Budget 2025 Highlights: Key Announcements and Detailed Analysis

The Union Budget 2025 has introduced significant tax reforms, trade facilitation measures, and sectoral investments aimed at driving economic growth. Here’s a comprehensive breakdown of the key announcements across taxation, indirect tax proposals, and various sectors for you. 

Direct Tax Proposals

1. Changes in Tax Structure Under the New Tax Regime 2025

The government has revamped the 2025 income tax slab under the new tax regime to make it more attractive for taxpayers. The new structure offers reduced tax rates for middle-class taxpayers while incentivizing them to opt for the new regime over the old one. The aim is to simplify taxation and enhance compliance by reducing exemptions and deductions while maintaining lower tax rates.

2. Increase in Rebate Under Section 87A

The rebate limit under Section 87A has been raised, ensuring that individuals earning up to a specified threshold pay zero tax. This move benefits salaried employees and small taxpayers by increasing their disposable income. The revised rebate helps lower-income groups manage inflation better while encouraging savings and investments.

3. Rationalisation of TDS/TCS

The government has introduced streamlined provisions for Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) to simplify tax compliance. Key changes include reduced TDS rates on specific transactions and easier documentation for businesses, thereby addressing difficulties faced by taxpayers in sectors such as e-commerce, real estate, and professional services.

4. Extension of Time-Limit for ITR-U

The deadline for filing updated Income Tax Returns (ITR-U) has been extended from the previous two-year limit to allow taxpayers more time to rectify errors, disclose omitted income, and ensure full compliance. This move encourages voluntary compliance and prevents unnecessary legal disputes.

5. Introduction of the Arm’s Length Price Scheme

To ensure fair taxation of transactions between related entities, the government has introduced the Arm’s Length Price (ALP) scheme. This is particularly relevant for multinational corporations and transfer pricing regulations, reducing the scope for tax evasion while maintaining a fair tax structure.

6. Withdrawal of Amount from National Savings Scheme (NSS) – Exempt

Investors in the NSS can now withdraw amounts without any tax liability, promoting long-term savings. This measure is expected to encourage more participation in small savings schemes by reducing the tax burden on withdrawals.

7. Extension of Tax Benefits Under Section 80CCD(1B) to NPS Vatsalya Accounts

The benefits under Section 80CCD(1B), previously available only for individual NPS accounts, have now been extended to contributions made to NPS Vatsalya Accounts. This ensures additional tax savings for parents investing in their children’s future through the National Pension System.

8. Omission of Sections 206AB and 206CCA

These sections, which mandated higher TDS/TCS rates for non-filers of income tax returns, have been removed. This omission simplifies compliance for businesses and individuals while reducing administrative burdens.

9. Insertion of Section 44BBD

A new presumptive taxation scheme under Section 44BBD has been introduced for specific businesses, allowing them to pay tax on a predefined percentage of turnover rather than maintaining extensive records. This move benefits small business owners and professionals by simplifying tax filing.

Indirect Tax Proposals

1. Rationalisation of Customs Tariff and Duty Inversion

The government has taken steps to correct duty inversions by adjusting customs tariffs on various imported goods. This move is aimed at protecting domestic manufacturers and reducing dependence on imported raw materials.

2. Healthcare Relief – Duty Exemptions on Medicines

Essential medicines, including those for rare diseases, cancer treatment, and critical care, have been granted full or partial duty exemptions. This will reduce healthcare costs and improve accessibility to life-saving drugs.

3. Boosting Domestic Manufacturing

Customs duty changes have been introduced to promote the domestic manufacturing of electronic goods, automobile components, and textile products. The revised duty structures will help India strengthen its ‘Make in India’ initiative while creating more jobs.

4. Export Promotion Initiatives

New incentives have been rolled out to boost the exports of handicrafts, leather goods, marine products, and Maintenance, Repair, and Overhaul (MRO) services. These measures aim to make Indian exports more competitive globally while supporting traditional industries.

5. Key Customs Reforms for Trade Facilitation

Trade procedures have been simplified, reducing paperwork and speeding up customs clearance processes. The move is expected to enhance ease of doing business and attract more foreign investment.

6. Amendments in the CGST Act, 2017

• Amendments in Section 107 & 112: Streamlining of GST appeals to speed up dispute resolution.
• Insertion of Section 122B: Introduction of penalties for fraudulent GST claims.
• Amendments in Section 34 & 38: Improvements in credit note issuance and input tax credit claims.

Sector-Wise Highlights

1. Agriculture and MSMEs

• Increased budget allocation for agricultural research and rural development.
• Subsidies and loan facilities for small and marginal farmers to improve productivity.
• MSMEs to receive extended credit support and easier loan approvals.

2. Investments

a) Investment in People

• Higher allocation for education and skill development programs.
• Expansion of government healthcare schemes and infrastructure.

b) Investment in Economy

• Increased capital expenditure on roads, railways, and smart city projects.
• Focus on renewable energy, including solar and wind power projects.

c) Investment in Innovation

• More funding for AI, robotics, and semiconductor research.
• Special incentives for startups in technology and green energy sectors.

3. Exports

• Export-friendly policies and financial support for small exporters.
• Strengthening of export credit and risk insurance mechanisms.

Budget 2025 highlights several tax relief measures, economic reforms, and sectoral investments aimed at boosting growth and ease of doing business. The Union Budget 2025 introduces a progressive tax environment, particularly with the new tax regime 2025 and changes in the 2025 income tax slab. Businesses and taxpayers should carefully analyze these changes under the income tax 2025 framework to optimize their financial strategies. The government’s approach balances economic growth, welfare measures, and fiscal discipline, making this budget a crucial step towards a self-reliant and future-ready India.