Key Facts:
The Union Budget of India, also referred to as the Annual Financial Statement in Article 112 of the Constitution of India is the annual budget of the Republic of India set by Ministry of Finance for the following financial year.
The Government presents it on the first day of February so that it can be materialized before the beginning of new financial year in April.
Prime Highlights:
Individuals earning up to 1.28 million rupees ($14,800) annually will be exempt from income tax, up from 700,000 rupees.
The government also lowered tax rates for those earning above the new threshold to boost domestic demand and economic growth.
Key Background:
India’s Finance Minister Nirmala Sitharaman presented the government’s annual budget for 2025-26, focusing on tax relief for the middle class and measures to stimulate economic growth. With the country’s economy facing challenges from inflation and low private investment, the budget aims to increase domestic demand and support critical sectors like agriculture and manufacturing.
A key highlight of the budget is the significant reduction in income tax for the middle class. Sitharaman announced that individuals earning up to 1.28 million rupees ($14,800) annually will no longer be required to pay taxes, up from the previous threshold of 700,000 rupees. In addition, tax rates for those earning above this threshold have been lowered. This move is expected to leave more money in the hands of consumers, encouraging household consumption, savings, and investment.
The tax cuts are anticipated to result in a loss of 1 trillion rupees ($11.6 billion) in government revenue, but the government is offsetting this with a modest increase in capital spending. Capital expenditure will rise to 11.21 trillion rupees in the coming fiscal year, compared to 10.18 trillion rupees in the current year.
Sitharaman also emphasized measures to support vulnerable groups such as youth, women, and farmers. To enhance agricultural productivity, the government will introduce a nationwide program targeting high-yield crops, including pulses and cotton. The program aims to assist 17 million farmers and increase subsidized credit available to them. In addition to these measures, the budget includes plans to register gig workers and facilitate their access to healthcare and welfare programs. The gig economy, projected to employ over 23 million people by 2030, will be provided with identity cards and easier access to social benefits.
A new fund for startups and a commitment to promoting innovation in collaboration with the private sector were also announced. Furthermore, a Nuclear Energy Mission was unveiled, aiming to develop at least 100GW of nuclear power by 2047 to support India’s transition to clean energy. This budget reflects the government’s focus on boosting consumption and long-term economic growth amid global uncertainties.
