Union Budget 2025-26: Major Developments and Taxpayer and Business Impacts

Union Budget 2025-26: Key Developments and Impact on Taxpayers & Businesses

The Union Budget 2025-26 of Finance Minister Nirmala Sitharaman is centered on priority areas that are economic growth, tax relief, infrastructure boom, and supporting large sectors. Heavy emphasis has been placed on growth in disposable income, capital expenditure, and to an extent the growth of domestic industries, but this budget as a whole is a budget that will shape the future of the Indian economy.
The detailed information regarding budget amounts is discussed here along with tax reforms, the other budgetary investments going on in the infrastructure sector, the support being given to MSME sectors, and the overall impact on the middle class and businesses.

Key Highlights of Union Budget 2025-26

1. Relief and Tax Reforms

The largest demand in the budget was exemption from income tax for individuals and businesses.

✔ Tax Exempt Limit Raised – Individuals with an income of up to ₹12 lakh per annum will be exempt from Income Tax under the new regime.
✔ Changed Tax Slabs – Tax slabs are to be changed for those who earn ₹12 lakh to ₹24 lakh every year.
✔ Standard Deduction Increase – Salaried and pensioners are now entitled to a higher standard deduction limit that will make them enjoy another tax relief.

2. Focus on Infrastructure Development

For additional encouraging long-term economic growth, the government increased capital expenditure by 10.1% in FY26.

✔ Infrastructure Development Transportation – Increased expenditure was made for planning better highways, railways, and urban transport.
✔ Smart Cities and Urban Development – Additional funding under the Smart Cities program to promote urban infrastructure and sustainability.
✔ Affordable Housing Programs – Subsidies have been provided to homebuyers and housing builders to lower housing expenses.

3. MSMEs and Start-Up Boost

The government also introduced further incentives and monetary allocations towards MSMEs and start-ups to promote entrepreneurship and employment generation.

✔ Extension of Tax Holiday – All Start-Ups registered until March 2027 will have their tax holidays extended.
✔ Reduced Compliance Burden – Easier regulations relating to the GST and quicker refund recovery for ease of doing business.
✔ Credit Access – Increased budget to MUDRA scheme for easy access to loans in the small business segment.

4. Promoting Second Home Ownership

✔ Second Home Loan Tax Credits – Extra tax credits for home loan borrowers purchasing a second home as a rental or investment property.
✔ Reduced Stamp Duty Rates – Stamp duty has been reduced on property deals to encourage real estate investment in certain urban areas.

5. Fiscal Responsibility and Growth Agenda

✔ Fiscal Deficit Targets – A target of 4.4% of GDP Fiscal Deficit to be achieved in FY26, as a reflection of long-term sustainable fiscal prudence.
✔ Asset Monetization Strategy 2025-30 – Reinvestment of the ₹10 lakh crore generated from asset monetization without relinquishing public ownership of the said assets and investing the proceeds in programming or financial investment of local infrastructure projects.
✔ Sector-Specific Growth Indicators – Increased expenditure in identified sectors such as healthcare, primary and secondary education and renewable energy that result in the creation of employment and sustainable long-term economic outputs.

6. Waiving Customs Duty to Promote Manufacturing

There have been different customs duty exemptions introduced by the Government to promote domestic production and exports:

✔ Critical Minerals – Zero basic customs duty on cobalt powder, lithium-ion battery waste directly, lead, zinc and 12 other critical minerals.
✔ Textiles – More textile machinery has been equipped with additional shuttle-less looms that are fully exempted from customs duty for the development of the domestic textile industry.

Impact on the Middle Class

The Union Budget for 2025 had announcements that will benefit the middle-class taxpayer in a number of ways:

✔ Income Tax Barriers – The introduction of new tax bands to extend income tax relief to waged taxpayers and pensions.
✔ Housing Benefits – Greater incentivization for a second home to give the owner peace of mind in terms of rental yield or property appreciation.
✔ Cost of Living Adjustments – Government expenditures on healthcare and inner-city infrastructure to directly and indirectly enhance quality of life.

New Income Tax Slabs (New Tax Regime)

There is no change in the previous tax regime, but under the new tax regime, the tax slabs would be as below:

In Conclusion

The Union Budget of 2025-26 attempts to balance economic growth, tax benefits, and fiscal prudence appropriately. The key points are:

✔ Income tax reduction → more savings for taxpayers.
✔ Infrastructure growth → expanding transport, intelligent cities, and housing.
✔ Subsidy to MSMEs and start-ups → encouraging business and employment growth.
✔ Support to the industry sector → decreasing reliance on imports.

The budget will stabilize the finances, grow the economy, and create jobs, all of which will propel India’s economy. As finances become increasingly significant, people and companies need to figure out how they will include these changes in their updates.

By Vikas Saini | 07/02/2025