Union Budget 2025 FAQs: Tax, Sectors, and Investment Insight

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The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman on February 1, 2025, introduces significant reforms aimed at stimulating economic growth, providing tax relief to the middle class, and bolstering various sectors. Below, we address key questions related to the budget:

1. What are the main highlights of the new budget?

The Union Budget 2025 introduces several key initiatives focusing on economic growth, tax reforms, and innovation. Here's an overview of the major highlights:

a. Tax reforms

• Zero Income Tax for Incomes up to ₹12 Lakh: Individuals earning up to ₹12 lakh (or up to ₹12.75 lakh, which takes into account a basic standard deduction of ₹75,000) annually will be exempt from income tax under the new tax regime, aiming to increase disposable income and stimulate consumption.

b. Research and innovation:

• Private sector-driven research initiative: An allocation of ₹20,000 crore has been made to implement a research, development, and innovation initiative led by the private sector, encouraging advancements in various fields.
• PM research fellowship: To promote technological research, the budget introduces ten thousand fellowships for scholars in prestigious institutions like IITs and IISc, fostering innovation and academic excellence.

c. Tariff revisions:

• Review of Import Tariffs: The government is considering revising import tariffs on over 30 items, including luxury cars, solar cells, and chemicals, potentially leading to increased imports from the United States. This move aims to reduce average tariffs and strengthen trade relations.

d. Economic growth and middle-class support:

• Stimulating Domestic Demand: The budget introduces significant personal tax cuts targeting the middle class to boost household consumption, savings, and investment, thereby stimulating economic growth amid global uncertainties.

These measures reflect the government's commitment to fostering economic growth, supporting the middle class, and encouraging innovation across various sectors.

2. What is the new income tax slab for 2025-26?

In the Union Budget for the fiscal year 2025-26, the Indian government has introduced significant changes to the income tax structure under the new tax regime. These reforms aim to increase disposable income for individuals, thereby stimulating consumption and economic growth.

The revised income tax slabs are designed to provide substantial relief to taxpayers across various income brackets:

• Up to INR 12,00,000: Nil
• INR 12,00,001 to INR 15,00,000: 10%
• INR 15,00,001 to INR 20,00,000: 15%
• INR 20,00,001 to INR 25,00,000: 20%
• Above INR 25,00,000: 30%

This restructuring aims to provide substantial tax relief to the middle class and simplify the tax system.

Additionally, the standard deduction has been increased from ₹50,000 to ₹75,000. This enhancement means that individuals with an income up to ₹12,75,000 will effectively pay no income tax after accounting for the standard deduction.

These adjustments are part of the government's broader strategy to simplify the tax system and provide relief to the middle class, thereby encouraging higher spending and investment within the economy.

3. Which sectors benefits from budget 2025?

The Union Budget 2025-26 introduces several initiatives aimed at boosting various sectors of the economy. Here's an overview of the key beneficiaries:

1. Infrastructure development:

• Increased capital expenditure: The budget allocates ₹11.21 lakh crore (3.1% of GDP) for capital expenditure in FY2025-26, focusing on the development of urban infrastructure, housing, and investment. This substantial investment aims to modernize the nation's infrastructure and stimulate economic growth.

2. Renewable energy:

• Increased Allocation: The budget increases the allocation for new and renewable energy by ₹9,251 crore, bringing the total to ₹26,549 crore. This move underscores the government's commitment to transitioning to clean energy sources and reducing reliance on fossil fuels.

3. Healthcare:

• Enhanced funding: The healthcare sector receives an allocation of ₹98,311 crore, up from ₹89,287 crore in the previous fiscal year. This increase is intended to strengthen medical care accessibility and infrastructure across the country.

4. What is cheaper in budget 2025?

The budget proposes reductions in customs duties for various items to make them more affordable:

• Electronics: Exemptions for open cells used in LED/LCD TVs.
• Textiles: Exemptions for looms to promote the textile industry.
• Electric Vehicles: Exemptions for capital goods used in manufacturing lithium-ion batteries.
• Leather Goods: Full exemption from basic customs duties for wet blue leather to promote domestic consumption and exports.

5. What are the key changes in personal banking introduced in the Union Budget 2025?

The Union Budget 2025 has introduced several key changes in personal banking to simplify processes and reduce compliance burdens:

• Simplification of KYC Process: The KYC process will be simplified with the rollout of a revamped Central KYC Registry in 2025.
• Rationalization of TDS/TCS Provisions: The budget aims to rationalize TDS/TCS provisions to ease difficulties and reduce compliance burdens.
• Removal of Higher TDS/TCS Rates for Non-Filers: The provisions requiring higher TDS/TCS rates for non-filers of income tax returns will be omitted from April 1, 2025.
• Relaxation in TCS on Foreign Remittances: The threshold for TCS on foreign remittances will be increased from INR 7 lakhs to INR 10 lakhs, and TCS will be removed for remittances from loans obtained for education.
• Exemption from Prosecution for Delayed TCS Payment: Relief from prosecution will be provided if TCS payment is made on or before the due date of filing the quarterly TCS return.
• Doubling of TDS Exemption for Senior Citizens: The TDS exemption limit on bank deposits for senior citizens has been from INR 50,000 to INR 1,00,000 per year.
• Higher TDS Exemption on Rental Income: The TDS exemption limit on rental income has been increased from INR 2.4 lakh to INR 6 lakh.

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6. From when is the new budget applicable?

The provisions of the Union Budget 2025-26 will come into effect from April 1, 2025, marking the beginning of the new fiscal year.

7. How does the Union Budget affect the stock market?

The Union Budget 2025 has resulted in a mixed response in the stock market. Personal income tax relief measures are anticipated to boost consumption, benefiting sectors such as FMCG, automobiles, and consumer durables. However, the modest increase in capital expenditure has led to subdued performance in infrastructure-related stocks. Overall, the market has remained relatively flat, reflecting a balance between positive consumption-driven momentum and concerns over limited infrastructure spending.

Additionally, the government’s focus on green energy initiatives has sparked interest in renewable energy stocks, with investors optimistic about long-term growth prospects in this sector.

8. What is the new tax regime in India?

The new tax regime introduced in the Union Budget 2025-26 offers revised income tax slabs with zero tax for incomes up to INR12 lakh. This regime aims to simplify the tax structure and provide relief to taxpayers, particularly the middle class. Taxpayers can choose between the new regime and the existing one, depending on which is more beneficial for them.

9. What is the fiscal deficit target for 2025-26?

The government has set a fiscal deficit target of 4.4% of GDP for the fiscal year 2025-26, a reduction from the revised 4.8% for the current year. This move aims to balance fiscal prudence with economic support.

10. What measures are included to support startups, MSME and innovation?

The Union Budget 2025 has introduced several significant changes for the MSME sector:

1. Revised MSME Classification Criteria: Investment and turnover limits have been increased to 2.5 and 2 times respectively.
2. Enhanced Credit Guarantee:
• Micro and Small Enterprises: From ₹5 Crore to ₹10 Crore.
• Additional Credit: ₹1.5 Lakh Crore over 5 years.
3. Guarantee Fee Moderation: Reduced to 1% for loans in 27 focus sectors under Atmanirbhar Bharat.
4. Support for Exporter MSMEs: Term loans up to ₹20 Crore for well-managed exporter MSMEs.
5. Fund of Funds: A ₹10,000 Crore fund to support startups.
6. New Schemes: Boost for footwear, leather, and toy manufacturing sectors.

These measures aim to enhance credit availability, support exports, and promote growth in specific manufacturing sectors.

11. How does the budget plan to manage government debt?

The government aims to reduce the debt-to-GDP ratio from 57.1% to 50% by March 2031, aligning with global fiscal trends to boost foreign investor confidence. This move is expected to enhance the country’s credit rating, lower borrowing costs, and create more fiscal space for public investments. Achieving this target will require strict fiscal discipline and effective management of public finances.

12. How does the Union Budget 2025 impact taxation for High Net Worth Individuals (HNIs)?

The Union Budget 2025 introduces several changes impacting High Net Worth Individuals (HNIs):

• Personal Income Tax: The new tax regime allows up to ₹12.75 lakhs as tax-free income.
• Capital Gains Tax: Specific changes to capital gains tax are expected to be announced later.
• NRI Taxation: Returning NRIs' foreign income and investments are exempt from taxation, while Indian-sourced income continues to be taxed.
• Lower TCS on International Remittances: The budget reduces the Tax Collected at Source (TCS) on international remittances under the RBI's Liberalized Remittance Scheme (LRS).

These measures aim to make India more attractive for HNIs and NRIs, encouraging investment and economic growth.

Final Thoughts

Union Budget 2025 is packed with impactful changes that will shape the financial landscape. Whether you're an individual taxpayer, a business owner, or an HNI, this budget offers key opportunities and adjustments to take note of. It's about simplifying tax structures and opening new avenues for growth. Stay updated, understand the implications, and use these insights to make informed financial decisions.

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*Disclaimer:*This video is based on publicly available information/news report on Union Budget 2025-26 and is for informational purposes only. Please consult your advisor for financial/taxation matters, DBS Bank does not advise on any tax aspects.