Finance Minister Nirmala Sitharaman unveiled the Union Budget 2025, which detailed the government’s financial strategy for the next year with an emphasis on social welfare, infrastructure, growth, and agriculture. The key elements include efforts to reduce the fiscal deficit as well as increased focus on digital transformation, green energy, and job growth. Considerable funds have been allocated for education, healthcare, and rural development in an effort to address socioeconomic disparities. Industry insiders have mostly praised the Union Budget 2025 for its progressive stance, especially in light of the declaration that income up to Rs. 12 Lakh and particularly the focus on green energy, technology, and infrastructure development. “India’s 2025 Budget makes clear that the country will not succumb to inertia as the world’s economic environment evolves. In a contentious global environment, where protectionism and domestic deregulation will converge unpredictably, the Budget signals India’s intent to chart its own course, embracing regulatory reform while strengthening global competitiveness. This agenda is a transformative step forward, and if executed effectively, it can solidify India as a steady global business hub in the face of geopolitical uncertainty.
CUSTOMS,INCOME TAX, CESS AND MORE
The FM mentioned several welcome steps on the Customs front keeping in mind ease-of-business by way of rationalizing and simplifying the customs rate structure by reducing the number of tariff slabs, ensuring that no more than one cess gets levied on a particular imported item by exempting Social Welfare Cess on several items as well as introduction of steps like a 3-year time limit for finalization of provisional assessments and allowing importers to file voluntary post-import declarations to correct past short-payments without a fear of penalty.
The speech of the Finance Minister unveiling Budget 2025-26 reveals a bold attempt of the government to revisit the direction of tax policy. A wide variety of measures relating to tax have been announced in the budget speech itself, which is rare but welcome. It is heartening to note the assurance that a new income tax law will be introduced for parliamentary review within the next few days particularly because its avowed purpose is to simplify tax law and is directed towards reducing disputes. The cherry on the cake is the significant expansion of the nil tax lab and thereby taking many in the middle class out of the tax net. This will clearly expand the scope of disposable income in the hands of the middle class, thereby boosting the consumption. This is not a populist measure given that the number of taxpayers who will now be excluded from the tax net are more in number but their per capita tax contribution is low. Hence, this measure will reduce the tax disputes on a personal Income tax front to wide cross-section of the citizens.
The tax policy outlined in the budget is clearly on a positive note and expected to lift the business morale and induce further investments.
Budget 2025 brings significant reforms to simplify taxes and provide relief to middle-class taxpayers. For businesses, the introduction of a streamlined transfer pricing scheme to determine arm’s length prices (ALP) for three-year block, expanded safe harbour rules, and extended benefits for start-ups are progressive moves to reduce compliance burdens and promote ease of doing business.
The announcement of a new income tax law is a welcome development. While previous attempts have faced challenges, we are hopeful that this version will simplify tax administration, reduce disputes, and create a more efficient and taxpayer-friendly system.
The government should urgently focus on simplifying taxation laws, which have become increasingly cumbersome to comply with. Additionally, collaboration with state governments is essential to reduce compliance burdens and promote deregulation at the local level, as local requirements often pose the greatest challenges for businesses. A practical approach to achieving this could be the digitisation of processes and the implementation of AI tools to expedite approvals—an approach already being adopted in other countries.
Budget 2025 proposes a significant shift in the settlement scheme under the Customs Act, 1962 with the creation of an Interim Board for Settlement. Three senior officers appointed by the Central Board of Indirect Taxes and Customs, all holding the rank of Chief Commissioner or above, will make up the Board. Notably, unlike the Settlement Commission’s prior form, this Board will function without judicial members. This change signifies a shift of the settlement process from a judicial to an executive function. Effective from 1st April 2025, the Settlement Commission will cease to function, and all pending applications will be taken over by the Interim Board from the stage at which they stood, ensuring continuity and efficiency in the settlement process.
The benefit of claiming two house properties as self-occupied is now proposed to be made available without any restrictive conditions attached. The earlier conditions required that either the owner actually occupies or that he is prevented from so occupying on account of his employment or profession being elsewhere. The proposal is likely to provide much needed relief to taxpayers who have not been able to let out their house properties due to any reason whatsoever, and who were earlier liable to pay taxes despite not generating any income thereon.
The time limit for use of imported inputs is being increased from 6 months to 1 year under the Import of Goods at Concessional Rate of Duty rules, 2017. Time limit of 2 years with further extended to 1 year has been prescribed for finalisation of provisional assessments. These amendments will provide more certainty to the trade. It is hoped that this applies to past cases also.
ENERGY SECTOR
To promote domestic manufacturing and employment generation critical steps like further exemptions on import of critical minerals like cobalt, basic customs duty exemptions for Lithium-Ion battery manufacture for mobile phones as well as EVs, extension of benefits for domestic MRO sector and continuation of benefits for ship-building and ship-breaking industries have been announced which should go a long way to boost these sectors.
A budget to take note of! It should boost key manufacturing sectors and specially the EV market. The revision in the tariff rates and reduction in the category would lead to lesser disputes in terms of classification and applicable rates leading to greater certainty and ease of doing business in India.
SKILL DEVEOPMENT
The Government of India has acknowledged the importance of Global Capability Centers to India’s growth story by announcing the launch of a national guidance framework to support the expansion of these centers and focusing on upskilling through the creation of Centers of Excellence. This is a positive step to maintain India’s leadership in innovation.
A ₹500 crore investment in the Centre of Excellence for AI in Education, the creation of five National Centres of Excellence for Skilling, the inclusion of 10,000 new medical seats, and 6,500 new seats across IITs are some of the major efforts. These actions will assist establish India as a worldwide leader, foster innovation, generate a skilled labor force, and improve talent development.
INDUSTRIES AND MANUFACTURING
The new announcement’s sustained boost to the industrial sector and India’s growing manufacturing share indicate significant growth potential.” Building a robust and competitive manufacturing ecosystem will require a targeted strategy in addition to tax breaks. It is encouraging that the government has consistently placed a strong emphasis on increasing manufacturing’s market share. The PM eDrive policy, along with continued support for clean technologies, batteries, and EVs, is anticipated to significantly boost industry growth, even though specific instructions are still pending.
A good sign is the Finance Minister’s plan to establish a national framework of guidelines for Global Capability Centers (GCCs), particularly for newly developed Tier 2 cities. India’s GCC market is expected to grow significantly, therefore this move comes at a good moment.
Policy formulation for developing GCC in Tier 2 cities and setting up of SWAMIH Fund 2 to ensure completion of 1 lakh homes is an excellent step that will also ensure opportunities for last-mile funding for fund houses.
The Union Budget clearly demonstrates that semiconductor and electronic manufacturing remains the key focal growth areas for the nation. With a direct eye on addressing the taxation concerns faced by the global supply chain players in the chip and semiconductor equipment manufacturing space, the Government has announced two key developments: (a) a presumptive taxation regime for non-residents who provide services to resident company that is establishing/operating an electronics manufacturing facility; and (b) safe harbour for tax certainty for non-residents who store components for supply to specified electronic manufacturing units.
The Hon’ble Finance Minister has announced the second fund, which is expected to invest INR 15,000 crores. This builds on the success of the Special Window for Affordable and Mid-Income Housing (SWAMIH) Fund-I, which delivered over 50,000 houses until 2024 by extending priority debt funding to stressed housing projects. It is anticipated that the Fund will support the development and delivery of more than 100,000 apartments and offer blended loan facilities to such stalled real estate projects nationwide. This last-mile funding will significantly slow down the decline of the debt and investment that current lenders and homebuyers have placed in these projects.
Along with the government, this will give private investors a feasible way to participate in investments. Hopefully, the investment will also receive preferential treatment, much like Fund I, in the event that the relevant real estate SPV becomes insolvent under the IBC framework.
The Hon’ble Finance Minister has announced the second fund, which is expected to invest INR 15,000 crores. This builds on the success of the Special Window for Affordable and Mid-Income Housing (SWAMIH) Fund-I, which delivered over 50,000 houses until 2024 by extending priority debt funding to stressed housing projects. It is anticipated that the Fund will support the development and delivery of more than 100,000 apartments and offer blended loan facilities to such stalled real estate projects nationwide. This last-mile funding will significantly slow down the decline of the debt and investment that current lenders and homebuyers have placed in these projects.
Along with the government, this will give private investors a feasible way to participate in investments. Hopefully, the investment will also receive priority treatment like Fund I in the event that the relevant real estate SPV becomes insolvent under the IBC framework.
Specific exemptions have been granted to electronic goods in accordance with the “make in India” policy. For example, parts of open cells that were previously subject to 2.5% BCD are now fully exempt. Additionally, capital goods exemptions have been granted to encourage the domestic production of lithium-ion batteries and ships in India, including shipbreaking services.
The current budget supports the goals of ease of doing business ,promoting domestic manufacturing, rationalizing tariff structures, and providing a flip to exports of goods from India.
FOREIGN INVESTMENTS
The Union Budget 2025 has made a laudable move by acknowledging the urgent need to assist revive India’s consumption engine and bring relief to taxpayers. The middle class will have more disposable money as a result of the proposed income tax slab modifications, which will boost the domestic demand growth story, which had started to slow down. Investor confidence will be increased for India Inc. by the emphasis on improved ease of doing business, including the expeditious approval of corporate mergers, the liberalization of FDI in insurance up to 100%, the further simplicity of compliances, and the decriminalization of 100 more provisions under business laws.
The government’s dedication to inclusive growth is demonstrated by noteworthy announcements to give MSMEs and new business owners from disadvantaged groups a financing boost.
The plan to raise FDI in insurance to 100% is a much-needed and timely reform.” In line with the regulatory goal of “Insurance for All” by 2024, this action will greatly increase capital inflow into the industry and improve insurance penetration. It is also a positive step that regulations will be made simpler. A thorough examination of the tiny print is necessary, nevertheless, especially with regard to the need that the full premium be invested in India. We also expect additional operational direction from IRDAI about the next steps.
JAN VISHAWAS BILL 2.0
The decisions made by the finance minister demonstrate a strong commitment to making doing business in India easier. A more efficient and transparent regulatory environment is indicated by actions such as expediting mergers and restructurings, reviewing non-financial rules thoroughly, introducing an investment-friendliness index, and passing the Jan Vishwas Bill. Together with the emphasis on trust-based governance, these efforts ought to greatly boost investor confidence and increase India’s appeal as a corporate destination.
AGRICULTURE SECTOR
A major step toward modernizing Indian agriculture is the Finance Minister’s announcement about farmers’ access to international best practices. In addition to increasing yields and farm profits, this project could fortify the link between agriculture and more wholesome food systems for future generations. A dual focus on production and health can be greatly improved by this connection between agriculture and health, which also gives Indian and international companies more chances for technical cooperation.
MSME/INDIA AS A TOY MANUFACTURING HUB
For India’s manufacturing and export-driven growth, the expansion of MSME investment and turnover limitations is revolutionary. With MSMEs accounting for 37% of manufacturing and 45% of exports, this action will increase loan availability, spur employment growth, and improve competitiveness internationally. Strengthening supply networks, formalizing enterprises, and promoting size without fear of losing incentives would all help India become a global manufacturing powerhouse more quickly.
ARTIFICIAL INTELLIGENCE
A strategic vision is indicated by the government’s ongoing investment in AI, which is now being extended to education. It acknowledges that artificial intelligence (AI) is a key force behind future social and economic development rather than only a technical breakthrough. By equipping the next generation with AI skills, this project will spur innovation and expansion in a number of industries.
TCS AND TDS
Notable changes include higher TDS exemption limits for rent and senior citizens’ interest income, tax exemption for taxpayers with income up to INR 12 lakh, and tax-free withdrawals for senior citizens from the National Savings Scheme after August 2024.” The Budget also eliminates TCS for remittances connected to education that are financed by loans from specific financial institutions, increases the TCS threshold for LRS to INR 10 lakh, and gives taxpayers additional time to file revised income tax returns.
INVESTMENTS AND STARTUPS
Following the strategy in the last several budgets, the government has once again placed a strong emphasis on Indian entrepreneurs with the goal of fostering innovation through technology and improving access to funding and investment. The government has created a new fund with a broader scope and a new contribution of 10,000 Cr rupees in order to do this. Over 9 lakh crore would be committed to these funds of funds. Given that the vast majority of young people are leaning towards startup India, this government action would undoubtedly bring us one step closer to Viksit Bharat.
ATMANIRBHAR BHARAT/ MAKE IN INDIA
The government has launched a new manufacturing effort within the “Make in India” campaign to offer broad policy assistance and a structured framework to help small, medium, and large-scale companies in accordance with the goals of the Budget 2025. The goal of this project is to create an environment for grid-scale batteries, solar PV cells, and electrolysers. India will benefit from increased local manufacturing, job creation, technological improvements, sustainability, competitiveness, foreign investment, infrastructure development, and improved energy security as a result of this.
FINANCING
A ₹30,000 UPI-linked credit card and increased loan limits will be part of the redesigned PM Swanidhi Scheme. In order to provide insurance coverage for about 1 crore gig workers, the government would also make it easier for them to register on the e-Shram platform and obtain identity cards. This is an obvious step by the government to make India a fin tech hub and encourage financial digital technology among the populace.
MEDICINES AND DRUGS
A complete exemption from BCD is a positive step because it would provide patients access to more life-saving medications. It is a good idea to propose the addition of 200 new cancer centers nationwide. This will significantly lower treatment expenses and increase cancer patients’ access to the newest treatment techniques when combined with import duty reductions and enrollment in patient assistance programs.
GLOBAL CAPABILITY CENTRES
There is great potential in the focus on high-tech services and manufacturing growth, both on the supply side through the focus on GCCs and electronics manufacturing, as well as on the supply side through infrastructure like the Tinkering Labs.
INFRASTRUCTURE DEVELOPMENT
The announcement that ₹1.5 lakh crores will be given to states for 50-year interest-free loans for infrastructure development is a very good thing since it will increase the states’ capacity to spend capital on infrastructure development, which will boost the economy.
The UDAAN scheme’s expansion to 120 new locations would greatly improve connectivity and encourage the growth of infrastructure in growing cities and smaller towns. Businesses, industries, and tourists will be drawn in by improved air connectivity, which will raise demand for both commercial and residential real estate. Land values will probably increase as these locations grow, attracting investments in the real estate, retail, and hospitality industries. Additionally, the expansion will generate employment opportunities, increasing disposable income and the need for high-quality housing.
All things considered, this project will hasten urbanization and increase the appeal of unexplored real estate markets to investors and developers.
The measures in the Union Budget 2025 show that the government is still committed to improving the infrastructure sector’s access to finance through the National Bank for Financing Infrastructure and Development (NaBFID). Long-term infrastructure finance, including the rise of bonds and derivatives markets to further support infrastructure expansion, is anticipated to be greatly aided by this. It is also suggested that NaBFID serve as a market maker to guarantee bond market liquidity and offer creative credit improvement options. NaBFID, which places a high priority on sustainable finance, is well-positioned to make a substantial contribution to the construction of climate-resilient infrastructure, which would increase project financing and foster economic growth in India.
Last-mile connectivity is given top priority in Budget 2025, which calls for internet access for all government schools and primary health facilities under BharatNet. India should anticipate a quicker rollout of internet in underserved areas as a result of BharatNet being named a “special project” under Right of Way.
NPS VATSALYA SCHEME
A very welcome feature that will motivate many taxpayers to choose the NPS Vatsalya Scheme is the benefit of deduction under Section 80CCD and the opportunity to partially withdraw the specified sum in certain circumstances.
