Union Finance Minister Smt. Nirmala Sitharaman presented the Union Budget 2025-26 on February 1, outlining the government’s roadmap for accelerating growth, fostering inclusivity, and strengthening India’s position as a global economic powerhouse. With total expenditure set at ₹50.6 lakh crore and net tax receipts estimated at ₹28.4 lakh crore, the budget focuses on four key growth engines—Agriculture, MSMEs, Investment, and Exports.
The agricultural sector receives a boost with the ‘Prime Minister Dhan-Dhaanya Krishi Yojana’ and a six-year ‘Mission for Aatmanirbharta in Pulses.’ MSMEs benefit from enhanced credit access and a new scheme for first-time entrepreneurs. Investment in infrastructure, education, and digital connectivity remains a priority, while exports are strengthened through the BharatTradeNet platform. Tax rationalization, incentives for domestic manufacturing, and support for innovation align with India’s long-term vision of ‘Viksit Bharat.’ The budget underscores self-reliance, job creation, and sustainable growth as key national priorities.
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Union Minister of Finance and Corporate Affairs Smt. Nirmala Sitharaman presented her eighth consecutive Union Budget in Parliament on February 1, 2025. The budget marks the government’s efforts to accelerate growth, secure inclusive development, stimulate private sector investments, boosting household confidence, and enhance the spending power of India’s growing middle class.
The Union Finance Minister informed the Parliament that for FY 2025-26, the total receipts other than borrowings and the total expenditure are estimated at ₹35 lakh crore and ₹50.6 lakh crore respectively. The net tax receipts are estimated at ₹28.37 lakh crore.
The Budget made a series of announcements for businesses, including credit enhancement for MSMEs, startups, establishment of Deep Tech Funds, income tax relief, etc. It identifies Agriculture, MSMEs, Investment, and Exports as vital engines driving the journey to Viksit Bharat, powered by reforms and guided by inclusivity.
Key enablers/engines in the journey towards Viksit Bharat
Agriculture: the 1st Engine
According to the Economic Survey 2024-25 presented, India’s agriculture sector continues to outperform expectations. The survey noted a 3.5% growth in the sector during the second quarter of FY25, underscoring its vital contribution to the Indian economy.
The budget 2025-26 has introduced ‘Prime Minister Dhan-Dhaanya Krishi Yojana’ in collaboration with states, covering 100 districts. This initiative aims to boost agricultural productivity, encourage crop diversification, enhance post-harvest storage, improve irrigation facilities, and ensure access to both long-term and short-term credit.
Additionally, a comprehensive multi-sectoral ‘Rural Prosperity and Resilience’ programme will be launched in partnership with states. This initiative seeks to address agricultural underemployment through skill development, investment, and technology, while also strengthening the rural economy. The programme will focus on creating ample opportunities for rural women, young farmers, rural youth, marginal and small farmers, and landless families.
To enhance self-reliance in pulse production, the government has announced a six-year “Mission for Aatmanirbharta in Pulses,” with a special focus on Tur, Urad, and Masoor. Central agencies such as NAFED and NCCF will procure these pulses for the next four years, ensuring stability for farmers.
The budget also emphasizes agriculture and allied activities through initiatives like the Comprehensive Programme for Vegetables & Fruits, the National Mission on High Yielding Seeds, and a five-year Mission for Cotton Productivity.
Additionally, the FM announced an increase in the loan limit under the modified interest subvention scheme for Kisan Credit Cards, raising it from ₹3 lakh to ₹5 lakh.
The Kisan Credit Card Scheme (KCC) was introduced to provide farmers with easy access to affordable credit for their agricultural needs so as to meet their short term/long term cultivation requirements, post-harvest expenses, consumption requirements, etc. The Modified Interest Subvention Scheme (MISS) provides concessional Short-term Agri-loans to farmers for crop and allied activities, providing a 7% interest rate on loans up to ₹3 lakh, with an additional 3% subvention for timely repayment, thereby bringing down the effective rate to 4%. MISS also includes post-harvest loans against NWRs for small farmers with KCCs.
MSMEs
The Finance Minister described MSMEs as the second engine of development, contributing 45% of the country’s exports. To support MSMEs in achieving greater economies of scale, technological advancement, and improved access to capital, the investment and turnover limits for MSME classification have been increased by 2.5 and 2 times, respectively. Additionally, measures to enhance credit availability with expanded guarantee cover have been introduced.
A new scheme has also been announced to support 5 lakh first-time entrepreneurs from among women, Scheduled Castes, and Scheduled Tribes. Under this initiative, eligible beneficiaries will have access to term loans of up to ₹2 crore over the next five years.
Furthermore, the Government will launch a scheme to establish India as a global hub for toys under the ‘Made in India’ brand. To further promote domestic manufacturing, a National Manufacturing Mission will be set up, covering small, medium, and large industries, in alignment with the “Make in India” initiative.
Investment
The Union Finance Minister highlighted investment as the third engine of growth, focusing on people, the economy, and innovation.
Investment in People:
Investment in the Economy:
Investment in Innovation:
Exports
Exports have been identified as the fourth key driver of India’s economic growth. To boost exports, the government is launching an Export Promotion Mission, jointly driven by the Ministries of Commerce, MSME, and Finance. This mission will specifically support MSMEs in accessing and thriving in the export market.
The Finance Minister has proposed ‘BharatTradeNet’ (BTN), a digital public infrastructure for international trade, serving as a unified platform for trade documentation and financing solutions.
The government is also committed to strengthening domestic manufacturing capabilities to seamlessly integrate with global supply chains. This includes supporting the domestic electronics industry to capitalize on opportunities arising from Industry 4.0. Furthermore, a National Framework is proposed to encourage the establishment of Global Capability Centers in emerging tier-2 cities.
To facilitate the export of high-value perishable goods, the government will invest in upgrading air cargo infrastructure and warehousing facilities, with a focus on horticultural produce.
The budget aims to improve ease of doing business by introducing a scheme for determining arm’s length price of international transaction for a block period of three years. This aligns with global ‘best’ practices. Additionally, the expansion of safe harbor rules aims to enhance certainty in international taxation.
The benefits of the existing tonnage tax scheme are also proposed to be extended to inland vessels.
To support the start-up ecosystem, the period of incorporation has been extended by five years. Additionally, to encourage infrastructure investment, the Budget extends the deadline for investments in Sovereign Wealth Funds and Pension Funds by five years, until March 31, 2030.
The Union Budget also proposes measures for the rationalization of Customs tariffs on industrial goods. It is proposed to:
To provide relief on the imports of drugs and medicines, the Budget fully exempts 36 lifesaving drugs used for treating cancer, rare diseases, and chronic illnesses from Basic Customs Duty (BCD). Additionally, 37 medicines and 13 new drugs and medicines under Patient Assistance Programs will also be exempt from BCD if supplied free to patients.
With a view to boost domestic manufacturing and value addition, the Basic Customs Duty (BCD) on 25 critical minerals unavailable domestically was exempted in July 2024. The Budget 2025-26 exempts cobalt powder, lithium-ion battery waste and scrap, lead, zinc, and 12 additional critical minerals.
To support domestic textile production, two more types of shuttle-less looms have been added to the fully exempted textile machinery category. Additionally, the BCD on knitted fabrics covering nine tariff lines has been revised from “10% to 20%” to “20% or ₹115 per kg, whichever is higher.”
In a move to address the inverted duty structure and promote “Make in India” initiative, BCD on Interactive Flat Panel Display (IFPD) is increased to 20% and on Open cells the BCD has been reduced to 5%. To further incentivize domestic manufacturing of open cells, the BCD on their components has been eliminated.
For enhancing lithium-ion battery manufacturing in the country, 35 additional capital goods for EV battery manufacturing and 28 more capital goods for mobile phone battery production have been included in the list of exempted capital goods.
The Union Budget 2025-26 also extends the BCD exemption on raw materials, components, consumables, and parts for shipbuilding for another ten years. Additionally, the BCD on Carrier Grade Ethernet switches has been reduced from 20% to 10%, bringing it in line with Non-Carrier Grade Ethernet switches.
To promote exports, the Union Budget 2025-26;
In addition, the Union Finance Minister has significantly increased the budgetary allocation for the Department for Promotion of Industry and Internal Trade (DPIIT), which oversees foreign direct investment policy, startup initiatives, and the promotion of manufacturing. As per the Budget documents, the allocation for DPIIT has increased by 64% to ₹13,145.06 crore for 2025-26, up from the revised estimate of ₹8,011 crore in 2024-25.
Key segments receiving increased allocations for the next fiscal include:
The Finance Minister has also allocated ₹2,500 crore in the Budget 2025-26 for a new scheme to develop plug-and-play industrial parks. This initiative aims to create investment-ready industrial parks with comprehensive infrastructure.
Additionally, funds for the Industrial Development of the Union Territory of Jammu and Kashmir have been raised to ₹300 crore for 2025-26. The Finance Minister also announced that the government will launch a new Funds of Funds for Startups with a contribution of ₹10,000 crore.
Through this Budget, the governmentt aims to drive economic growth while ensuring that the benefits of increased public spending and tax rationalization reach all sectors of the economy. With significant tax reforms, the Budget also addresses the needs of the middle class, which forms the majority of India’s population.
On the personal tax front, tax slabs and rebates have been revised under the default (new tax) regime. As a result, no income tax will be payable on earnings up to ₹12 lakh, except for income taxable at special rates, such as capital gains.
Key domestic taxation proposals include extending the sunset clause for eligible startups to claim a tax holiday and bringing inland vessels under the existing tonnage tax regime. Additionally, the threshold limits for TDS provisions have been increased to prevent low-value transactions from being subject to TDS compliance.
The corporate tax rates remain unchanged
A new presumptive tax regime has been introduced for non-residents offering technology or services to support electronics manufacturing in India. Moreover, activities limited to purchasing goods from India are now excluded from significant economic presence (SEP) provisions, aligning them with business connection rules.
Conclusion
The Union Budget 2025-26 seeks to balance economic growth, fiscal responsibility, and social inclusivity. It emphasizes investment, innovation, regulatory reforms, and tax rationalization to drive sustainable growth, boost consumption, and encourage private sector participation. Key highlights include income tax rebates and schemes for the MSME sector, women, farmers, education, investments and export promotion, all aimed at enhancing self-reliance in line with the Atmanirbhar Bharat vision.
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