to improve taxpayer convenience. Key initiatives include faceless assessments, a taxpayer charter, and quicker return processing, with nearly 99 per cent of returns now based on self-assessment emphasizing the tax department’s approach of “trust first, scrutinize later,” she reaffirmed the commitment to simplifying compliance.
- The tax threshold on interest for senior citizens increased to ₹1 lakh
- TDS on rent increased to ₹6 lakh from ₹2.4 lakh
- Remove TCS (Tax Collected at Source) on remittances for education purposes if the remittance is funded through a loan taken from a specified financial institution.
- Provision of higher TDS (Tax deducted on source) only in non-PAN cases
- Additionally, the threshold for TCS on remittances under the RBI’s Liberalized Remittance Scheme (LRS) has been increased from ₹7 lakh to ₹10 lakh.
Cess and Tariffs
The government simplified and streamlined the customs tariff structure addressing the duty inversion and promoting domestic manufacturing, value addition, and exports. This rationalization is part of a comprehensive review of the customs rate structure announced in the July 2024 Budget. In addition to the seven tariff rates removed in the 2023-24 Budget, seven more rates were eliminated, leaving only eight remaining, including a zero rate. While duty incidents will largely be maintained, a few items have marginal reductions. The government also proposes to levy no more than one cess or surcharge and exempt the social welfare surcharge on 82 tariff lines.
Financial Reforms
- FDI in insurance for firms which invest the entire premium in India rises from 74 per cent to 100 per cent.
- The Finance Minister announced the rollout of a revamped central KYC registry, emphasizing the need for regulations evolving in line with technological innovations and the global regulatory landscape.
- The government ensured faster approvals for company mergers and expanded the scope of related regulations also demonstrated a strong commitment to improve the ease of doing business, the government plans to develop a modern, people-friendly, and trust-based regulatory framework.
- Sitharaman introduced an Investment Friendliness Index for states to encourage competitive cooperative federalism. Additionally, under the Financial Stability and Development Council (FSDC), a mechanism will be set up to evaluate the impact of current financial regulations and subsidiary instructions, to boost the responsiveness and growth of the financial sector.
Infrastructure
The Finance Minister unveiled the creation of a ₹1 lakh crore Urban Challenge Fund to transform cities into growth hubs, support innovative redevelopment, and improve water and sanitation infrastructure, as highlighted in the July Budget. The fund will cover up to 25 per cent of the cost for bankable projects, and stipulates at least 50 per cent of the funding comes from bonds, bank loans, or public-private partnerships (PPPs). Each infrastructure ministry will present a three-year list of Public-Private Partnership (PPP) projects which focuses on three PPP proposals per ministry. An initial ₹10,000 crore has been proposed for the fiscal year 2025-26 to launch the initiative.
Capex: Additionally, the government will provide ₹1.5 lakh crore in interest-free loans for capital expenditure and offer incentives to encourage reforms.
Affordable Housing: Another 40,000 units to be completed in FY26, announces Finance Minister. SWAMI Fund 2 will be established of ₹15,000 crore
Nuclear Energy
The Finance Minister introduced a Nuclear Energy Mission to accelerate India’s shift towards clean energy, aiming to develop at least 100 GW of nuclear power by 2047 by encouraging private sector involvement, amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act. Furthermore, a dedicated ₹20,000 crore research and development initiative for Small Modular Reactors (SMRs) was launched, to have at least five indigenously developed SMRs operational by 2033.
MSMEs
The Finance Minister highlighted that MSMEs are the second engine of growth in India accounting for 45 per cent of the country’s exports. To further support their development, the Finance Minister has introduced customized credit cards for MSMEs, a fund of funds for startups, and an expanded fund-of-funds (f-o-f) with a wider scope, all designed to improve capital access. Additionally, the government will enhance the investment and turnover limits for MSMEs, increasing them by 2.5 times and 2 times, respectively, to boost their growth and operational efficiency.
Agriculture
The Finance Minister covered agriculture as a key priority in Budget 2025 and unveiled a new initiative under Prime Minister Krishi Yojana. The Jan Dhanya Krishi Yojana initiative will focus on 100 districts with low productivity, moderate crop intensity, and below-average credit access. Its aims include crop diversification, augmenting storage, improving irrigation, and facilitating long and short-term credit for farmers. An estimated 1.7 crore farmers are expected to benefit from these measures.
The Finance Minister also announced that the government will launch a 6-year mission aimed at achieving self-reliance in pulses, with a special focus on tur and masoor. Makhana Board will also be established in Bihar. As part of the National Mission for Edible Oil & Seeds, the program also aims to strengthen domestic production and reduce dependence on imports.
Kisan Credit Cards
The Finance Minister stated that Kisan Credit Cards (KCC) will continue to support 7.7 crore farmers, fishermen, and dairy farmers with short-term credit access. Additionally, under the revised interest subvention scheme, the loan limit for KCC-backed borrowing will be raised from ₹3,000 to ₹5,000, offering enhanced financial support for agricultural activities.
Leather and Footwear
The Finance Minister revealed measures enhancing productivity, quality, and competitiveness in India’s footwear and leather sector. A new scheme will support design, component manufacturing, and machinery for non-leather footwear, alongside leather footwear. This initiative is expected to create 22 lakh jobs, generate ₹400 crore, and boost exports to over ₹1.1 lakh crore. Additionally, the toy sector will see a new scheme aimed at establishing India as a global hub for toys, focusing on developing clusters, skills, and a sustainable manufacturing ecosystem for high-quality, innovative toys.
Investing in people
The Finance Minister emphasized investment as the third engine of growth, focusing on people, the economy, and innovation. As part of this, the government is prioritizing the Sashakt Anganwadi and Poshan 2.0 programs, providing nutritional support to over 8 crore children, pregnant women, lactating mothers, and around 20 lakh adolescent girls in aspirational districts and the Northeast, with enhanced cost norms to boost their effectiveness. Additionally, infrastructure will be expanded in 5 IITs established after 2014 to accommodate 6,500 more students, and 5 National Centres of Excellence for skilling will be set up. The government also plans to issue identity cards and register gig workers on the e-Shram portal, aiming to assist 1 crore workers.
Power
The Finance Minister outlined significant power sector reforms focused on improving electricity distribution and transmission. The government incentivize states to implement reforms in electricity distribution and boost intrastate transmission capacity, aiming to enhance the financial health and operational efficiency of power companies to assist states in these efforts, an additional borrowing allowance of 0.5 per cent of GSDP will be provided, based on their progress in implementing these reforms.
Aviation
The UDAN scheme has connected 1.5 crore middle-class people to 88 airports through 619 routes. A modified version of UDAN will be launched, expanding to 120 new destinations, to accommodate an additional 4 crore passengers. Greenfield airports will also be developed in Bihar to further enhance connectivity.
Healthcare & education
In the post-pandemic era, healthcare continues to be a crucial sector requiring significant attention. The Budget allocated increment in funding for healthcare infrastructure, medical education, and mental health services for enhancing accessibility and affordability. The Union Finance Minister Nirmala Sitharaman announced by next year, 10,000 additional seats will be added in medical colleges and hospitals, while 75,000 seats will be added in the next 5 years. While presenting the Budget 2025-26, she announced that the Centre will create additional infrastructure in five IITs started after 2024. Ahead of the Bihar elections, the Finance Minister also announced that IIT Patna’s hostel and other infrastructure capacities will be boosted.
AI and Start-ups
A new fund of funds (FoF) announced for startups with an expanded scope of Rs 10,000 crore was announced by Sitharaman. The government has proposed to set up a centre of excellence (CoE) in artificial intelligence (AI) for education with a total investment of Rs 500 crore. The government will extend the startup incorporation period by 5 years, allowing more firms to qualify for benefits. Gig workers in India will get health insurance under the government’s Jan Arogya scheme, and will be given identity cards, the minister announced. 50,000 Atal Tinkering Labs will be set up in the next five years to cultivate scientific temper in young minds. The government will launch the Bharatiya Bhasha Pushtak scheme to provide a digital form of Indian language books for schools and higher education.
