Union Budget 2025 Highlights Explained

The Union Budget 2025-26 brings key reforms that mainly aim to drive economic growth, support startups and MSMEs, and boost private sector investments. A major highlight is the removal of income tax liability for individuals earning up to ₹12 lakh annually under the new tax regime.

The budget also focuses on infrastructure, manufacturing, financial regulations, and exports to strengthen India’s position as a global economic powerhouse.

To get a comprehensive idea of the key changes and highlights of the Union Budget 2025, keep scrolling this guide.

Changes in Tax Structure of 2025

The government has given significant relief to the middle class by modifying the tax brackets in the new tax system. The revised brackets for 2025 are outlined below:

Budget 2025 Announcement for MSMEs

In the Union Budget 2025, Finance Minister Nirmala Sitharaman declared a range of measures to strengthen the Micro, Small, and Medium Enterprises (MSME) sector.

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Customised Credit Cards for Micro Enterprises

Microenterprises that are registered on the Udyam portal will be able to obtain customized credit cards with a maximum limit of ₹5 lakh. The plan includes the issuance of 10 lakh of these cards in the inaugural year.

Increased Credit Guarantee Cover for MSMEs

The credit guarantee coverage for micro and small enterprises has been enhanced from ₹5 crore to ₹10 crore. This change is expected to facilitate an additional ₹1.5 lakh crore in credit over the upcoming five years.

Revised MSME Classification Criteria

The investment threshold for MSMEs has been elevated by 2.5 times, while the turnover limit has doubled. This adjustment aims to promote business expansion and improve access to advanced technology and capital.

Scheme for First-Time Entrepreneurs

A new initiative will be launched to support 5 lakh first-time entrepreneurs, including women and individuals from Scheduled Castes and Scheduled Tribes. This program will offer term loans up to ₹2 crore over the next five years.

Support for Labour-Intensive Sectors

To promote job creation and growth in sectors with high employment potential, the government introduced several initiatives in labour-intensive industries:

• Toy Industry: A scheme aimed at establishing India as a global hub for sustainable toy manufacturing will strengthen domestic production capabilities and attract investment for high-quality, sustainable practices under the ‘Made in India’ brand.
• Footwear and Leather Industry: A special product-focused scheme will enhance design capacity, component manufacturing, and production of non-leather footwear, aiming to generate employment for 22 lakh people and achieve a turnover of ₹4 lakh crore.
• Food Processing Sector: A National Institute of Food Technology will be set up in Bihar to improve farmers' income and offer skill development, entrepreneurship, and employment opportunities for the youth.

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Enhancing Credit Access for MSMEs and Startups

To make credit more accessible, the credit guarantee cover will be increased as follows:

• Micro and Small Enterprises: The coverage will rise from ₹5 crore to ₹10 crore, providing an additional ₹1.5 lakh crore in credit over the next five years.
• Startups: The cover for startups will go up from ₹10 crore to ₹20 crore, with a reduced guarantee fee of 1% for loans in 27 key sectors vital for Atmanirbhar Bharat.
• Exporter MSMEs: Well-performing exporter MSMEs will benefit from an extended credit guarantee cover for term loans up to ₹20 crore.

Income Tax Rebate Under Section 87A

As per the new Budget 2025, the income tax rebate has been notably raised from ₹25,000 to ₹60,000. This adjustment allows individuals earning up to ₹12,00,000 to qualify for a full tax rebate, leading to no tax obligation.

Omission of Sections 206AB and 206CCA

Sections 206AB and 206CCA were eliminated in the Union Budget 2025. These sections imposed increased TDS and TCS rates—either double the standard rate or 5% on individuals who did not file their tax returns and had a total TDS or TCS amounting to ₹50,000 or more.

Although these measures were designed to encourage tax compliance, they created significant obstacles for businesses and small taxpayers, as verifying whether returns were filed became quite challenging. The decision to remove these sections aims to ease the compliance burden and streamline the tax process, with these changes scheduled to take effect on April 1, 2025.

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TDS or TCS Rationalisation Measures in Budget 2025 

The Union Budget 2025 suggested simplifying the Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) systems to help alleviate compliance difficulties for taxpayers, particularly those in the middle-income bracket. To streamline the taxation process, the government has also increased the threshold limits for different TDS sections. The proposed modifications include the following:

Key Initiatives for Export in Budget 2025 

The Union Budget 2025 introduces several measures to boost exports and enhance India's trade competitiveness.

• Export Promotion Mission

This initiative aims to set specific sectoral and ministerial goals to enable cross-border factoring assistance, easier access to export credit, and aid for MSMEs in navigating non-tariff challenges in international markets.

• Bharat Trade Net (BTN)

A unified digital platform named ‘BharatTradeNet’ (BTN) will be established to streamline trade documentation and financing for international trade. This system will support integration with global supply chains.

• National Framework for Global Capability Centres (GCC)

This framework will serve as a guideline for states to encourage the establishment of Global Capability Centers in emerging tier 2 cities.

• Air Cargo Warehousing

The initiative focuses on improving infrastructure and establishing warehousing solutions for air cargo, particularly for high-value perishable horticultural products.

Extension of Time Limit for Submitting Income Tax Returns

The deadline for filing updated returns has been extended from 24 months to 48 months from the close of the relevant assessment year. This offers taxpayers additional time to amend or update their tax returns without incurring penalties. The tax payable will vary based on when the updated return is submitted:

• 60% of the tax and interest on the extra income if filed within 24 to 36 months.
• 70% of the tax and interest if filed within 36 to 48 months.

Conclusion

The Union Budget 2025 introduces a range of transformative measures to enhance India’s global competitiveness. Key reforms, such as tax relief for middle-class individuals, expanded credit access for businesses, and initiatives to promote exports, will provide a strong foundation for sustained growth.

Additionally, the simplification of this tax process reflects the government’s commitment to fostering a thriving business environment. 

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