Union Budget 2025-26

The Union Budget for 2025-26, presented by the Government of India, lays out a clear and ambitious roadmap for the country’s economic future. In a global landscape filled with uncertainty, this Budget focuses on India’s commitment to accelerating growth while ensuring inclusivity, innovation, and sustainability. With a sharp focus on empowering key sections of society—farmers, youth, women, and the underprivileged—it aligns closely with the vision of Viksit Bharat, or a developed India.

At its core, the Budget prioritizes ten key areas, including agricultural growth, rural prosperity, manufacturing, employment, and energy security. It also introduces transformative reforms across six critical domains—taxation, power, urban development, mining, financial sector, and regulatory frameworks. By fostering a more competitive and resilient economy, the Government aims to unlock India’s full potential on the global stage.

As India steps into the second quarter of the 21st century, this Budget not only reflects the nation’s aspirations but also builds on a decade of transformative policies. With inclusivity as its guiding principle and reform as its engine, the Union Budget 2025-26 sets the stage for a future driven by prosperity, equity, and resilience.

Agriculture

Recognizing agriculture as the foundation of India’s economy, the Budget introduces targeted initiatives to enhance productivity, promote sustainability, and uplift rural livelihoods. With a focus on tackling underemployment and migration, these measures aim to transform agriculture into a more dynamic and rewarding sector.

Key Proposals

• Prime Minister Dhan-Dhaanya Krishi Yojana: Inspired by the Aspirational Districts Programme, this initiative targets 100 districts with lower productivity, moderate crop intensity, and below-average credit access. By aligning existing schemes with new interventions, the program seeks to boost output, promote crop diversification, expand irrigation, and improve storage infrastructure. With an estimated reach of 1.7 crore farmers, its success will hinge on seamless coordination between the Centre and states.
• Rural Prosperity and Resilience Program: Designed to address underemployment in agriculture, this initiative combines skilling, technology, and investments to create sustainable rural livelihoods. By reducing forced migration, it will provide critical support for rural women, young farmers, and landless workers.
• Mission for Aatmanirbharta in Pulses: A six-year plan focusing on self-reliance in pulses—Tur, Urad, and Masoor—through strategic procurement by agencies like NAFED and NCCF.
• Vegetable and Fruit Promotion Program: This initiative supports production, processing, and market linkages to ensure better returns for farmers. Farmer-Producer Organizations (FPOs) and cooperatives will play a key role in implementation.
• Makhana Board in Bihar: This region-specific initiative aims to boost the production, processing, and marketing of makhana (foxnuts). By organizing farmers into FPOs and providing training, the program ensures they gain access to government support and markets.
• National Mission on High-Yielding Seeds: Recognizing the role of quality seeds in enhancing productivity, this initiative strengthens research, develops climate-resilient and pest-resistant varieties, and ensures their widespread commercial availability.
• Fisheries Development: As the world’s second-largest producer of fish, India is introducing an enabling framework to sustainably harness fisheries resources, with a focus on the Andaman & Nicobar and Lakshadweep Islands.
• Mission for Cotton Productivity: A five-year program to increase cotton yields, with a special focus on extra-long-staple varieties, in alignment with the Government’s 5F vision for textiles.
• Kisan Credit Card (KCC) Expansion: The loan limit under KCC will be increased from INR 3 lakh to INR 5 lakh, benefiting 7.7 crore farmers, fishermen, and dairy farmers. Additionally, a new urea plant in Assam will support domestic fertilizer production.
• India Post as a Rural Growth Catalyst: India Post will be repositioned to support small businesses, self-help groups, and MSMEs, evolving into a key logistics hub for rural entrepreneurs.

MSMEs

The Budget positions Micro, Small, and Medium Enterprises (MSMEs) as the second engine of economic growth, recognizing their vital role in manufacturing, exports, and job creation. With 5.7 crore MSMEs contributing 36% to manufacturing output and 45% to exports, targeted interventions in this sector are critical for sustained economic expansion.

Key Proposals

• MSME Classification Criteria Revised: Investment and turnover limits have been increased by 2.5 and 2 times, respectively, encouraging businesses to scale up operations.
• Credit Guarantee Expansion: The guarantee cover for micro and small enterprises has been doubled from INR 5 crore to INR 10 crore, unlocking an additional INR 1.5 lakh crore in credit over five years.
• Micro-Enterprise Credit Cards:A new credit card scheme will offer a INR 5 lakh limit to Udyam-registered businesses, with 10 lakh cards to be issued in the first year.
• Support for First-Time Entrepreneurs: A special loan scheme (up to INR 2 crore) will support women, SC/ST entrepreneurs, building on the success of Stand-Up India.
• Labour-Intensive Sector Boost: A Focus Product Scheme for footwear, leather, and toys aims to enhance productivity and competitiveness, creating 22 lakh jobs and boosting exports.
• National Institute of Food Technology: A new institute in Bihar will strengthen food processing in the eastern region, generating income opportunities for farmers and employment for youth.
• National Manufacturing Mission: Under Make in India, this initiative provides policy support for manufacturing, with a special focus on Clean Tech industries like solar PV cells, EV batteries, and wind turbines.

Investment

The Budget identifies investment as the third engine of growth, focusing on three core areas: investing in people, strengthening the economy, and fostering innovation. By prioritizing human capital, infrastructure, and technological advancements, the Government aims to drive long-term, sustainable growth.

Key Proposals

Investing in People

• Strengthening Nutrition and Healthcare: The Saksham Anganwadi and Poshan 2.0 program will receive enhanced cost norms to support 8 crore children, 1 crore pregnant women, and 20 lakh adolescent girls. Additionally, Day Care Cancer Centres will be set up in district hospitals, with 200 centers planned for 2025-26, improving access to cancer treatment at the grassroots level.
• Expanding Educational Access and Innovation: Over the next five years, 50,000 Atal Tinkering Labs will be established in government schools to foster creativity and problem-solving among students. Bharatnet will expand broadband connectivity to all government secondary schools and primary health centers in rural areas, bridging the digital divide.
• Advancing Higher Education and Skilling: The Bharatiya Bhasha Pustak Scheme will promote digital learning in Indian languages, while five National Centres of Excellence for Skilling will equip youth with globally relevant skills. IITs will see infrastructure expansion to accommodate 6,500 more students, and a Centre of Excellence in AI for Education will be launched with an outlay of INR 500 crore. Additionally, 10,000 new medical seats will be added in 2025-26, as part of a broader plan to increase capacity by 75,000 seats over five years.
• Supporting Urban Livelihoods and Gig Workers: A revamped PM SVANidhi scheme will provide enhanced loans and UPI-linked credit cards for street vendors. Gig workers will receive identity cards, registration on the e-Shram portal, and healthcare benefits under PM Jan Arogya Yojana.

Investing in Economy

• Boosting Infrastructure Through PPPs: Ministries and states are encouraged to develop a three-year pipeline of public-private partnership (PPP) projects, ensuring sustainable infrastructure growth. An interest-free loan of INR 1.5 lakh crore will be provided to states for capital expenditure and reforms.
• Asset Monetization and Water Security: The Second Asset Monetization Plan (2025-30) aims to raise INR 10 lakh crore for new projects. The Jal Jeevan Mission has been extended until 2028, ensuring 100% tap water coverage in rural areas.
• Urban Growth and Energy Expansion: An INR 1 lakh crore Urban Challenge Fund will help cities become growth hubs with enhanced water and sanitation infrastructure. Meanwhile, the Nuclear Energy Mission targets 100 GW of nuclear energy capacity by 2047, including the development of Small Modular Reactors (SMRs).
• Shipbuilding and Maritime Growth: The maritime sector will see significant investments, including policy revamps, Credit Notes for shipbreaking, and new shipbuilding clusters. An INR 25,000 crore Maritime Development Fund will provide long-term financing.
• Aviation and Connectivity: The UDAN scheme will expand to 120 new destinations, aiming to serve 4 crore passengers in the next decade. Greenfield airports will be developed in Bihar, while the Western Koshi Canal Project will support farmers in the Mithilanchal region.
• Housing and Mining Sector Reforms: The SWAMIH Fund 2 will facilitate the completion of 1 lakh stalled housing units, benefiting middle-class families. A State Mining Index will be introduced to promote transparency and efficiency in mining.

Investing in Innovation

• Boosting R&D and Technological Advancement: The Government has earmarked INR 20,000 crore for private-sector-led research & development. A Deep Tech Fund of Funds will support high-tech startups, while 10,000 PM Research Fellowships will be launched for advanced research.
• Ensuring Future Food Security: A second Gene Bank with 10 lakh germplasm lines will be established, safeguarding India’s agricultural biodiversity.
• Modernizing Land Records and Knowledge Systems: The National Geospatial Mission will digitalize land records and improve urban planning. Meanwhile, the Gyan Bharatam Mission will preserve India’s manuscript heritage through a National Digital Repository.

Exports

The Budget identifies exports as the fourth engine of growth, emphasizing their critical role in driving economic expansion and integrating India into global supply chains. To boost exports, the Budget introduces several strategic measures aimed at enhancing competitiveness, streamlining processes, and supporting domestic industries.

Key Proposals

• Export Promotion Mission: A dedicated mission will set sectoral and ministerial export targets, coordinated by the Ministries of Commerce, MSME, and Finance. This initiative will facilitate access to export credit, cross-border factoring support, and assistance in overcoming non-tariff barriers.
• BharatTradeNet (BTN): A new digital public infrastructure platform will streamline trade documentation and financing, complementing the Unified Logistics Interface Platform (ULIP) and improving ease of doing business for exporters.
• Integration into Global Supply Chains: The Government will set up facilitation groups to assist select industries in expanding their global footprint, particularly in Industry 4.0 technologies and electronic equipment manufacturing.
• Global Capability Centres (GCCs) in Tier 2 Cities: A national framework will guide states in improving talent availability, infrastructure, and regulatory policies to attract multinational companies to smaller cities.
• Enhancing Air Cargo and Warehousing: Infrastructure upgrades and streamlined customs processes will improve the export of high-value perishable goods, such as horticultural produce, making India more competitive in global markets.

Reforms

The Budget highlights reforms as the driving force behind India’s economic transformation. Building on the significant policy shifts of the past decade, this year’s Budget introduces targeted reforms in taxation, the financial sector, and regulatory frameworks.

Key Proposals

Tax Reforms with a “Trust First” Approach

• The Government continues to emphasize a taxpayer-friendly approach, reinforcing initiatives like faceless assessment, faster tax refunds, and the Vivad se Vishwas scheme to resolve disputes efficiently. A new income-tax bill will be introduced, promising a more streamlined tax structure, with details to be outlined in Part B of the Budget.

Financial Sector Reforms

• The foreign direct investment (FDI) limit in the insurance sector will be increased from 74% to 100%, with a key condition that the entire premium remains invested within India. To improve rural financial access, India Post Payment Bank will expand its services, and NaBFID will launch a Partial Credit Enhancement Facility to boost infrastructure financing through corporate bonds.

Simplifying Compliance

• A revamped Central KYC Registry will roll out in 2025, simplifying periodic KYC updates. The Budget also proposes streamlining company mergers, expanding the fast-track merger process to make business consolidations quicker and easier.

Boosting Foreign Investment

• A revamped Bilateral Investment Treaty (BIT) will be introduced, making India’s investment environment more attractive while aligning with the ‘First Develop India’ vision.

Regulatory Reforms for Business Growth

• A High-Level Committee for Regulatory Reforms will review licensing, certification, and compliance norms to reduce bureaucratic hurdles. Additionally, an Investment Friendliness Index will rank states based on their business climate, fostering healthy competition.

Further Decriminalization of Business Offences

• The Jan Vishwas Bill 2.0 will build on previous efforts, decriminalizing over 100 legal provisions, reducing penalties, and fostering a more business-friendly regulatory framework.

Indirect Taxes

The Budget introduces reforms in indirect taxes to simplify the customs tariff structure, strengthen domestic manufacturing, and make trade processes more efficient. These measures address duty inversion, promote value addition, and provide relief to consumers, particularly in healthcare.

Key Proposals

Streamlining the Customs Tariff Structure

• The number of tariff rates will be reduced to eight, including a zero rate. A single cess or surcharge will replace multiple levies, while the Social Welfare Surcharge will be removed on 82 tariff lines, reducing complexity. Legislative amendments to the Customs Act, 1962, include:
• Introducing a two-year time limit for finalizing provisional assessments (extendable by one year) under Section 18(1B).
• Allowing voluntary revision of entries after clearance of goods under Section 18A, enabling importers and exporters to revise entries and pay duties or claim refunds within a prescribed time.
• Clarifying the period of limitation for refund claims under Section 27 and defining the relevant date for duty payments under Section 28.
• Establishing an Interim Board to handle pending applications and exercise the powers of the Settlement Commission under Sections 127A to 127H.

Healthcare Relief

• Basic Customs Duty (BCD) will be fully exempted on 36 life-saving drugs, while six more will see reduced duties (5%), making critical medicines more affordable. Bulk drugs used in their production will also be exempted. Additionally, 37 more medicines and 13 new patient assistance programs will be added to the list of duty-free imports by pharmaceutical companies for free supply to patients.

Strengthening Domestic Manufacturing

• Critical raw materials such as cobalt powder, lithium-ion battery scrap, lead, zinc, and 12 other minerals will receive duty exemptions, supporting MSMEs and emerging industries like electric vehicles (EVs) and electronics. Additionally, 35 capital goods for EV battery manufacturing and 28 for mobile phone battery manufacturing will be exempted from duty.

Electronics & Textiles Boost

• To fix duty inversion in electronics, BCD will increase on Interactive Flat Panel Displays (IFPDs) from 10% to 20%, while duties on Open Cell components will be reduced to 5%.
• The textiles sector will benefit from duty exemptions on two more types of shuttle-less looms (Rapier Looms and Air Jet Looms) and revised BCD rates on knitted fabrics to boost technical textiles.

Shipbuilding & Telecommunications Support

• The 10-year extension of BCD exemptions for shipbuilding and shipbreaking will sustain growth in the maritime sector. In telecom, the BCD on carrier-grade Ethernet switches will be lowered from 20% to 10%, aligning with non-carrier-grade switches.

Export Promotion

• The export period for handicrafts will be extended from six months to one year (with a three-month extension if needed). Additionally, nine new items will be added to the duty-free input list for handicraft exporters.

Trade Facilitation Measures

A two-year time limit for finalizing provisional assessments will reduce business uncertainty. Furthermore:

• A voluntary compliance mechanism under Section 18A will allow importers and exporters to self-report material facts and pay duties without penalties, encouraging transparency.
• Amendments to the GST laws include simplifying input tax credit distribution, introducing a Track and Trace Mechanism under Section 148A, and clarifying definitions of terms like ‘Local Fund’ and ‘Municipal Fund’ under Section 2(69)(c).

Direct Taxes

The Budget introduces major reforms in direct taxation, emphasizing simplicity, taxpayer trust, and economic growth. Key changes focus on reducing compliance burdens, making taxation fairer, and providing relief for the middle class.

Key Proposals

Personal Income Tax Reforms

• A revamped tax structure under the new tax regime has been introduced, ensuring lower tax rates and increased savings for middle-income groups. The new tax slabs are as follows:

• In addition to lower tax rates, the rebate limit under the new regime has been raised from INR 7 lakh to INR 12 lakh, ensuring that individuals with income up to INR  12 lakh pay no tax at all. A marginal relief provision has also been introduced for those with incomes slightly above INR12 lakh, further reducing tax liability.

Rationalization of TDS/TCS

To reduce complexity and ease compliance, certain TDS/TCS rates have been streamlined:

• TDS on securitization trust income lowered from 25%-30% to 10%.
• TCS on timber and forest produce reduced from 2.5% to 2%.
• TCS on education loans for foreign study (under LRS) removed entirely (previously 0.5% above INR 7 lakh).

Higher Thresholds for TDS/TCS Applicability

To reduce the compliance burden, thresholds have been increased for various transactions, benefiting taxpayers:

• Interest on securities: INR 10,000 (previously Nil).
• Interest (banks, cooperatives, post office): INR 1,00,000 for senior citizens (previously INR 50,000).
• Dividend income threshold for TDS: INR 10,000 (previously INR 5,000).
• TDS on rent: INR 50,000 per month (previously INR 2,40,000 annually).
• TDS on professional fees: INR 50,000 (previously INR 30,000).

Extended Time Limit for Filing Updated Returns

• Taxpayers now have 48 months (instead of 24 months) to file updated returns, giving them more flexibility.
• Additional tax payable will be:
• 60% of tax & interest if filed within 36 months.
• 70% of tax & interest if filed within 48 months.

Mandatory Crypto-Asset Reporting

• Crypto exchanges will now be required to report transactions, increasing transparency.

Self-Occupied Property Valuation Simplification

• Homeowners can now declare the annual value of self-occupied homes as nil, reducing compliance issues.

Ease of Doing Business: Startups & Investments

• Startups incorporated before April 1, 2030, will continue to enjoy tax benefits under Section 80-IAC.
• Foreign Institutional Investors (FIIs) will now have capital gains taxed at the same rate as domestic investors, improving investment clarity.
• Simplified Tax Rules for Charitable Institutions: Registration validity increased to 10 years (previously 5 years).
• Minor defaults will no longer trigger loss of registration.
• Business trusts will now be taxed under Section 112A (long-term capital gains), aligning them with other investment structures.
• Transfer pricing provisions will apply for three-year blocks, reducing litigation risks.
• Investment & Employment Incentives
• Non-resident companies setting up electronics manufacturing facilities in India will benefit from a simplified tax regime.
• The existing tonnage tax scheme will now cover inland water transport vessels, promoting waterway-based logistics.
• The special tax regime for units in IFSC (International Financial Services Centre) has been extended until March 31, 2030.
• Sovereign Wealth & Pension Funds now have until March 31, 2030, to invest and claim tax exemptions.

Reducing Compliance Burden

• No Tax Collected at Source (TCS) will be applied on high-value goods sales exceeding INR 50 lakh, reducing the burden on businesses.
• Sections 206AB & 206CCA, which imposed higher TDS/TCS rates on non-filers, have been removed, easing compliance.Ambiguity regarding what qualifies as forest produce under Section 206C(1) has been removed, reducing disputes.

New Income-Tax Bill

A revised tax code will cut the length of tax laws by nearly 50%, making compliance simpler for taxpayers and administrators alike.

Conclusion

The Union Budget 2025-26 lays out a clear and ambitious roadmap for India’s journey toward Viksit Bharat, striking a balance between growth, inclusivity, and sustainability. By identifying agriculture, MSMEs, investment, and exports as the four key engines of economic expansion, the Budget focuses on job creation, industrial growth, and rural empowerment. At the same time, taxation, infrastructure, and regulatory reforms are designed to streamline business operations, attract investments, and ease compliance burdens. Targeted investments in healthcare, education, and skilling reflect the Government’s strong commitment to building human capital and fostering long-term socio-economic progress.

However, the real challenge lies in execution. The success of these initiatives will depend on effective implementation, active stakeholder participation, and continuous monitoring to ensure that the benefits reach every segment of society. While the Budget presents a bold and forward-looking vision, its true impact will be determined by how well these ambitious proposals translate into tangible, on-the-ground results.

King Stubb & Kasiva,
Advocates & Attorneys

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