The Union Budget for FY 2025 has introduced a range of policy reforms and financial incentives aimed at boosting economic growth, easing taxation, and supporting businesses. Here’s a breakdown of the key highlights:

The pillar of “four”

In Union Budget 2025-26, FM Nirmala Sitharaman outlined an ambitious roadmap aiming at India’s rapid economic growth with focus on “agriculture”, “MSMEs”, “investments” and “exports” positioning them as key drivers of job creation, self-resilience and enhanced global competitors.

Focus Areas in Union Budget 2025

The Budget focus areas include:

• Agricultural growth and rural development.
• Power sector development.
• Tourism and Innovation.
• Education.
• Infrastructure and energy sector development.
• Manufacturing and innovation.
• Sector-specific support and tariff proposals.
• Focus on export Industry.
• Taxation reforms.

1. Boost for Start-ups & MSMEs

• Tax Benefits for Start-ups: The eligibility period for tax incentives has been extended by 5 years.
• Increased Credit Guarantee: MSME credit guarantee cover raised from Rs 10 crore to Rs 20 crore.
• New Fund of Funds for Start-ups: A Rs 10,000 crore fund-of-funds will be set up to support start up investments.
• Focus on Toy Sector: A scheme will be implemented to position India as a global manufacturing hub for the toys sector.
• Employment Boost: A new scheme for the footwear and leather sector will generate employment for 22 lakh people and attract investments of Rs 4 lakh crore

2. Infrastructure & Energy Investments

• Nuclear Energy Expansion: Aiming for 100 GW of nuclear power by 2047.
• Green Energy Focus: More investments in solar PV, electrolysers, and grid-scale batteries.
• Focus on Nuclear Energy: A nuclear energy mission will focus on research and development of small modular reactors, with an outlay of Rs 20,000 crore.
•  Development of Greenfield Airports and Financial Support in Canal Project in Bihar: Financial support will be provided for the development of Greenfield airports in Bihar and The Western Kosi Canal project in Bihar will also receive financial backing.
• Maritime Sector Support: An Rs 25,000 crore maritime development fund launched.
• Revamp of Shipbuilding Financial Assistance Policy: The shipbuilding financial assistance policy will be revamped to boost the industry.
• Air Connectivity Expansion: The Udaan scheme will connect 120 new destinations.
• PPP Mode: Each infrastructure-related ministry will draft a three-year plan for implementation in Public-Private Partnership (PPP) mode.

3. Agriculture & Rural Development

• Farmers’ Credit Limit Increase: Loan limit for the new Kisan scheme raised to Rs 5 lakh.
• Dhan Dhanya Krishi Yojana: Special support for 100 low-productivity districts.
• Fisheries Development: A new policy framework for sustainable fishing in Exclusive Economic Zone (EEZ) will be introduced.
• Initiative on Cotton Production: A 5-year mission will be launched to boost cotton production in the country.

4. Key Announcements on Manufacturing, Infrastructure, and Innovation

·         “Make in India” Initiative: A National Manufacturing Mission will be set up to further strengthen the "Make in India" initiative.

·         Urea Plant in Assam: A new urea plant with a capacity of 1.27 lakh tonnes will be established in Namrup, Assam.

·         Makhana Board in Bihar: A Makhana board will be established in Bihar to promote production, processing, value addition and marketing of Makhana.

·         Efforts will be made to create an ecosystem for solar photovoltaic (PV) cells, electrolysers, and grid-scale batteries.

·         Focus on Innovation: 50,000 Atal Tinkering Labs will be set up to foster innovation and creativity.

·         Free Broadband Connectivity: Broadband connectivity will be provided to all government secondary schools and primary healthcare centres.

·         Skill Training Centres: Five National Centres of Excellence for Skilling will be established to promote vocational training and skill development.

5. Social Welfare & Education

• Medical and AI Education: 10,000 new medical seats and three AI research centres planned.
• Day-care Cancer Centres: Day-care cancer centres will be established in every district within three years, with 200 centers planned for 2025-26.
• Broadband Connectivity: High-speed internet access to be provided in all government schools and healthcare centres.
• Vocational Training Boost: Five National Centres of Excellence for Skilling to be established.
• Social Security for Gig Workers: A new scheme under the E-shram portal to provide insurance and benefits.

6. Tourism and Innovation

• Top 50 Tourism Destinations: States in partnership to develop key tourism sites with better infrastructure to boost tourism across India.
• Support for Homestays: Mudra loans to be extended for small homestay businesses to encourage local tourism.
• Introduction of e-Visa for Certain Tourist Groups: e-visa options with visa fee waivers will be introduced for certain tourist groups to boost the tourism industry in India.
• Medical Tourism Initiative: ‘Heal-in-India’ campaign to attract international patients.
• Deep tech Fund of Funds: A special fund-of-funds will be explored to support deep technology start-ups.

7. Other Sector-Specific Support and Tariff Proposals

·         Textiles: To promote domestic production of technical textile products like agro-textiles, medical textiles, and geo-textiles, two more types of shuttle-less looms will be fully exempted from customs duty. The BCD rate on knitted fabrics covered by nine tariff lines will be revised to "20% or ₹115 per kg, whichever is higher."

·         Electronics: The BCD on Interactive Flat Panel Displays (IFPD) will increase from 10% to 20%, while the BCD on Open Cell and other components will be reduced to 5% to support manufacturing. Additionally, parts of Open Cells used in LCD/LED TVs will be fully exempt from BCD.

·         Lithium-ion Battery Manufacturing: To support domestic production of lithium-ion batteries, 35 capital goods for EV battery manufacturing and 28 for mobile phone battery manufacturing will be added to the BCD exemption list.

·         Shipping Sector: The BCD exemption on raw materials, components, consumables, and parts for shipbuilding will be extended for 10 years. Ship-breaking will receive similar exemptions to boost competitiveness.

·         Telecommunications: The BCD on Carrier Grade Ethernet switches will be reduced from 20% to 10% to align with Non-Carrier Grade Ethernet switches.

·         Export Promotion Measures:

o    Handicrafts: Export timelines extended from six months to one year, with an additional three-month extension if needed. Nine new items will be added to the duty-free inputs list.

o    Leather Sector: BCD on Wet Blue leather will be fully exempted, and crust leather will be exempt from 20% export duty to benefit small tanners.

o    Marine Products: To enhance India’s seafood export competitiveness, BCD on Frozen Fish Paste (Surimi) will be reduced from 30% to 5%, and BCD on fish hydrolysate for fish and shrimp feed will be reduced from 15% to 5%.

8. Fiscal Deficit & Market Borrowing

• Fiscal Deficit: FY25 fiscal deficit estimated at 4.8% of GDP, with a 4.4% target for FY26.
• Market Borrowing: Gross borrowing for FY26 projected at Rs 14.82 lakh crore.
• Tax Receipts: Expected to reach Rs 28.37 lakh crore in FY26.
• Capex for FY25: Revised capital expenditure for FY25 set at Rs 10.18 lakh crore.

9. New Policy Announcements

• Insurance FDI: Foreign Direct Investment in insurance sector increased from 74% to 100%.
• New Income Tax Bill: A revised income tax bill will be introduced soon.
• Central KYC Registry: A central KYC registry to be rolled out in 2025.

10. Customs duty and tariff proposals in FY25 Budget

·         Seven Tariff Rates to be Removed: Additional to those removed in previous budgets.

·         Exemption on Social Welfare Surcharge: 82 tariff lines currently under cess will be exempted.

·         36 Life-Saving Drugs: Added to the list of medicines fully exempt from Basic Customs Duty (BCD).

·         Increase in BCD on Flat Panel Displays: From 10% to 20%.

·         Exemption on Critical Minerals: 12 more critical minerals will be exempt from BCD.

·         Addition of 35 Capital Goods: For EV manufacturing, will be included in the BCD exemption list.

·         Customs Duty Reduction: Open-cell customs duty reduced to 5%.

11. Personal Income Tax Reforms

·         Higher Tax Exemption: Under the new tax regime, individuals earning up to Rs 12 lakh annually will not have to pay income tax.

·         New Income Tax Slabs:

• Up to Rs 4 lakh – No tax
• Rs 4 lakh – Rs 8 lakh – 5%
• Rs 8 lakh – Rs 12 lakh – 10%
• Rs 12 lakh – Rs 16 lakh – 15%
• Rs 16 lakh – Rs 20 lakh – 20%
• Rs 20 lakh – Rs 24 lakh – 25%
• Above Rs 24 lakh – 30%

·         TDS and TCS Reforms:

• Number of TDS rates and thresholds reduced for easier compliance.
• TDS on rent threshold raised to Rs 6 lakh.
• TCS threshold on remittances under LRS increased from Rs 7 lakh to Rs 10 lakh.
• No TCS on education loans: If remittances for education are made using an education loan, no TCS will be charged.

·         More Time for Taxpayers: The period for filing updated tax returns extended from 2 years to 4 years.

• Self-Occupied Property: Taxpayers can now declare two self-occupied properties with nil taxable value.

Conclusion

The Union Budget FY 2025 presents a forward-looking roadmap for economic growth, tax relief, and sectoral reforms. With a strong emphasis on infrastructure, Tourism, digital transformation, and social welfare, the budget aims to create a balanced and sustainable growth trajectory for India. Stay tuned for further updates and analysis on the impact of these policies!

-Dayco India

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