Finance Minister Nirmala Sitharaman presented the Union Budget 2025-26 on February 1, marking her eighth consecutive budget. As the second full budget under the Modi 3.0 government, it focuses on economic acceleration, inclusive development, and boosting household sentiment. The budget introduces income tax relief, customs duty adjustments, and measures to support critical sectors like agriculture, manufacturing, and MSMEs.
Income Tax Relief Measures
A major announcement in the budget is income tax exemption for individuals earning up to Rs 12 lakh annually under the new tax regime. For salaried employees, this limit effectively rises to Rs 12.75 lakh per annum, including a standard deduction of Rs 75,000. This move aims to provide financial relief to the middle class and increase disposable income. The estimated revenue loss due to this change is Rs 1 lakh crore.
Customs Duty Adjustments: What Gets Cheaper
The budget has introduced changes in customs duties to benefit various industries. Some of the key reductions include:
- Medicines: 36 life-saving drugs for cancer and chronic diseases are fully exempted from basic customs duty.
- Electronic Goods: Basic customs duty on open cells and other components is reduced to 5%.
- Critical Minerals: Cobalt powder, lithium-ion battery waste, lead, and zinc are exempted from customs duty.
- EV and Mobile Battery Manufacturing: Over 35 additional goods for EV battery production and 28 for mobile phone battery manufacturing are now exempted.
- Wet Blue Leather: Fully exempted from customs duty.
- Frozen Fish Paste (Surimi): Basic customs duty reduced from 30% to 5%.
- Shipbuilding Materials: Customs duty exemptions extended for another 10 years.
Customs Duty Adjustments: What Gets Costlier
Certain goods will become more expensive due to increased basic customs duties, including:
- Interactive Flat-Panel Displays: Basic customs duty raised from 10% to 20%.
- Knitted Fabrics, Telecom Equipment, and Plastic Products: Increased customs duties to boost domestic manufacturing.
Other Key Announcements
- Provisional Assessments: A two-year limit introduced for faster customs clearance.
- Tariff Rates: Seven tariff rates removed to simplify trade regulations.
- Social Welfare Surcharge: Exempted on 82 tariff lines.
- Income Tax Returns: Filing limit extended from two to four years.
- Tax Collected at Source (TCS): Threshold raised from Rs 7 lakh to Rs 10 lakh for LRS remittances.
- Tax Deducted at Source (TDS): Limit on rent increased to Rs 6 lakh.
- Kisan Credit Card Loan: Increased to Rs 5 lakh from Rs 2 lakh.
- 100% FDI in Insurance: New guidelines introduced to allow full foreign direct investment in the insurance sector.
Economic Outlook for 2025-26
The Economic Survey 2024-25 projects India’s GDP growth to range between 6.3% and 6.8% for the next financial year. Food inflation is expected to decline in the last quarter of FY25, while the fiscal deficit target is set at 4.4%. The survey highlights strong economic fundamentals driven by fiscal discipline, private consumption, and a stable external account.
