Key Highlights of Budget 2025

Union Finance Minister Nirmala Sitharaman presented her 8th budget on Saturday, February 1, 2025. The announcement featured several major initiatives aimed at benefiting the nation's middle class. Among the key measures is the introduction of a new tax regime that exempts salary income up to 12 lakh rupees. This article delves into these and other significant highlights of the budget 2025.

Key Highlights of Union Budget 2025

• Credit Cards for Micro Enterprises: Introduction of a scheme to facilitate access to credit cards for micro-enterprises​
• Scheme for First-time Entrepreneurs: A dedicated support program launched to help first-time entrepreneurs, especially from rural and marginalized sectors​
• Significant Enhancement of Credit Availability with Guarantee Cover: Credit guarantee cover for MSMEs raised from ₹5 crores to ₹10 crores, ensuring easier access to capital​
• Revision in Classification Criteria for MSMEs: Updates to classification rules to ensure better alignment with current industry needs and support for MSME growth​
• Removal of Seven Tariff Rates: Streamlining of customs duties by removing seven tariff rates, leaving only eight to improve efficiency​
• Implementation of a Single Cess or Surcharge: Policy proposal to apply only one cess or surcharge for most items, aimed at simplifying the tax structure​
• Tax Deduction Limit for Senior Citizens: The deduction limit for senior citizens is doubled from ₹50,000 to ₹1 lakh​
• Increase in TDS on Rent: The annual limit for TDS on rent is increased from ₹2.4 lakh to ₹6 lakh, offering relief to tenants​
• Extension of Time Limit for Filing Updated Returns: The time limit for filing updated returns is extended from 2 years to 4 years to provide more flexibility​
• Tax relief: Tax relief measures include raising the income tax rebate limit to ₹12 lakh and doubling senior citizens' tax-free interest income to ₹1 lakh.

Click on the link to download Finance Bill 2025

Click on the link to download the Budget 2025 speech presented by Finance Minister Nirmala Sitharaman

Budget 2025 announcement for MSMEs

In the Union Budget 2025, Finance Minister Nirmala Sitharaman announced several initiatives to bolster the Micro, Small, and Medium Enterprises (MSME) sector:

Customized Credit Cards for Micro Enterprises

Micro enterprises registered on the Udyam portal will receive customized credit cards with a ₹5 lakh limit. In the first year, 10 lakh such cards will be issued.

Increased Credit Guarantee Cover for MSMEs

The credit guarantee cover for micro and small enterprises has been raised from ₹5 crore to ₹10 crore, aiming to provide an additional ₹1.5 lakh crore in credit over the next five years.

Revised MSME Classification Criteria

The investment limit for MSMEs has been increased by 2.5 times, and the turnover limit by 2 times, to facilitate business growth and access to better technology and capital.

Scheme for First-Time Entrepreneurs:

A new scheme will be launched to support 5 lakh first-time entrepreneurs, including women, Scheduled Castes, and Scheduled Tribes. This initiative will provide term loans of up to ₹2 crore over the next 5 years.

Support for Labour-Intensive Sectors

• Footwear and Leather Sectors: A Focus Product Scheme will support design capacity, component manufacturing, and production of non-leather quality footwear, aiming to create employment for 22 lakh people and generate a turnover of ₹4 lakh crore.
• Toy Industry: A scheme to position India as a global hub for sustainable toy manufacturing under the 'Made in India' brand is set to enhance domestic manufacturing capabilities and encourage investment in high-quality, sustainable production practices.
• Support for Food Processing: The establishment of a National Institute of Food Technology in Bihar will promote enhanced income for farmers. Additionally, it aims to provide skill development, entrepreneurship, and employment opportunities for the youth.

Enhancing Credit Access for MSMEs and Startups:

To improve access to credit, the credit guarantee cover will be enhanced as follows:

• Micro and Small Enterprises: The cover will be increased from ₹5 crore to ₹10 crore, enabling an additional ₹1.5 lakh crore in credit over the next 5 years.
• Startups: The cover will be raised from ₹10 crore to ₹20 crore, with a reduced guarantee fee of 1% for loans in 27 key sectors crucial for Atmanirbhar Bharat.
• Exporter MSMEs: The credit guarantee cover for well-run exporter MSMEs will be extended for term loans up to ₹20 crore.

These measures aim to strengthen the MSME sector, promote entrepreneurship, and boost manufacturing and exports, contributing to India's economic growth.

Also read: Budget 2025 - Supporting MSMEs and Furthering Make in India

Budget 2025 Highlights: Manufacturing Mission – Advancing "Make in India"

The Government will establish a National Manufacturing Mission to promote "Make in India" across small, medium, and large industries. This initiative will provide policy support, execution roadmaps, and a governance and monitoring framework for both central ministries and state governments.  The Mission’s mandate will include 5 focus areas:

• Ease and cost of doing business;
• Future ready workforce for in-demand jobs;
• A vibrant and dynamic MSME sector;
• Availability of technology; and
• Quality products.

Clean Tech Manufacturing

The Mission will also support Clean Tech manufacturing. The focus will be on enhancing domestic value addition and strengthening the ecosystem for solar PV cells, EV batteries, motors and controllers, electrolyzers, wind turbines, high-voltage transmission equipment, and grid-scale batteries.

Budget 2025: Key Initiatives for Export

The Union Budget 2025 includes several key initiatives aimed at boosting exports and strengthening India's trade competitiveness. Some of the notable measures include:

Export Promotion Mission

A new Export Promotion Mission will be established with sectoral and ministerial targets. This mission will be driven by the Ministries of Commerce, MSME, and Finance. It aims to facilitate easy access to export credit, cross-border factoring support, and assist MSMEs in tackling non-tariff barriers in foreign markets.

BharatTradeNet (BTN)

A unified digital platform, BharatTradeNet (BTN), will be set up to streamline international trade documentation and financing solutions. It will complement the Unified Logistics Interface Platform and align with international practices.

Support for Integration with Global Supply Chains

The government will support the development of domestic manufacturing capacities for integration with global supply chains. Sectors will be identified based on objective criteria, and facilitation groups will be formed with industry representatives to support specific products and supply chains.

Industry 4.0 and Youth Employment Opportunities

There will be significant opportunities in Industry 4.0, requiring high skills and talent. The government will support the domestic electronics industry to leverage these opportunities, benefiting the youth.

National Framework for Global Capability Centres (GCC)

A national framework will be developed to guide states in promoting Global Capability Centres (GCC) in emerging tier 2 cities. This framework will include measures to enhance talent availability, infrastructure, and industry collaboration.

Warehousing Facility for Air Cargo

The government will facilitate infrastructure upgrades and the development of warehousing facilities for air cargo, particularly for high-value perishable horticultural products. Cargo screening and customs protocols will be streamlined to enhance ease of trade.

Budget 2025: Key Indirect Tax Reforms 

The Union Budget 2025 introduces several key changes in indirect taxes, focusing on customs duty rationalization, GST improvements, and tax compliance reforms. Here are the highlights:

Rationalization of Customs Tariff for Industrial Goods

• Reduction in Tariff Rates: Seven additional tariff rates removed, leaving only eight, including ‘zero’ rate.
• Cess Adjustments: Appropriate cess applied to maintain duty incidence, with a marginal reduction on select items.
• Simplified Surcharge Structure: Social Welfare Surcharge exempted on 82 tariff lines subject to a cess.

Sector-Specific Customs Duty Reforms

• Pharmaceuticals: 36 lifesaving drugs fully exempted from Basic Customs Duty (BCD), with six additional medicines getting a 5% concessional rate.
• Critical Minerals: BCD fully exempted on cobalt powder, lithium-ion battery waste, lead, zinc, and 12 more minerals.
• Textiles: New exemptions for shuttle-less looms; revised BCD on knitted fabrics to 20% or ₹115/kg, whichever is higher.
• Electronics:
  • BCD on Interactive Flat Panel Displays (IFPDs) increased from 10% to 20%.
  • Exemption for Open Cell TV parts to boost domestic production.
• Lithium-Ion Batteries: 63 additional capital goods exempted to support EV and mobile battery manufacturing.
• Shipping: BCD exemptions for shipbuilding extended for another 10 years.
• Telecommunication: BCD on Carrier Grade Ethernet Switches reduced from 20% to 10%.

Export Promotion Measures

• Handicrafts: Export period extended from six months to one year, with an additional three-month extension option.
•  Leather:
  • Full BCD exemption on Wet Blue Leather for domestic processing.
  • Export duty exemption on crust leather (previously 20%) to aid small tanners.
• Marine Products:
  • BCD on Frozen Fish Paste (Surimi) reduced from 30% to 5%.
  • BCD on fish hydrolysate cut from 15% to 5% to support fish and shrimp feed production.
• Railway Maintenance, Repair, and Overhaul (MRO): Extended export period for imported railway goods from six months to one year, extendable by another year.

Trade Facilitation Measures in Budget 2025

• Time Limit for Provisional Assessments: Set at two years, extendable by one year, to ensure faster resolution.
• Voluntary Compliance Scheme: Allows importers/exporters to declare post-clearance discrepancies, pay duty with interest but without penalties, unless an audit or investigation is initiated.
• Extended End-Use Compliance Timeline: Industry now has one year (instead of six months) to use imported inputs, with quarterly reporting instead of monthly.
• Extended Duration for Export of Handicrafts: The time limit for export of handicrafts manufactured from duty-free inputs is being increased from 6 months to 1 year, with a further extension of 3 months if required.
• Removal of IGCR Condition for Import of Seeds for Lab-Grown Diamonds: The Customs (Import of Goods at Concessional Rate of Duty or For Specific End Use) Rules, 2022 (IGCR) condition for customs duty exemption on import of seeds used in rough Lab-Grown Diamond manufacturing is being removed.
• Extended Time Limit for Export of Repaired Foreign-Origin Goods: The time limit for the export of foreign-origin goods imported for repairs is being extended from 6 months to 1 year, with a further 1-year extension for railway goods.
• Amendment to IGCR Rules for End-Use Compliance: Rules 6 and 7 of the Customs (Import of Goods at Concessional Rate of Duty or For Specific End Use) Rules, 2022 are being amended to:
  • Extend the end-use fulfillment period from 6 months to 1 year.
  • Reduce compliance burden by requiring only a quarterly statement instead of a monthly statement.

Union Budget 2025 Announcments on GST Amendments for trade facilitation   

Here is a summary of the amendments related to trade facilitation in the Union Budget 2025:

• Section 2 Amendments:
  • Clause (61): Allows Input Service Distributor to distribute input tax credit for inter-state supplies where tax is paid on reverse charge basis, effective from 1st April 2025.
  • Clause (69) (c): Clarifies the definitions of 'Local Fund' and 'Municipal Fund' under the term "local authority".
  • Clause (112A): New definition for "Unique Identification Marking" for the Track and Trace Mechanism.
• Amendments in Section 12 and 13: Omission of sub-sections related to the time of supply concerning vouchers.
• Amendments in Section 17: Substitution of "plant or machinery" with "plant and machinery" to be effective from 1st July 2017.
• Amendments in Section 20: Input tax credit distribution for inter-state supplies with reverse charge tax explicitly mentioned, effective from 1st April 2025.
• Amendments in Section 34: Requirement for reversing input tax credit for credit notes, if availed, by the registered recipient.
• Amendments in Section 38: Omission of the term "auto-generated" and insertion of "including" for more inclusivity in reporting input tax credit details.
• Amendments in Section 39: Enabling provision for conditions and restrictions related to return filing.
• Amendments in Sections 107 and 112: 10% mandatory pre-deposit of penalty for appeals involving only penalty demand, with no tax demand, in both Appellate Authority and Appellate Tribunal cases.
• Insertion of Section 122B: New penalties introduced for contraventions related to Track and Trace Mechanism under section 148A.
• Insertion of Section 148A: Provisions for implementing the Track and Trace Mechanism for specified commodities.
• Amendments in Schedule III: Supply of goods warehoused in Special Economic Zones or Free Trade Warehousing Zones will not be treated as supply, effective from 1st July 2017. Refund of tax already paid will not be available for such transactions.

Other Provisions:

Exemption from Service Tax: Insurance services related to the Weather Based Crop Insurance Scheme and Modified National Agricultural Insurance Scheme are exempted from service tax for the period from 1st April 2011 to 30th June 2017.

Click on the link to download Budget 2025: Comprehensive Analysis of Income Tax & GST

Budget 2025: Key Highlights on Direct Tax

The Union Budget 2025 includes several key proposals for direct taxation, with a major focus on rationalization, simplification, and compliance improvement. Some of the major highlights include:

Personal Income-Tax Reforms 

Revised Tax Slabs under New Tax Regime

The government has proposed substantial relief for the middle class through a revision of the tax slabs under the new tax regime. The updated slabs are as follows:

Rebate on Income-Tax for Residents

The income-tax rebate has been significantly enhanced under the new tax regime. For residents earning up to ₹7,00,000, no income tax is levied. The government has proposed increasing this rebate to ₹12,00,000, so that individuals with incomes up to this threshold will not have to pay tax.

Additionally, marginal relief will continue to be available for incomes slightly exceeding ₹12,00,000, providing tax relief for individuals just above this threshold.

Example Calculation: For a person with a total income of ₹8,00,000:

Present tax: ₹30,000

Proposed tax: ₹20,000

Benefit: ₹10,000

Tax after rebate: 

Here's a table showcasing the proposed tax benefit with examples for various income levels:

This reform aims to reduce the tax burden on middle-class individuals, particularly those with income up to ₹12,00,000, helping them save more of their earnings.

Learn more: Budget 2025 - Proposals related to Personal Income tax

TDS/TCS Rationalization Measures in Budget 2025

• Fewer TDS Rates & Higher Thresholds: The number of TDS rates and deduction thresholds will be reduced for better clarity and uniformity.
• Higher TDS Limits for Senior Citizens & Rent:
  • Interest Income for Senior Citizens: TDS exemption limit doubled from ₹50,000 to ₹1 lakh.
  • Rental Income: TDS threshold increased from ₹2.40 lakh to ₹6 lakh, reducing compliance burden for small taxpayers.

Changes in TCS (Tax Collected at Source)

• Higher Threshold for LRS Remittances: The TCS threshold for foreign remittances under the Liberalized Remittance Scheme (LRS) has been increased from ₹7 lakh to ₹10 lakh.
•  TCS Exemption for Education Loans: No TCS will be collected on education-related remittances funded by loans from recognized financial institutions.
•  Removal of TCS on Sale of Goods: To ease compliance, TCS will no longer apply to transactions involving the sale of goods.

Also read: Rationalisation of certain provisions of Income Tax Act  

Reduction in TDS/TCS Rates

To simplify compliance and reduce the burden on taxpayers, the government has proposed reducing the TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) rates in various sections. Below are the revised rates:

Increase in TDS/TCS Thresholds

The government also proposes increasing the thresholds for TDS/TCS in specific sections, which will reduce the number of individuals/entities required to comply with these provisions. Below are the updated thresholds:

Click here to learn more about  Budget 2025: TDS and TCS Rationalization

Higher TDS Only for Non-PAN Cases

The higher rate of TDS will now apply only to taxpayers who do not have a valid PAN, reducing compliance burdens for businesses.

Decriminalization of TCS Delays

Similar to TDS decriminalization in July 2024, TCS delays up to the filing due date will also be decriminalized, reducing penalties for businesses.

Extension of Time Limit for Filing Updated Returns

The time limit to file updated returns has been extended from 24 months to 48 months from the end of the relevant assessment year. This provides taxpayers more time to correct or update their tax returns without facing penalties. The tax payable will depend on when the updated return is filed:

• 60% of the tax and interest on additional income if filed within 24-36 months.
• 70% of the tax and interest if filed within 36-48 months.

Reporting Requirement for Crypto-Assets

The government plans to amend the tax laws to require prescribed reporting entities to report transactions related to crypto-assets. This move aims to provide better tracking and transparency around crypto-asset transactions. Furthermore, the definition of "virtual digital assets" will be aligned accordingly.

Simplification of Annual Value for Self-Occupied Property

The government proposes that if the owner of a house property occupies it as their own residence, or cannot occupy it for any reason, the annual value of the property will be considered as nil for tax purposes, simplifying the process of calculating income from house property.

Omission of TCS on Sale of Specified Goods

 To reduce the compliance burden, the government proposes to omit TCS (Tax Collected at Source) on the sale of specified goods valued over ₹50 lakh. This reduction will simplify tax filing and collection procedures for businesses and individuals dealing with high-value goods.

Removal of Higher TDS/TCS for Non-Filers

Sections 206AB and 206CCA, which impose higher TDS and TCS rates on non-filers of income tax returns, are proposed to be omitted. This will reduce the compliance burden on businesses and individuals who are required to deduct or collect tax at source.

Rationalization of "Forest Produce" Definition

The definition of “forest produce” under Section 206C(1) will be clarified to remove any ambiguity. It is also proposed that TCS be applicable only on forest produce obtained under a forest lease, simplifying the application of TCS in these cases.

Extension of Time Limit for Startups (Section 80-IAC)

The benefit under Section 80-IAC for startups will be extended for another five years. This extension will make the benefits available to eligible startups incorporated before April 1, 2030, encouraging more innovation and entrepreneurship.

Parity in Long-Term Capital Gain Tax for Non-Residents

The government has proposed bringing parity in the taxation of long-term capital gains between residents and non-residents (Foreign Institutional Investors). This will ensure that the capital gains tax treatment for foreign investors is aligned with that for domestic investors.

Simplification for Charitable Trusts/Institutions

The validity of registration for charitable trusts and institutions will be extended from 5 years to 10 years. This measure aims to reduce paperwork and compliance for smaller trusts and institutions. Additionally, the definition of "specified violation" for cancellation of registration will be rationalized, exempting minor defaults such as incomplete applications.

Taxation of Business Trusts

Business trusts (e.g., Real Estate Investment Trusts or Infrastructure Investment Trusts) will now have their income taxed at the maximum marginal rate subject to provisions of Section 112A, simplifying the tax treatment for such trusts.

Tax Relief Measures for Charitable  Trusts & Institutions 

The registration period for small charitable trusts and institutions is being increased from 5 years to 10 years, reducing their compliance burden. The government aims to ensure that minor defaults, such as incomplete applications, do not lead to severe tax consequences for charitable organizations.

Also read: Rationalisation of provisions for charitable trusts/institutions

Tax Benefit for Self-Occupied Properties

Currently, taxpayers can claim the annual value of self-occupied properties as nil only under certain conditions. The benefit will now extend to two self-occupied properties without any conditions, making it easier for homeowners to avail of tax relief.

Click on the link to download Budget 2025 Income Tax Reforms - Explained

Ease of Doing Business Initiatives in Budget 2025

• Streamlining Transfer Pricing Regulations: A new scheme will be introduced to determine the arm's length price of international transactions for a block period of three years instead of conducting yearly examinations.
• Expansion of Safe Harbour Rules: The safe harbour rules (SHR), which allow taxpayers to adopt pre-defined margins for certain international transactions, will be expanded to reduce litigation and provide tax certainty in international taxation.
• Relief for Senior Citizens with Old National Savings Scheme (NSS) Accounts: Many senior citizens have old NSS accounts that no longer accrue interest. To provide relief:
• Withdrawals made on or after August 29, 2024, will be exempt from tax.
• NPS Vatsalya accounts will receive similar tax treatment as regular NPS accounts, subject to overall limits.
• Digitalization of Appellate Order Processing: As promised in the July 2024 Budget, all tax-related processes, including appellate orders, will be fully digitalized and paperless within the next two years.

Other Highlights Announced in Union Budget 2025

• Grameen Credit Score Framework: A new framework for rural India’s credit scoring.
• FDI in Insurance: Limit raised to 100% for foreign direct investment.
• Housing Fund: ₹15,000 crore allocated for completing 1 lakh housing units.
• Atmanirbharta in Oil Seeds: Six-year mission to boost domestic oil seed production.
• Cotton Yield Improvement: Aiming for better cotton yields with a five-year initiative.
• Kisan Credit Card: Loan limit raised to ₹5 lakh for farmers.
• Atal Tinkering Labs: To be set up in schools for innovation and skill development.
• Broadband Internet: Provision for internet access in government secondary schools.
• IIT Infrastructure: Expansion of IIT infrastructure, including IIT Patna.
• Daycare Cancer Centres: 200 centres are to be set up in district hospitals by 2026.
• Duty on Life-Saving Drugs: Duty on six life-saving drugs was reduced to 5%.
• MSME Credit Guarantees: Coverage for MSME loans raised from ₹5 crore to ₹10 crore.
• PPP Mode Projects: Three-year projects to be implemented in public-private partnership (PPP) mode.
• Interest-Free Loans: ₹1.5 lakh crore allocated for infrastructure reforms in states.
• Regional Airports: Over 100 new regional airports are planned.
• UDAN 2.0: Connecting 120 new airports, with a focus on Northeast and Bihar.
• Export Promotion Mission: Easier access to export credit through a new mission.
• Tariff Rates: Removal of seven tariff rates, leaving eight remaining.
• Investment-Friendly Index: New index to promote state-level competition for investments.
• Fiscal Deficit: Target set at 4.8% of GDP for FY 2025.
• Capital Expenditure: ₹10.18 lakh crore allocated for capital expenditure.
• Term Loan for Women Entrepreneurs: Loans up to ₹2 crore are available for first-time entrepreneurs.
• Nutritional Support: Nutritional aid for over 8 crores children and 1 crore lactating mothers
• National Manufacturing Mission: New policy support for manufacturing.
• Clean Technology Manufacturing Mission: Initiative to boost clean technology.
• Nuclear Energy Mission: Focus on nuclear energy research and development.
• Jal Jeevan Mission: Extended until 2028 to ensure water access.
• Centre of Excellence in AI: ₹500 crore allocated to set up AI research centre.
• EV Battery Manufacturing: Additional capital goods for EV battery production.
• Visa Fee Waivers: Certain tourist groups are exempt from visa fees.

 For your quick reference, please find attached a PDF that provides a comprehensive analysis of the income tax and GST changes outlined in the Union Budget 2025.

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