The much-anticipated Union Budget 2025, presented by Finance Minister Nirmala Sitharaman on February 1, 2025, marks a pivotal moment for India's economic strategy, aiming to empower various sectors and demographics including the poor, youth, farmers, and women. This budget prioritizes long-term sustainable growth through significant reforms centered on taxation, infrastructure improvement, agriculture development, and digital transformation.
One of the standout features of Budget 2025 is the introduction of the New Income Tax Bill, set to simplify tax compliance substantially. Under the proposed changes, the tax structure is set for revision, including:
- Increase in Rebate under Section 87A: The rebate has been hiked from Rs. 25,000 to Rs. 60,000, allowing individuals earning up to Rs. 12,00,000 to have zero tax liability.
- Rationalization of TDS/TCS: The proposal includes raising threshold limits to reduce compliance burdens for middle-income earners.
- Extended Time-Limit for ITR-U: The deadline for updated income tax returns will be extended from two years to four years.
- Introduction of the Arm's Length Price Scheme: This new framework will simplify transfer pricing regulations for international transactions.
Budget 2025 also emphasizes investment and reform across various sectors. A new presumptive taxation regime for non-residents providing services within India's electronics manufacturing sector is expected to significantly reduce the operational tax burden for foreign firms. This framework, encapsulated under Section 44BBD of the Income Tax Act, estimates only 25% of non-residents' revenues will be taxable, equipping India to potentially emerge as a global hub for semiconductor manufacturing.
Sandeep Sehgal, partner at AKM Global, commented, "This measure may serve as a significant boost for the industry, helping bring technology and qualified support to India." The memorandum relating to Budget 2025 outlines this ambition clearly, emphasizing increased certainty for non-resident corporations.
Indirect Tax Changes: On the indirect tax front, the budget proposed the rationalization of customs duties by eliminating cumbersome tariff rates and providing exemptions for lifesaving drugs to ease healthcare costs. For example, 36 lifesaving medicines will be granted full Basic Customs Duty (BCD) exemption, and exemption efforts also extend to raw materials for manufacturing key technologies such as EV batteries and mobile devices.
Support for Agriculture: To bolster agricultural productivity, the National Mission on High-Yielding Seeds aims to deliver over 100 climate-resilient seed varieties. Complementing this, the Prime Minister Dhan-Dhaanya Krishi Yojana will be implemented across 100 low-productivity districts, potentially impacting 1.7 crore farmers positively.
Among other initiatives, the budget plans to launch the ‘Mission for Aatmanirbharta’ program, targeting three main pulse varieties. The new initiatives focus not only on farmer empowerment but also on improving crop yield, which is particularly relevant as climate change poses challenges to agricultural outputs.
Investment Strategies: The infrastructure and investments announced are positioned to directly support GDP growth. The Union Budget 2025 proposes providing 50-year interest-free loans to states, unlocking funds for extensive development projects. This substantial allocation of Rs. 1.5 lakh crore aims to catalyze public capital expenditures and reform incentives.
Employment and Education: Sectors such as education also received attention, with plans to set up 50,000 Atal Tinkering Labs to spark innovation among children, alongside provisions for enhancing medical education by increasing the number of seats available next year.
The Finance Minister's presentation reflected significant changes with the intention of promoting clarity and easing navigation within the tax system. According to government sources, about 78 percent of taxpayers have already embraced the new tax regime — underlining the progression toward ambitious economic reform.
Challenges Ahead: While the budget proposes several wide-ranging reforms and initiatives, analysts caution about effective implementation and monitoring of these ambitious plans. Each sector's outcomes depend heavily on state and local governance structures, as well as the mobility of policies from legislation to practical application.
With these sweeping changes, the Union Budget 2025 appears poised to not only reshape India’s tax structure but also drive inclusive growth across multiple sectors. It remains to be seen how successfully the government can balance reforms with the legitimate needs of taxpayers, businesses, and the economy as a whole.