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Home / IAS Preparation / Union Budget 2025-2026: Income Tax Slabs Highlights, Analysis & Key Takeaways For UPSC

Union Budget 2025-2026: Income Tax Slabs Highlights, Analysis & Key Takeaways For UPSC

Last Updated on Mar 17, 2025
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Union Budget 2025-2026 is a statement of strategic vision for India's economic future, presented by the Finance Minister. The budget balances fiscal discipline with inclusive growth in the face of global challenges and domestic aspirations. The budget focuses on key sectors - economic growth, employment generation, digital transformation, and controlling inflation - while investing in green technologies and rural development. With a robust focus on building resilience in both the economy and society, the Union Budget 2025-26 looks to form the basis for a sound, diversified, and sustainable future for India.

The Union Budget holds significant relevance for the UPSC Civil Services Examination, particularly under General Studies Paper III. This encompasses Economic Development, Government Budgeting, and inclusive growth.

Download the Union Budget Highlights 2025-26 PDF!

A Complete Analysis of the Union Budget 2025-26 - Watch Now!

Union Budget 2025: Overview

The Union Budget 2025, presented by the Finance Minister, aims to strengthen India's economic growth trajectory and address key challenges like inflation, unemployment, and fiscal consolidation. The budget focuses on boosting infrastructure development, enhancing social welfare schemes, and promoting innovation and digitization. A significant emphasis is placed on sustainability, with increased investments in renewable energy and green technologies. For jobs creation, the budget proposes supporting MSME and startups. Health and education sectors will be expanded along with improved rural development, agricultural reforms, and tax reforms, which have been simplified and will focus on widening the tax base and making the system efficient. The budget intends to balance prudence in finance with the demand to drive in a growth manner, which seeks resilience and diversity for the economy under global uncertainty.

Budget Estimates 2025-26

  • For the fiscal year 2025-26, the total receipts, excluding borrowings, are estimated to be ₹34.96 lakh crore, while the total expenditure is projected at ₹50.65 lakh crore. The net tax receipts are anticipated to be ₹28.37 lakh crore.
  • The fiscal deficit for the year is expected to be 4.4 percent of the Gross Domestic Product (GDP). To finance the fiscal deficit and other expenditures, the gross market borrowings are estimated at ₹14.82 lakh crore.
  • Additionally, a significant focus has been placed on capital expenditure, with an allocation of ₹11.21 lakh crore, which constitutes 3.1 percent of the GDP for the fiscal year 2025-26.

Know more on the Key Highlights of the Union Budget 2024-25!

Key Focus Areas of the Union Budget 2025

To achieve the vision of Viksit Bharat, the Union budget 2025 focuses on transformative reforms across six domains. These are: 

  • Taxation
  • Power sector
  • Urban development
  • Mining
  • Financial sector
  • Regulatory reforms.

Union Budget 2025 Highlights

Some of the major highlights of the Union Budget 2025 has been given below:

  • Inflation Management: India's inflation remains low, stable, and moving towards the 4% target.
  • Youth Employment and Skilling: PM’s Package of 5 schemes with an outlay of ₹2 lakh crore to facilitate employment, skilling, and opportunities for 4.1 crore youth over 5 years.
  • Economic Priorities: Sustained efforts on 9 priorities to achieve the vision of 'Viksit Bharat,' generating ample opportunities for all.
  • Budget Focus: Emphasis on employment, skilling, MSMEs, and the middle class.
  • Income Tax Relief:
    • Major relief to 4 crore salaried persons and pensioners.
    • Standard deduction increased from ₹50,000 to ₹75,000 in the new tax regime 2025.
    • Deduction on family pension increased from ₹15,000 to ₹25,000.
    • Corporate tax for foreign companies was cut from 40% to 35%.
    • Angel tax abolished for all classes of investors.
    • TDS on most payments merged from 5% to 2%.
  • Capital Gains and Custom Duty:
    • Capital gain exemption limit raised to ₹1.25 lakh per annum.
    • Custom duty on X-ray panels, mobile phones, and PCBA reduced to 15%.
    • Custom duty on precious metals including gold and silver brought down to 6%.
  • Corporate Tax Compliance:
    • More than 58% of corporate tax receipts received under the new structure.
    • Two-thirds of individual income tax payers shifted to the new structure of income tax.
  • Agriculture and Allied Sectors:
    • Release of 109 high-yielding and climate-resilient varieties of 32 field and horticulture crops.
    • Organizing natural farming for 1 crore farmers in the next two years.
    • Allocation of ₹1.52 lakh crore to agriculture and allied sectors.
  • Industrial Training and Education: Upgradation of 1,000 Industrial Training Institutes.
  • Eastern Region Development: Formulation of 'Purvodaya' plan for the all-round development of Bihar, Jharkhand, West Bengal, Odisha, and Andhra Pradesh.
  • Women's Development: Over ₹3 lakh crore allocated to schemes for women and girls.
  • Rural Development:
    • ₹2.66 lakh crore earmarked for rural development, infrastructure and all the others.
    • The Phase IV of PMGSY, which was recently launched by Prime Minister Shri Narendra Modi to provide all-weather connectivity to 25,000 habitations in rural areas.
  • MSMEs: Raised the limit of MUDRA loan to ₹20 lakh from ₹10 lakh.
  • Housing and Urban Development: Housing for All 1 Cr. Urban Poor and Middle Class Families with An Investment of ₹10 Lakh Crores Under PM Awas Yojana Urban 2.0
  • Internship Opportunities: A Comprehensive Programme to Provide Internship Opportunities to 1 Cr. Youths in 5 Years in the Best of 500 Companies
  • Space Economy: Upscale the Space Economy by 5 times in the next 10 years with a ₹1,000 crores venture capital fund.

Download the Key Features of the Union Budget 2025-26 PDF!

Key Priorities in the Union Budget 2025-26

The union budget 2025 includes significant allocations and announcements across various sectors. It focuses on infrastructure development, technological advancement, and boosting economic growth.

Agriculture

Focused on enhancing productivity, sustainability, and farmer welfare through targeted initiatives and resources.

  • Prime Minister Dhan-Dhaanya Krishi Yojana - Developing Agri Districts Programme: Launch of a program partnering with states, covering 100 districts with low productivity, moderate crop intensity, and below-average credit parameters, benefiting 1.7 crore farmers.
  • Building Rural Prosperity and Resilience: Comprehensive multi-sectoral program addressing under-employment in agriculture through skilling, investment, technology, and invigorating the rural economy.
    • Phase-1 to cover 100 developing agri-districts.
  • Aatmanirbharta in Pulses
    • Launch of a 6-year "Mission for Aatmanirbharta in Pulses" focused on Tur, Urad, and Masoor.
    • NAFED and NCCF to procure these pulses from farmers over the next 4 years.
  • Comprehensive Programme for Vegetables & Fruits: Promoting production, efficient supplies, processing, and remunerative prices for farmers, in partnership with states.
  • Makhana Board in Bihar: Establishment of a Makhana Board to improve production, processing, value addition, and marketing of makhana.
  • National Mission on High Yielding Seeds: Aiming to strengthen the research ecosystem, targeted development, and propagation of high-yield seeds with more than 100 seed varieties.
  • Fisheries: Framework for sustainable harnessing of fisheries from the Indian Exclusive Economic Zone and High Seas, focusing on the Andaman & Nicobar and Lakshadweep Islands.
  • Mission for Cotton Productivity: A 5-year mission to improve productivity and sustainability of cotton farming, promoting extra-long staple cotton varieties.
  • Enhanced Credit through KCC: Loan limit under the Modified Interest Subvention Scheme to be increased from ₹3 lakh to ₹5 lakh for loans through the Kisan Credit Card.
  • Urea Plant in Assam: New plant with an annual capacity of 12.7 lakh metric tons to be set up at Namrup, Assam.

MSMEs

Promoting growth, competitiveness, and innovation in micro, small, and medium enterprises.

  • Revision in Classification Criteria for MSMEs: Enhancement of investment and turnover limits for classification of all MSMEs by 2.5 and 2 times, respectively.
  • Credit Cards for Micro Enterprises: Customized credit cards with ₹5 lakh limit for micro enterprises registered on the Udyam portal; 10 lakh cards to be issued in the first year.
  • Fund of Funds for Startups: New Fund of Funds with an expanded scope and a fresh contribution of ₹10,000 crore.
  • Scheme for First-time Entrepreneurs: New scheme for 5 lakh women, Scheduled Castes, and Scheduled Tribes first-time entrepreneurs to provide term loans up to ₹2 crore over five years.
  • Focus Product Scheme for Footwear & Leather Sectors: Scheme to enhance productivity, quality, and competitiveness of India’s footwear and leather sector, facilitating employment for 22 lakh persons, generating turnover of ₹4 lakh crore, and exports of over ₹1.1 lakh crore.
  • Measures for the Toy Sector: Scheme to create high-quality, innovative, and sustainable toys, making India a global hub for toys.
  • Support for Food Processing: Establishment of the National Institute of Food Technology, Entrepreneurship, and Management in Bihar.
  • Manufacturing Mission - Furthering "Make in India": National Manufacturing Mission announced to cover small, medium, and large industries.

Investments

Boosting economic growth through strategic investments in people, infrastructure, and innovation.

Investing in People

  • Saksham Anganwadi and Poshan 2.0: Enhanced cost norms for nutritional support.
  • Atal Tinkering Labs: Establishment of 50,000 Atal Tinkering Labs in government schools over the next 5 years.
  • Broadband Connectivity to Government Secondary Schools and PHCs: Broadband connectivity under the Bharatnet project.
  • Bharatiya Bhasha Pustak Scheme: Digitally available Indian language books for school and higher education.
  • National Centres of Excellence for Skilling: 5 National Centres of Excellence for skilling with global expertise.
  • Expansion of Capacity in IITs: Additional infrastructure to facilitate education for 6,500 more students in the 5 IITs started after 2014.
  • Centre of Excellence in AI for Education: New Centre of Excellence in Artificial Intelligence with an outlay of ₹500 crore.
  • Expansion of Medical Education: Addition of 10,000 seats in medical colleges and hospitals next year, with a goal of 75,000 seats over five years.
  • Day Care Cancer Centres in All District Hospitals: Establishment of Day Care Cancer Centres in all district hospitals over the next 3 years, with 200 centers in 2025-26.
  • Strengthening Urban Livelihoods: Scheme for socio-economic upliftment of urban workers to improve their incomes and livelihoods.
  • PM SVANidhi: Enhanced loans, UPI-linked credit cards with a ₹30,000 limit, and capacity-building support.
  • Social Security Scheme for Welfare of Online Platform Workers: Identity cards, registration on the e-Shram portal, and healthcare under PM Jan Arogya Yojna for gig-workers.

Investing in the Economy

  • Public Private Partnership in Infrastructure: Infrastructure-related ministries to come up with a 3-year pipeline of projects in PPP mode, with states encouraged to participate.
  • Support to States for Infrastructure: ₹1.5 lakh crore proposed for 50-year interest-free loans to states for capital expenditure and reforms.
  • Asset Monetization Plan 2025-30: Second plan for 2025-30 to generate ₹10 lakh crore for new projects.
  • Jal Jeevan Mission: Extended until 2028 with an enhanced total outlay.
  • Urban Challenge Fund: ₹1 lakh crore fund announced for "Cities as Growth Hubs," "Creative Redevelopment of Cities," and "Water and Sanitation," with an allocation of ₹10,000 crore proposed for 2025-26.
  • Nuclear Energy Mission for Viksit Bharat
    • Amendments to the Atomic Energy Act and Civil Liability for Nuclear Damage Act.
    • New Nuclear Energy Mission for research and development of Small Modular Reactors (SMR) with an outlay of ₹20,000 crore.
  • Shipbuilding
    • Revamp of the Shipbuilding Financial Assistance Policy.
    • Inclusion of large ships above a specified size in the infrastructure harmonized master list (HML).
  • Maritime Development Fund: ₹25,000 crore fund set up with up to 49% government contribution, and the balance from ports and private sector.
  • UDAN - Regional Connectivity Scheme: Modified scheme to enhance connectivity to 120 new destinations over the next 10 years, supporting helipads and smaller airports in hilly, aspirational, and North East region districts.
  • Greenfield Airport in Bihar: Announcement of new airports in Bihar, expansion of Patna airport capacity, and a brownfield airport at Bihta.
  • Western Koshi Canal Project in Mithilanchal: Financial support for the Western Koshi Canal ERM Project in Bihar.
  • Mining Sector Reforms: Policy for recovery of critical minerals from tailings.
  • SWAMIH Fund 2: ₹15,000 crore fund to complete 1 lakh dwelling units quickly with government, bank, and private investor contributions.
  • Tourism for Employment-led Growth: Development of 50 top tourist sites with states through a challenge mode.

Investing in Innovation

  • Research, Development, and Innovation: ₹20,000 crore allocated for a private sector-driven initiative.
  • Deep Tech Fund of Funds: Exploration of funds for catalyzing next-generation startups.
  • PM Research Fellowship: 10,000 fellowships for technological research in IITs and IISc with enhanced financial support.
  • Gene Bank for Crops Germplasm: 2nd Gene Bank with 10 lakh germplasm lines for future food and nutritional security.
  • National Geospatial Mission: Development of foundational geospatial infrastructure and data.
  • Gyan Bharatam Mission: Survey, documentation, and conservation of over 1 crore manuscripts.

Exports 

Strengthening export promotion and enabling international trade growth.

  • Export Promotion Mission: Sectoral and ministerial targets driven by the Ministries of Commerce, MSME, and Finance.
  • BharatTradeNet: Unified platform for trade documentation and financing solutions.
  • National Framework for GCC: Guidance framework for promoting Global Capability Centres in tier 2 cities.

Financial Sector Reforms and Development

Implementation of measures to enhance financial inclusion, improve asset quality of banks, and foster a more robust and resilient financial system.

  • FDI in Insurance Sector: Raising the FDI limit to 100% for companies investing the entire premium in India.
  • Credit Enhancement Facility by NaBFID: Setting up of a 'Partial Credit Enhancement Facility' for corporate bonds for infrastructure.
  • Grameen Credit Score: Public Sector Banks to develop a framework for serving SHG members and rural people.
  • Pension Sector: Coordination forum for developing pension products.
  • High-Level Committee for Regulatory Reforms: Review of all non-financial sector regulations, certifications, licenses, and permissions.
  • Investment Friendliness Index of States: Launch of the index to promote competitive cooperative federalism.
  • Jan Vishwas Bill 2.0: Decriminalization of over 100 provisions in various laws.

Direct Tax Reforms

Introduction of a new tax regime with increased exemption limits and simplified compliance to reduce the tax burden on middle-class taxpayers and enhance disposable income.

Tax Reforms

  • Direct and Indirect Tax Forgone: Government to forgo Rs 1 lakh crore in direct taxes and Rs 2,600 crore in indirect taxes due to changes in tax rates.
  • Income Tax Relief: No income tax payable up to Rs 12 lakh under the new regime, benefiting the middle class significantly.
  • Senior Citizens: Interest income tax deduction limit doubled to Rs 1 lakh; TDS on rent limit increased to Rs 6 lakh.
  • Income Tax Slabs: New income tax slabs under the new regime, that is, Rs 4-8 lakh at 5%, Rs 8-12 lakh at 10%, Rs 12-16 lakh at 15%, Rs 16-20 lakh at 20%, Rs 20-24 lakh at 25%, and above Rs 24 lakh at 30%.

Ease of Tax Compliance

  • Updated ITR Facility: Time limit for filing updated returns extended from 2 years to 4 years to encourage voluntary compliance.
  • TDS and TCS Relaxations: Rationalized tax deduction at source (TDS) and similar relaxation on Tax Collected at Source (TCS).

Ease of Doing Business

A proposal to introduce a scheme for ascertaining the arm's length price of international transactions for a block period of three years will be introduced. The scope of safe harbor rules will be enlarged to reduce litigation and provide certainty in international taxation. Withdrawing funds by an individual from the National Savings Scheme (NSS) on or after 29th August, 2024, shall not be liable to tax. NPS Vatsalya accounts will also be treated on par with the normal NPS accounts, subject to overall limits.

Employment and Investment

  • Tax Certainty for Electronics Manufacturing Schemes: A presumptive taxation regime for non-residents who provide services to resident companies establishing or operating electronics manufacturing facilities will be introduced. A safe harbour for tax certainty for non-residents storing components for supply to specified electronics manufacturing units will also be established.
  • Tonnage Tax Scheme for Inland Vessels: Benefits of the existing tonnage tax scheme will be extended to inland vessels registered under the Indian Vessels Act, 2021, to promote inland water transport.
  • Extension for Incorporation of Start-Ups: The period of incorporation for start-ups to avail benefits will be extended by 5 years, allowing start-ups incorporated before 1.4.2030 to benefit.
  • Alternate Investment Funds (AIFs): Certainty of taxation on gains from securities for Category I and Category II AIFs which invest in infrastructure and similar areas will be made available.
  • Expansion of Investment Date for Sovereign and Pension Funds: The investment date for Sovereign Wealth Funds and Pension Funds will be further extended by five years to 31st March, 2030, so that funding is encouraged from these sources to the infrastructure sector also.

Indirect Tax Reforms

The Union Budget 2025-26 proposes to abolish seven tariff rates, besides the seven abolished in the budget for 2023-24, leaving only eight remaining tariff rates including the zero rate. Appropriate cess would be levied to keep the effective duty incidence intact, with some exceptions. There will be no more than one cess or surcharge levied; thus, the Social Welfare Surcharge on 82 tariff lines subject to a cess will be exempted. The indirect taxes forgone are likely to be about ₹2,600 crore.

Support to Domestic Manufacturing and Value Addition

  • Critical Minerals: Full exemption of Basic Customs Duty (BCD) on cobalt powder, lithium-ion battery waste, lead, zinc, and 12 other critical minerals to secure supply chains.
  • Technical Textiles: Two more types of shuttle-less looms to be added to the exemption list of import duty, and a greater impetus to be given towards domestic production at competitive prices.
  • Electronics: BCD raised by 10% to 20% on flat LED TV panels.
  • Lithium-ion Batteries and Mobile Phones: A total of 35 capital goods related to lithium-ion batteries and 28 items related to mobile phones are added in the list.
  • Internet Switches: BCD for carrier-grade internet switches to reduce 20% to 10%.
  • Duty-Free Inputs: Increase nine items in the duty-free input list to facilitate enhanced production capabilities.
  • Provisional Assessments: Tie up a time limit of 2 years extendable by 1 year to provide exceptional relief, where provisional assessments under the Customs Act would reduce uncertainty and cost.
  • End-use imports: The time limit for planning and utilization of imports in the industry is increased from 6 months to 1 year.

Export Promotion

  • Handicraft Goods: The export period will be extended to one year instead of six months, and there will be a further three months extension if necessary. Nine items will be added to the list of duty-free inputs.
  • Leather Sector: BCD on wet blue leather will be fully exempted, and crust leather will be exempted from the 20% export duty.
  • Marine Products: The BCD on frozen fish paste (Surimi) for manufacture and export of its analog products will be reduced from 30% to 5%. The BCD on fish hydrolysate for manufacture of fish and shrimp feeds will be reduced from 15% to 5%.
  • Domestic MROs for Railway Goods: Railways MROs shall have the same type of import facilitation as that of aircraft and ships MROs with regard to the import of repair items. The six-monthly time limit for the export of such items shall be extended up to one year, and further, extendable up to a one-year period.

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Union Budget 2025-26 FAQs

The sectors benefiting from the 2025 budget include agriculture, MSMEs, infrastructure, education, healthcare, manufacturing, technology, and exports.

Lifesaving drugs and medicines, critical minerals, and components for EV and mobile phone batteries are some of the items that become cheaper in the 2025 budget due to exemptions and reduced customs duties.

The budget deficit for 2025 is estimated to be 4.4% of GDP.

The budget date for 2025 is 1st February 2025.

The new income tax slab for 2025-26 is as follows: income up to ₹4 lakh: Nil; income from ₹4 to 8 lakh: 5%; income from ₹8 to 12 lakh: 10%; income from ₹12 to 16 lakh: 15%; income from ₹16 to 20 lakh: 20%; income from ₹20 to 24 lakh: 25%; income above ₹24 lakh: 30%.
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