Budget 2025-26 Income Tax Cuts, Focus on Infrastructure, and Other Highlights

Every year, people eagerly await the Union Budget because it sets the course for inflation, taxes, job opportunities, and overall economic growth. It affects businesses, industries, and common people in different ways. The Union Budget 2025-26, presented by Finance Minister Nirmala Sitharaman on 1^st February 2025, did the same.

With a vision of Viksit Bharat, the government has laid down 4 engines for development- Agriculture, MSMEs, Investment, and exports. They have introduced multiple reforms to facilitate the utilization of these engines towards growth.

Let us discuss these reforms in detail, understanding if they align with the expectations of the nation.

What Was Expected from the Budget 2025-26?

These were a few common expectations from Budget 2025:

• Middle-class taxpayers wanted relief from high taxes and inflation.
• Small businesses hoped for easier access to loans and ease in GST compliance.
• Industries expected incentives for manufacturing, exports, and infrastructure.
• Tech and startups wanted government support for AI, innovation, and digital growth.
• Job seekers looked for measures to create large-scale employment.

Now, let’s look at what the budget finally announced and if it was able to deliver to these expectations!

Income Tax Cuts Bring Relief to the Middle Class

Taxation is often the most talked-about part of the budget. This year, in Budget 2025-26, the government has given significant relief to middle-class taxpayers.

• Raised Tax-Free Income Limit: The tax-free income limit raised to ₹12 lakh, and the standard deduction adjusted. This means those earning up to ₹12.75 lakh will pay no income tax. This move directly impacts middle-income households, increasing their disposable income. It also aligns with one of the engines of development for Viksit Bharat- investments since increased spending will directly have impact on consumer spending on investments.
  
• Income Tax Bill: We are awaiting a new Income Tax Bill (Bill 2025) planned for Parliament next week. It might further introduce some significant measures for taxpayers.
  
• TDS & TCS Reforms: Senior citizens have also benefited from tax reforms. The TDS exemption limit on interest income has doubled from ₹50,000 to ₹1 lakh, reducing tax deductions on their savings. Additionally, the TCS on education loans removed, lowering the cost for students studying abroad. Another significant change is the increase in the TDS threshold on rent to ₹6,00,000. There have also been other changes in TDS rate chart.
  
• Rationalization of Customs Traffic Structure: The government has restructured the tariffs removing 7 tariff rates and keeping only 8, including a zero rate. Moreover, the social welfare surcharge xempted on 82 tariff lines.

Massive Investments in Infrastructure and Energy

Infrastructure continues to be a major priority in this budget.

• Funding for Infrastructural Development: The government has announced a ₹1.5 lakh crore fund for states in Budget 2025-26. This fund is focused on capital projects like highways, railways, and urban development.
  
• Asset Monetization Plan: An asset monetization plan for generating ₹10 lakh crore over the next five years by leasing out government-owned infrastructure.
  
• Investment in Energy Sector: On the energy front, a ₹20,000 crore allocation for nuclear power is also a significant announcement. India is also investing in Small Modular Reactors (SMRs), which could help transition away from coal-based energy. The aim is to develop 5 SMRs by 2033.
  
• Marinetime Development Fund: Meanwhile, a ₹25,000 crore Maritime Development Fund is set to expand India’s shipping and logistics sector, strengthening global trade capacity.

Agriculture Sees Productivity-Focused Initiatives in Budget 2025-26

Another engine of development for Viksit Bharat- the agricultural sector was also in focus as the government took initiatives to improve production and reduce dependency on imports.

• Dhan-Dhaanya Krishi Yojana: The Dhan-Dhaanya Krishi Yojana is being launched to target 100 low-yield districts, using better irrigation, seed quality, and financial support to increase productivity. The approach is similar to the Aspirational District Programme.
  
• Rural Prosperity and Reselience Programme: This programme will be launched in cooperation with states to address underemployment in agriculture through skilling, investment, technology, and invigorating the rural economy.
  
• Aatmanirbharta in Pulses: This is a 6-year Mission to achieve self-sufficiency in pulses with special focus on Tur, Urad and Masoor production—three major crops where India has relied on imports.
  
• Mission for Cotton Productivity: A dedicated 5-year mission to facilitate improvements in productivity and sustainability of cotton farming.
  
• Increase in loan limit: In terms of financial support, the Kisan Credit Card loan limit increased from ₹3 lakh to ₹5 lakh, allowing farmers easier access to working capital.
  
• Makhana Board in Bihar: This is another interesting move, focused on processing and export opportunities for Makhana, recognizing its growing demand.

Unlike previous years, there are no new direct subsidies or price support measures. Instead, the government has shifted towards a self-sufficiency model, relying on better productivity to improve farm incomes.

Credit Support for Small Businesses and Startups

MSME is also one of the engines for development as per the government’s vision for Viksit Bharat. For them, in Budget-2025-26, there has been a revision in classification criteria and much-improved credit availability.

– Revision in MSME Classification: Here is the revised criterion for MSME classification that aims to push the MSME led growth:

– Credit Guarantee Increased: The credit guarantee cover for small businesses doubled from ₹5 crore to ₹10 crore, which will allow banks to lend more confidently.

– Fund of Funds for Startups: A ₹10,000 crore Fund of Funds launched for startups, particularly in high-growth sectors like technology and clean energy.

– New Credit Card System: Meanwhile, a new credit card system for micro-enterprises introduces a ₹5 lakh credit limit, making short-term capital easier to access.

– Special Finance Assistance: First-time women, SC, and ST entrepreneurs can now access loans up to ₹2 crore under this program.

Despite these financial incentives, GST compliance for MSMEs remains unchanged—an area where many small businesses were expecting the changes.

Initiatives for Export Promotion in Budget 2025-26

Export as the 4^th engine for development as a major focus in the budget presented multiple initivatives for export promotion:

• Export Promotion Mission: This Mission with sectoral and ministerial targets easy access to export credit, cross-border factoring support, and support to MSMEs. It is planned to tackle non-tariff measures in overseas markets.
• National Framework for GCC: A framework to guide states for promoting Global Capability Centres in emerging tier 2 cities.
• Warehousing Facility for Air Cargo: To promote infrastructure upgradation and warehousing for air cargo that includes high value perishable horticulture produce.

Healthcare Affordability Improves with Duty Reductions

The move to make some life-saving medicines more accessible and affordable has been a significant part of the budget.

• Waiver of Custom Duty on Drugs: The government has waived customs duties on 36 life-saving drugs and introduced concessional tax rates on six more medicines. This will help in making treatments for conditions like cancer and kidney failure more affordable.
• Day Care Cancer Centres: In a major public health initiative, 200 Day Care Cancer Centre planned in district hospitals over the next three years. This will provide easier access to cancer treatment, especially in rural and semi-urban areas where specialized facilities still lack.
• Lowered Import Duties: The government has also lowered import duties on bulk drugs used in medicine manufacturing. This could help reduce costs for pharmaceutical companies and make drugs more affordable for consumers.

Government Backs Tech and AI

India is set to experience some groundbreaking advancements in the tech sector since India’s digital and tech industries were major focus in this budget.

• Centres of Excellence in Artificial Intelligence: The government launched three such centres for agriculture, health, and sustainable cities in 2023. A fourth and dedicated Centre for education was also launched with a total outlay of 500 crore.
• National Centres of Excellence for Skilling: 5 specific centres for workforce training in emerging fields like AI, robotics, and blockchain.
• Deep Tech of Funds: A Deep Tech Fund of Funds will provide financial backing for startups from advanced technology sectors.
• Bharat TradeNet: Meanwhile, Bharat TradeNet as a digital trade platform, simplifying documentation and financing for Indian exporters.

Conclusion

The budget this year has definitely made a mark with some unexpected moves. Tax relief was something that a significant part of the country hoped for, and the budget delivered it. Alongside, strong infrastructure investments, and better healthcare affordability are also some positive initiatives. We might also experience some shift in India’s economy, expecting tech development, clean energy consumption, and growth for small businesses. However, rural healthcare infrastructure, job creation initiatives, and GST compliance reforms still remain unaddressed.

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