The Union Budget 2025-26, presented by Finance Minister Nirmala Sitharaman, focuses on economic growth, job creation, and tax relief for the middle class. With an emphasis on four major engines of development—agriculture, MSMEs, investment, and exports—the budget aims to drive India towards self-reliance and long-term financial stability.
Several tax reforms, investment plans, and welfare measures have been introduced to support individuals, businesses, and key industries. The budget also outlines the government’s commitment to fiscal discipline while promoting infrastructure development, digital transformation, and social welfare programs.
One of the most notable announcements in this year’s budget is the major income tax relief for the salaried class. Individuals earning up to ₹12.75 lakh annually will not have to pay income tax under the new tax regime, providing much-needed relief to the middle class. This move is expected to increase disposable income, boost household savings, and enhance consumer spending. Additionally, the budget introduces significant reforms in agriculture, healthcare, manufacturing, and digital innovation, aiming for inclusive growth and long-term economic resilience.
The government has taken a strategic approach to balance economic growth and fiscal responsibility. With a fiscal deficit target of 4.4% for FY26, the budget reflects a structured plan to manage government spending while fostering economic expansion. Investment in infrastructure, education, and artificial intelligence has been highlighted, reflecting a vision for a modern, technology-driven economy.
Tax Reforms and Relief for Middle Class
A key highlight of the budget is the relief provided to taxpayers. Individuals earning up to ₹12 lakh per annum will not have to pay income tax, and those earning up to ₹12.75 lakh will benefit from additional deductions. This move is expected to strengthen the financial stability of middle-class households. The government has also introduced changes in TDS and TCS rules, including an increase in the TDS threshold on rent from ₹2.4 lakh to ₹6 lakh and an increase in the limit for senior citizens’ tax deduction on interest from ₹50,000 to ₹1 lakh.
Another major tax reform includes an extended time limit for filing updated income tax returns, increasing it from two years to four years. This encourages voluntary compliance and ensures taxpayers can rectify their financial records without penalties. These changes reflect the government’s focus on simplifying tax procedures and making compliance easier for individuals and businesses.
Strengthening Agriculture and Rural Development
The agricultural sector has received significant attention in this year’s budget. The launch of the “Prime Minister Dhan-Dhaanya Krishi Yojana” will cover 100 districts with low agricultural productivity, aiming to improve crop output, irrigation, and post-harvest storage. Additionally, the “Mission for Aatmanirbharta in Pulses” has been introduced, focusing on increasing the domestic production of tur, urad, and masoor. The government has assured farmers that agencies like NAFED and NCCF will procure these pulses for the next four years to support pricing and availability.
To ease financial burdens on farmers, the budget raises the loan limit under the Kisan Credit Card (KCC) from ₹3 lakh to ₹5 lakh. This will help farmers access credit more easily and invest in better farming practices. Further initiatives include a five-year mission to improve cotton productivity and a comprehensive program for fruits and vegetables, aiming to increase overall agricultural efficiency and income for farmers.
Boosting MSMEs and Manufacturing
Micro, Small, and Medium Enterprises (MSMEs) have been described as a key engine of economic growth. The government has increased credit guarantees for MSMEs from ₹5 crore to ₹10 crore, making it easier for small businesses to access funds for expansion. Investment and turnover limits for MSMEs have also been enhanced, allowing them to grow without the constraints of outdated classification criteria.
A National Manufacturing Mission has been introduced to support industries of all sizes, reinforcing the “Make in India” initiative. This mission will provide incentives, infrastructure support, and technology adoption measures to help businesses compete globally. Additionally, a scheme for first-time entrepreneurs from Scheduled Castes, Scheduled Tribes, and women has been launched, offering loans of up to ₹2 crore over the next five years.
The government has also outlined a plan to develop India into a major toy manufacturing hub, promoting locally made toys and reducing reliance on imports. These initiatives aim to create more jobs and establish India as a leader in global manufacturing.
Investments in Infrastructure and Digital Economy
Investment is another key driver of economic growth in this year’s budget. A total of ₹1.5 lakh crore has been allocated as 50-year interest-free loans to states for capital expenditure. Infrastructure ministries have been directed to develop a three-year pipeline of projects, ensuring systematic development and job creation.
The “BharatNet” project will expand broadband connectivity to all government secondary schools and primary health centres in rural areas, bridging the digital divide and improving access to education and healthcare. Additionally, the government has announced plans to set up 50,000 Atal Tinkering Labs in government schools over the next five years, encouraging innovation and technical education among students.
A ₹1 lakh crore Urban Challenge Fund has been set up to support cities in becoming economic growth hubs. This fund will focus on urban planning, redevelopment, and improving water and sanitation infrastructure. Further, the second Asset Monetization Plan (2025-30) will raise ₹10 lakh crore by reinvesting capital from government assets into new projects.
Artificial Intelligence, Healthcare, and Social Welfare
Recognizing the potential of artificial intelligence, the budget has allocated ₹500 crore for establishing a Centre of Excellence in AI for Education. This initiative will drive research and innovation in AI-powered learning solutions.
The healthcare sector has also received major support, with gig workers set to benefit from government-sponsored healthcare under the PM Jan Arogya Yojana. Additionally, the government will issue identity cards to gig workers, ensuring better job security and access to social benefits.
The budget also introduces exemptions on basic customs duty (BCD) for 36 life-saving drugs used to treat cancer, rare diseases, and chronic conditions. Further, to boost domestic pharmaceutical production, BCD exemptions have been extended to raw materials used in drug manufacturing.
Export Promotion and Global Trade
Exports are a critical engine of economic growth, and the government has launched an Export Promotion Mission to support Indian businesses in reaching global markets. A digital public infrastructure platform, “BharatTradeNet,” will facilitate trade documentation and financing, making international trade more efficient.
To strengthen India’s position in global supply chains, the government is supporting domestic manufacturing capacities for industries like electronics and pharmaceuticals. Infrastructure for air cargo and high-value perishable exports will be upgraded, further enabling Indian businesses to compete internationally.
Fiscal Discipline and Future Roadmap
The government has reaffirmed its commitment to fiscal discipline, targeting a fiscal deficit of 4.4% for FY26. The revised estimate for total receipts (excluding borrowings) stands at ₹31.47 lakh crore, while total expenditure is estimated at ₹47.16 lakh crore. This responsible financial planning aims to maintain a stable economic environment while supporting growth.
A high-level committee will be established to review and simplify regulations, certifications, and compliance requirements for businesses. Additionally, an Investment Friendliness Index of States will be launched to promote competitive federalism and attract private investment.
