Union Budget 2025- Major Announcements and Key highlights!

The Finance Minister, Nirmala Sitharaman, has announced the national budget for 2025-26, concentrating on boosting the economy, developing infrastructure, and reforming financial systems. This budget is designed to enhance India's strength in different sectors and address challenges in agriculture, manufacturing, and taxation. The main objectives include achieving self-sufficiency, fostering sustainable growth, promoting financial inclusion, and advancing digital technology.

February 1, 2025


1. Agriculture and Rural Development

Objectives:
- Attain self-sufficiency in food production and lessen dependence on imports.
- Provide more financial support to farmers to increase their income and stability.

Key Actions:
- Implement a six-year plan to increase pulses production, ensuring food security.
- Initiate a five-year plan to improve cotton production and quality, aiding farmers and the textile industry.
- Raise the Kisan Credit Card limit from ₹3 lakh to ₹5 lakh to improve farmers' access to credit.

2. Manufacturing and Industry

Objectives:
- Position India as a global leader in manufacturing through the 'Make in India' initiative.
- Enhance job creation by strengthening the industrial ecosystem.

Key Actions:
- Launch the National Manufacturing Mission to encourage domestic manufacturing and innovation.
- Establish five national skilling centers to train workers for jobs in the manufacturing sector.

3. Infrastructure and Urban Development

Objectives:
- Accelerate urbanization and infrastructure development.
- Enhance public services to improve living standards.

Key Actions:
- Allocate ₹1.5 trillion in 50-year interest-free loans to states for infrastructure projects.
- Set up a ₹1 trillion fund to support urban infrastructure projects, including transportation and smart city developments.

4. Financial Sector and Taxation

Objectives:
- Simplify the tax system to make compliance easier.
- Provide tax relief to the middle class to encourage consumer spending.

In appreciation of the middle class's role in national progress, the government has consistently worked towards lowering their tax obligations. Finance Minister Nirmala Sitharaman announced that individuals earning up to ₹12 lakh annually will now be exempt from income tax.

For salaried taxpayers, this exemption extends to ₹12.7 lakh due to the inclusion of a ₹75,000 standard deduction. Additionally, tax slabs and rates are being revised to provide further relief across all income groups.

Key Actions:
- Increase the income tax exemption limit to ₹12 lakh annually, boosting disposable income.
- Introduce a new Income Tax Bill to streamline tax policies and improve compliance.

Anticipated Direct Tax Code Reforms

  • Comprehensive Tax Code Overhaul: The Direct Tax Code (DTC) seeks to modernize and simplify existing tax laws by reducing the number of sections and eliminating outdated provisions.
  • Standardization of Tax Rates: The proposed code may implement a flat 15% tax rate on dividend income and introduce a 35% tax bracket for high earners, replacing the current surcharge-based system.
  • Minimizing Exemptions and Deductions: To simplify tax compliance, many exemptions and deductions may be removed, leading to a streamlined tax structure with lower overall rates.
  • Capital Gains Tax Uniformity: The tax treatment across different asset classes is expected to be standardized to remove existing disparities.
  • Expansion of Digital Tax Compliance: The focus will be on transitioning to a fully digital tax system, replacing traditional compliance methods with automated e-filing and AI-driven audits.
  • Incentives for Startups and MSMEs: The revised tax code is likely to introduce tax incentives for startups and micro, small, and medium enterprises (MSMEs) to foster innovation and growth.
  • Revised Assessment Framework: The process for tax assessments and disputes is expected to be made more transparent, reducing litigation and ensuring a faster resolution mechanism.
  • Flexible Tax Regime: The new system may provide taxpayers with the option to either stick with existing tax benefits or opt for a simplified structure with reduced rates but no deductions.

- Simplify the tax code and unify the tax year.
- Extend the timeline for filing updated returns.
- Implement new tax slabs for different income levels:

- ₹0 - ₹4 lakh: Nil
- ₹4 - ₹8 lakh: 5%
- ₹8 - ₹12 lakh: 10%
- ₹12 - ₹16 lakh: 15%
- ₹16 - ₹20 lakh: 20%
- ₹20 - ₹24 lakh: 25%
- Above ₹24 lakh: 30%

- Revise TDS and TCS policies, including TCS exemption for education-related remittances and raising the TDS threshold for senior citizens.

Implications for CA Students and Chartered Accountants:

  • Increased Tax Filings and Advisory Opportunities: The revised tax structure will create more advisory and compliance work for Chartered Accountants (CAs), as businesses and individuals seek guidance on optimizing tax benefits.
  • Growth in Financial Planning Roles: CAs specializing in tax planning will have new opportunities to assist salaried individuals in making informed financial decisions.
  • Shift Towards Digital Compliance: With an emphasis on simplified filing and increased exemptions, CA professionals will need to stay updated with automated tax assessment systems and digital platforms.
  • Expanded Learning for CA Students: Aspiring CAs must understand the new tax regime and its implications for corporate and individual taxation, strengthening their expertise in evolving tax policies.

5. Customs and Import Duty Reforms

Motives:

  • To encourage domestic manufacturing by reducing dependency on imported raw materials.
  • To ensure cost-effective production of critical goods for industries.
Proposed Exemptions and Adjustments:
  • Full exemption proposed for cobalt powder, lithium iron battery waste and scrap, lead, zinc, and 12 other critical minerals to boost domestic resource utilization.
  • To support local production of technical textiles, two additional types of shuttle-less looms will now be exempt from import duty.
  • Basic Customs Duty (BCD) on Flat LED TV panels will increase from 10% to 20%, aligning with the Make in India vision to encourage domestic electronics manufacturing.
  • 35 more capital goods for lithium-ion battery production and 28 items for mobile phone manufacturing will be added to the duty-exempt list.
  • BCD on carrier-grade internet switches will be reduced from 20% to 10%, facilitating more cost-effective technology adoption.
  • Nine additional items will be included in the duty-free inputs list to support various industries.
  • A fixed time limit of 2 years (extendable by 1 year) will be introduced for provisional assessments under the Customs Act, reducing uncertainty and costs in trade.
  • The time limit for the end use of imports will be extended from 6 months to 1 year, enabling industries to better manage their import strategies.


6. Foreign Investment and Economic Growth

Objectives:
- Draw more foreign investments into the country.
- Enhance export growth and strengthen global market presence.

Financial Sector Reforms

  • The government has proposed increasing the Foreign Direct Investment (FDI) limit in the insurance sector from 74% to 100%, provided the companies reinvest their entire premium earnings within India.
  • To strengthen financial inclusion, the India Post Payment Bank will expand its reach in rural areas, ensuring better banking access.
  • Public sector banks will introduce a Grameen credit score framework, assisting in financial evaluation for rural borrowers.
  • A regulatory coordination forum will be set up to oversee the development of pension products, enhancing retirement planning options.
  • A revamped central KYC registry will be launched in 2025, improving efficiency in customer verification processes and accelerating re-KYC updates.
  • Bilateral investment treaties were signed with two countries in 2024, and the government plans to revamp the current BIT framework to create a more investment-friendly environment.
  • The Foreign Direct Investment (FDI) cap in the insurance sector has been raised from 74% to 100%, attracting global investors and improving financial services.
Export Promotion Mission
  • A new 'Export Promotion Mission' will be launched to facilitate easy credit for exporters, reducing trade barriers and increasing global competitiveness.


7. Energy and Sustainability

Objectives:
- Shift towards clean and sustainable energy sources.
- Promote self-reliance in energy production.

Key Actions:
- Develop 100 gigawatts of nuclear energy by 2047, allowing private sector participation to decrease reliance on fossil fuels.

8. Welfare and Social Security

Objectives:
- Support and empower workers in informal jobs.
- Ensure fair pay and social security benefits.

Supporting Gig Workers
A social security plan for gig workers ensures they are registered, have identity cards, and receive welfare benefits, recognizing their importance in the economy.

9. Education and Skill Development

Objectives:
- Improve access to quality education and close skill gaps.
- Enhance digital learning and use of technology in education.

Higher Education Initiatives

50,000 Atal Tinkering Labs will be established in government schools over the next five years to foster innovation and creativity among students.

Broadband connectivity will be extended to all government secondary schools and primary centers in rural regions, ensuring access to digital education.

The Bharatiya Bhasha Pustak scheme will be introduced to provide Indian language books for schools and higher education institutions, promoting regional languages.

Five National Centers of Excellence for Skilling will be set up in collaboration with global partners, building on prior commitments to enhance skill development.

Expansion of IITs will continue, with student capacity in 23 IITs doubling from 65,000 to 1.35 lakh over the past decade. Infrastructure will be expanded in five IITs established after 2014, along with further development at IIT Patna.

AI-powered learning tools are being introduced. Rural schools are upgraded with smart classrooms and digital tools.

Conclusion

The Union Budget 2025 is a forward-thinking plan focused on self-reliance, financial inclusion, economic resilience, and sustainable growth. It emphasizes investments in agriculture, manufacturing, infrastructure, education, and digital transformation while providing relief to the middle class and small businesses. This budget aims for growth, job creation, and environmental care, laying out a path for India’s long-term success.

Reference Links:-

How to Prepare Financial Statements: A Step-by-Step Guide with Examples

Why It Is Important to Have Accounting Standards in India



CA Tushar Makkar
Author - Auditing in real life | Consulting in India, US, Europe and Middle East | Content creator | Ex-PwC | CA AIR 47 Nov' 17 | YouTuber 40k+ | Expertise in manage accounts and Audit