Finance Minister Nirmala Sitharaman on Saturday unveiled “transformative” tax reforms that ranged from a simpler income tax law to higher TCS threshold for remittances and income tax benefits for middle class.
Sitharaman in 2025-26 Budget promised to bring a simpler, less voluminous new law to replace six decades old law governing income tax, saying it will have the spirit of “Nyay” (justice) and will work on the principle of “trust first, scrutinise later”.
She also extended the time limit to 4 years for individuals filing updated tax returns. Updated returns are filed by taxpayers who had omitted to report their correct income. Currently, such returns can be filed within two years of the relevant assessment year.
Nearly 90 lakh taxpayers have voluntarily updated their incomes by paying additional tax.
Over the past 10 years, our government has implemented several reforms for convenience of tax payers, such as faceless assessment, tax payers charter, faster returns, almost 99 per cent returns being on self-assessment, and Vivad se Vishwas scheme.
Sitharaman in her Budget speech said the objectives of her taxation proposal are reforms in Personal Income Tax with special focus on middle class, rationalisation of TDS/TCS for easing difficulties and voluntary compliance.
The Budget increased the threshold for tax deduction at source for better clarity and uniformity.
Individuals earning up to Rs 12 lakh in a year will not have to pay any taxes after she raised the exemption threshold from Rs 7 lakh. An additional Rs 75,000 standard deduction is available for the salaried class.
Presenting her eighth straight budget, she also altered tax slabs for people earning above this threshold to help save up to Rs 1.1 lakh in taxes for those with income up to Rs 25 lakh in a year.
The raising of the rebate leads to 1 crore people not having to pay any tax, she said.
The overall tax slab rejig will benefit 6.3 crore people, or more than 80 per cent of taxpayers.
“The new structure will substantially reduce taxes on the middle class and leave more money in their hands, boosting household consumption, savings and investment,” Sitharaman said presenting what was dubbed as ‘reformist’ budget for the next fiscal in Lok Sabha.
The Budget for April 2025 to March 2026 fiscal (FY26) proposed to raise foreign investment limit in insurance sector to 100 per cent from current 74 per cent and continued spending spree on infrastructure while raising allocations for social sectors as well as providing for measures for poor, youth, farmers and women.
All this she did while managing to stick to the fiscal consolidation roadmap, projecting a fiscal deficit of 4.4 per cent of the GDP in FY26 as against an estimated 4.8 per cent in the current year ending March 31.
Commenting on the announcements, Prime Minister Narendra Modi said it is a “people’s budget” that fulfils the dreams of every Indian and said that it is a “force-multiplier” that will boost consumption, investment and growth.
“The budget lays a strong foundation to increase savings and make citizens partners in development,” he said.
Sitharaman’s budget has proposals aimed at boosting both consumption and investment, which in turn are expected to give a flip to domestic economic activity, protecting the growth outlook amidst global uncertainties. While maintaining the thrust on infrastructure development, it also continued to provide increasing support to the MSME and the agricultural sector.
Also announced were duty cuts on intermediaries and certain lifesaving drugs.
To balance the revenue lost, she budgeted a modest increase in capital spending at Rs 11.21 lakh crore in the next financial year compared to a lowered Rs 10.18 lakh crore in current fiscal. Besides, an increase in dividend expected from the Reserve Bank and other government-owned financial institutions will also help to contain the losses.
The budget comes against the backdrop of the Indian economy growing at its weakest pace since pandemic and rising geopolitical risks particularly with the new US President Donald Trump threatening to impose widespread tariffs including on India.
The 6.4 per cent GDP growth estimated for the current fiscal and 6.3 to 6.8 per cent in the next are well below the 8 per cent growth needed to meet the ambitious goal of making India a developed nation by 2047.
“Our endeavour will be to keep the fiscal deficit each year such that the central government debt remains on a declining path as a percentage of the GDP,” she said, projecting debt at 50 per cent of GDP by March 2031.
Other measures include a national mission to push high-yielding crops with a special focus on pulses and cotton production, hike in the limit of subsidised credit to farmers to Rs 5 lakh from Rs 3 lakh, missions to push manufacturing and exports, a new policy for labour intensive sectors like leather and footwear and a scheme to make India a global hub for toy manufacturing.
The finance minister also announced a social security cover for nearly 1 crore gig workers and a Rs 10,000 crore fund of funds for start-ups.
Another major announcement was setting a target of at least 100 GW of electricity from nuclear energy by 2047 and amendment to nuclear liability regulations to allow private sector investment.
Sitharaman also announced reduction in duties on a raft of goods including open cells, while fully exempting critical minerals such as cobalt, scraps of lithium-ion battery, lead, zinc and a few others from import duty.
She proposed a hike in the threshold of tax collected at source on remittances under the RBI’s Liberalised Remittance Scheme from Rs 7 lakh to Rs 10 lakh, benefiting the travel and foreign exchange sectors. Students and individuals seeking medical treatment will also benefit from this.
Rationalising TDS provisions, the finance minister increased the thresholds for non-deduction across various TDS provisions broadly ranging from Rs 5,000 to Rs 50,000. The threshold for TDS on rent has been increased from Rs 2.40 lakh to Rs 6 lakh.
That apart, omissions of higher TDS/TCS rates are now applicable for non-filers.
The Union Government unveiled several big-ticket plans for poll-bound Bihar in the FY26 Budget, which include setting up of a makahana board, a greenfield airport as well as financial support for Western Koshi Canal Project in the Mithilanchal region of the state.
The Finance Minister also announced the establishment of a National Institute of Food Technology, Entrepreneurship and Management in Bihar and the expansion of hostel and other infrastructure capacity at IIT-Patna.
Other announcements for Bihar include the capacity expansion of Patna airport and development of a brownfield airport at Bihta.
— With PTI inputs
Revised tax slabs under new tax regime
February 1, 2025 12:44 pm
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Income up to Rs 4 lakh (per annum) ----- Nil; Between Rs 4 and 8 lakh -- 5 per cent (tax); Between Rs 8 and 12 lakh -- 10 per cent; Between Rs 12 and 16 lakh -- 15 per cent; Between Rs16 and 20 lakh -- 20 per cent; Between Rs 20 and 24 lakh -- 25 per cent; Above Rs 24 lakh -- 30 per cent. *Nil tax slab will apply for annual income up to Rs 12 lakh (Rs 12.75 lakh for salaried tax payers with standard deduction of Rs 75,000) under new tax regime.
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Finance Minister Nirmala Sitharaman said the government will arrange identity cards and registration on the e-Shram portal to assist 1 crore gig workers. "...Gig workers of online platforms provide great dynamism to the 'New Age' services economy. Recognising their contribution, our government will arrange for their identity cards and registration on the e-Shram portal," she said.
Import duties on 25 critical minerals, 36 drugs for rare diseases removed
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Govt to facilitate greenfield airports in Bihar to meet future needs of the state: FM Sitharaman
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Fiscal deficit for FY25 at 4.8 per cent of GDP, at 4.4 per cent for FY26: FM
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Net market borrowings estimated at Rs 11.54 lakh crore for next fiscal, says Sitharaman.
Govt to set up high level committee for regulatory reforms on all non-financial sectors: FM
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Govt to extend mudra loans to homestays; develop 50 tourism sites in partnership with states
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In efforts to boost tourism in the country, Sitharaman said medical tourism will be promoted in partnership with the private sector and the government will also give special focus to destinations related to life and times of Lord Buddha. She also said financial support will be provided for Western Kosi Canal, benefiting 50,000 hectare in Mithilanchal region in Bihar.
Jan Vishwas Bill 2.0 to be brought to decriminalise more than 100 offences: FM
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New Income Tax Bill to be introduced next week in Parliament to take forward 'trust first, scrutinise later' concept: FM
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Govt to launch modified UDAN scheme to connect 120 destinations, help 4 crore additional passengers in next 10 years: FM
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Financial support will be provided for western kosi canal, benefiting 50,000 hectare in Mithilanchal region in Bihar: FM
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In next 5 years, 10,000 fellowships for tech research in IIT and IISCs to be provided: FM
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50,000 Atal Tinkering Labs will be set up in next 5 years to cultivate scientific temper in young minds: FM
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Makhana Board in Bihar
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Term loan of up to Rs 20 crore for well-run export oriented MSMEs: FM
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National mission on high-yielding seeds to be launched: FM
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"Kisan Credit Card facilitates short-term loans for 7.7 crore farmers, fishermen and dairy farmers. The loan limit under modified interest subvention scheme will be enhanced from Rs 3 lakh to Rs 5 lakh for loans taken through the KCC. For self-reliance in urea production, our govt had reopened three dormant urea plans in the eastern region to further augment urea supply - a plant with annual capacity of 12.7 lakh metro tonnes will be set up at Namrup in Assam," says Sitharaman.
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In this Budget, proposed development measures span 10 broad areas, focusing on poor, youth, farmers and women: Sitharaman
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"Our economy is the fastest growing among all major economies. Our development track record for the past 10 years and structural reforms have drawn global attention. Confidence in India's capability and potential has only grown in this period. We see the next 5 years as a unique opportunity to realise sabka vikas, stimulating balanced growth of all regions."
Union Finance Minister Nirmala Sitharaman begins her budget speech amid protest by Samajwadi Party MPs including party chief Akhilesh Yadav
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Cabinet approves Union Budget 2025-26
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The Union Cabinet headed by PM Modi approved the Union Budget 2025-26. Following this, Finance Minister Nirmala Sitharaman will present the Budget in the Lok Sabha. This is the second Budget of the BJP-led NDA government in its third term in office.
Finance Minister Nirmala Sitharaman meets President ahead of Budget speech
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President Murmu offered 'dahi-chini' (curd-sugar), considered auspicious, to Sitharaman before she left for Parliament to present the Union Budget.
Sitharaman takes Tablet in red pouch to present paperless budget
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The Finance Minister will present her eighth consecutive Budget, which she will deliver from a digital tablet enclosed in a traditional 'bahi-khata' style pouch. Sitharaman, India's first full-time woman Finance Minister, broke away from the colonial tradition of carrying a Budget briefcase in July 2019, opting instead for a traditional 'bahi-khata', to carry the Union Budget papers. She continued this custom the following year, and in the pandemic-affected 2021, she replaced the traditional papers with a digital tablet to carry her speech and other Budget documents. This tradition continues on Saturday.
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Analysts and experts expect some tax rationalisation, export push
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Expectations of relief on income tax, particularly for lower middle class, high after PM Modi invoked goddess of wealth for elevating poor and middle class
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"I pray to Goddess Lakshmi that the poor and the middle-class sections in the country are blessed by her," Modi said on Friday while speaking to reporters outside Parliament before the start of the Budget session.
