Union Budget 2025-2026: A Roadmap to Developed India

Key Takeaways: 

• The government aims to transform India into a developed country by 2047. This blog covers key insights of how the Union Budget is prudently crafted to cater to the growing economy and needs of the nation. 

• The National Financial Plan has discussed strengthening of sectors like: Urban Development, Infrastructure, Education, Healthcare, Clean Energy, and Tourism, positioning India as a global economic powerhouse in the coming years. 

• Boosting MSMEs and Employment. Initiatives like increased credit limits, customized credit cards, funds worth Rs.10,000 crore for startups to drive entrepreneurship and job creation, are positioned as a cornerstone of transformative action.  

Presented by the Finance Minister of India, Nirmala Sitharaman on February 1, 2025, the Union Budget 2025-2026 serves as a blueprint for 'Viksit Bharat' (Developed India). The government proposes a solid road plan for ultimate growth of the country by 2047. Notably, the government has demonstrated strong performance amid a growing global economy, highlighting a 3.2% increase as compared to the past years. 

As we step into the second month with a reformative budget, let us take a look at the well-orchestrated union budget for 2025. 

2025-26 Union Budget: Theme and Vision 

The Union Budget 2025 is structured on the strategic aim that ‘developing India’ turns strong as ‘developed India’ by 2047. The economic blueprint’s focus areas include:  

• Promoting equitable growth while achieving balanced development across regions. 

• Catalyzing private investment while enhancing employment generation. 

• Amplifying India’s influence in global trade and manufacturing.  

Four Key Engines of Growth -  

While discussing the holistic growth of the country, the budget also deliberates on four key engines of development: 

• Agriculture: Strengthening rural economies and safeguarding food security. 

• MSMEs: Boosting credit accessibility while simplifying the business landscape. 

• Investment: Fostering infrastructure expansion and nurturing human capital. 

• Exports: Broadening India’s footprint in worldwide trades.  

Six Structural Reform Domains -   

The structural reform domain represents key areas of focus aimed at driving sustainable economic growth and cultivating long-term development:  

• Taxation: Simplified frameworks for both direct and indirect tax structures. 

• Power Sector: Advancing green energy transition, expanding nuclear capacity, and improving electricity grid management. 

• Urban Development: Creating smart cities improved water and sanitation projects. 

• Mining: Expanding domestic resource extraction and supply of essential minerals. 

• Financial Sector: Fortifying banking, insurance, and investment regulatory framework. 

• Regulatory Reforms: Lessening compliance burdens and improving business climate.  

Empowering Middle Class: A Welcomed Relief  

Approximately 31% of Indian population falls under the middle-class slab. The 2025-26 budget therefore addresses the contribution of mainstream society, extending a significant tax relief for their remarkable contribution to nation’s growth. Considering the tax slab, that was gradually raised since 2014, a revolutionary measure has been introduced by the Government under the new income tax regime, as it highlights: 

• No income tax will be due for individuals earning up to ₹12 lakh, which translates to an effective monthly income of ₹1 lakh. 

• Salaried individuals can avail tax exemptions up to ₹12.75 lakh due to the standard deduction of ₹75,000. 

Tax Benefits and Effective Rates:  

Revised Tax Slabs: 

These changes are intended to provide major relief for the taxpayers. With an estimated ₹1 lakh crore in direct tax revenue foregone, the government of India aims to boost disposable income for savings, investments, and consumption. The introduced changes are formatted to release the tax burden on the middle class, benefiting people across various income slabs. 

Rural Empowerment Initiatives:  

The government took a pivotal step to tackle the underemployment issue in rural areas. Considering this, a significant program titled Rural Prosperity and Resilience will soon be launched and sooner implemented. The initiative will devote attention to skilling, technology, and generating employment in rural districts. Moreover, another step titled the Mission for Cotton Productivity aims to help cotton farmers improve yield and sustainability.   

Boosting Entrepreneurship and Employment  

The Union Budget 2025-2026 proposes a comprehensive strategy further discussing the enablement of entrepreneurship and employment across sectors, suggesting few initiatives that aim to empower workers and businesses driving growth in both: urban and rural landscapes! Some significant projects are: 

Socio-Economic Upliftment of Urban Workers: The cabinet proposed a new agenda dedicated to the socio-economic upliftment of urban workers. The aim is to enhance their incomes, secure long-term financial stability, and improve their quality of life. The ultimate aim of this initiative is to introduce better opportunities and resources for the urban workers to thrive in the evolving economy.  

Support for Gig Workers: The ruling party also introduced the PM Jan Arogya Yojana, which discussed rolling out ID cards for gig workers and registering them on the e-Shram portal. The change will contribute to the gig economy by allowing them to access healthcare benefiting one crore gig workers. This initiative will provide gig workers with enhanced recognition and social protection. 

SWAMIH Fund 2 for Infrastructure Growth: A new ₹15,000 crore SWAMIH Fund 2 will be established with contributions from the government, banks, and private investors for completion of 1 lakh housing units offering a much-needed boost to the housing sector. SWAMIH Fund 1 has already delivered 50,000 units, with an additional 40,000 units slated for completion in 2025. 

Enhancing Access to Credit for Small and Emerging Enterprises: Another major initiative was taken to improve the access to credit, this includes:  

1. The Credit Guarantee Cover for Micro and Small Enterprises will rise from ₹5 crore to ₹10 crore. It will additionally be unlocking ₹1.5 lakh crore credit over the next 5 years. 
2. Startups will benefit with an increased credit guarantee from ₹10 crore to ₹20 crore, this will be followed by a trimmed guaranteed fee to 1% for loans in 27 sectors crucial to Atmanirbhar Bharat. 
3. For well-managed exporter MSMEs, the limit for term loans will be raised to ₹20 crore, helping them expand and boost exports potentials.  

Reinforcing Tourism Sector  

The union budget highlights the comprehensive growth of every sector including tourism. Top 50 destinations in India will be developed by seeking help from the states to encourage tourism and generate employment-led growth: 

• Skill Development Programs: This will observe intensive training for youth, including specialized programs at Institutes of Hospitality Management. 

• Support for Homestays: MUDRA loans provided for individuals to set up homestays, promoting local tourism, encouraging employment. 

• Incentives for States: Performance-linked incentives will be provided to the states to enhance destination management, better amenities, cleanliness, and marketing efforts. 

• Streamlined e-Visa Facilities: The introduction of streamlined e-visa systems will be seen in order to enhance international tourism.  

Empowering MSMEs 

The government has paid special attention towards boosting the growth of Micro, Small and Medium Enterprises (MSMEs). The investment and turnover limits of MSMEs are said to rise to 2.5 and 2 times, respectively. This will stimulate greater opportunities to scale up, access technology, and secure capital. This will help generate employment, particularly for the youth.  

The union budget speaks of the newly launched Export Promotion Mission, which is a joint effort by the Ministries of Commerce, MSME, and Finance. This measure will help MSMEs improve access to export credit and cross-border factoring support and boost overall export activities. Furthermore, the Indian government has an action plan ready to streamline the regulatory processes. A revamped Central KYC Registry in 2025 will be introduced that will precisely streamline the Know Your Customer (KYC) process and help users with easier updates.  

Several measures have been introduced to promote entrepreneurship, MSMEs, and employment opportunities: 

• Customized Credit Cards: The government has introduced ₹5 lakh limit Customized Credit Cards for Micro Enterprises, while 10 lakh cards are expected to be issued in the first year. 

• Fund of Funds for Startups: A ₹10,000 crore Fund of Funds will be set up to encourage startups and stimulate innovation.  

• First-Time Entrepreneurs Scheme: A new scheme will be launched that will offer Term Loans up to ₹2 crore for 5 lakh women and Scheduled Castes/Scheduled Tribes entrepreneurs. 

• Footwear & Leather Sector Support: The government will focus on product schemes for the footwear and leather sector. Under the scheme the ruling body is expected to generate 22 lakh jobs and of around turnover of ₹4 lakh crore. 

• Clean Tech Manufacturing: The government will endorse the manufacturing of clean technologies, such as solar PV cells, EV batteries, and wind turbines. This scheme is another initiative taken in order to generate more employment and provide a push to domestic manufacturing. 

• National Centers of Excellence for Skilling: Five centers will be established in partnership with global experts to enhance skills and employment. 

Investing in Economic Growth 

Several initiatives are aimed at boosting infrastructure, energy, and regional development: 

• Interest-Free Loans for States: An outlay of ₹1.5 lakh crore will be dispensed for interest-free loans to states for capital expenditure and reform incentives. 

• Shipbuilding Assistance: The Shipbuilding Financial Assistance Policy will be overhauled to address cost challenges and support the maritime sector. 

• Nuclear Energy Mission: A ₹20,000 crore outlay will be provided for research and development of Small Modular Reactors (SMRs), with a goal of having at least five operational by 2033. 

• UDAN Scheme Expansion: The revised UDAN scheme will improve regional connectivity to 120 new destinations, favoring four crore passengers in the coming decade. 

• Critical Minerals Support: To spur manufacturing, the government will waive customs duties on cobalt, lithium-ion battery scrap, and other critical minerals.   

Reforms in Taxes and Business Ease 

• Customs Duty Reductions: The government has proposed excluding customs duties on certain goods, such as cobalt powder, and upgrading support for domestic industries like EV and mobile phone battery manufacturing. 

• TDS and TCS Adjustments: The government has proposed increasing tax limits on senior citizens' interest income and tax at source (TCS) on remittances under the RBI's Liberalized Remittance Scheme (LRS). 

• Reform for Foreign Direct Investment (FDI): The FDI limit for the insurance sector will be increased from 74% to 100% for companies investing the entire premium in India. 

• New Income Tax Bill: The new bill is also pipelined in the budget session, which is designed such that a reduction of content to 50% is anticipated which can simplify the tax policies for the taxpayers and minimize litigation. 

What This Means for You 

The Union Budget 2025-2026 brings significant reforms impacting both individuals and businesses. Here’s how you can benefit: 

For Individuals: 

• Higher Disposable Income: With increased tax exemptions (up to ₹12 lakh), you’ll have more money for savings, investments, or daily expenses. 
•  Lower Tax Burden: Revised tax slabs reduce the effective tax rate, ensuring middle-class earners retain more of their earnings. 
•  More Job Opportunities: Boosted investments in MSMEs, infrastructure, and clean tech mean more employment prospects across industries. 
• Better Social Security: Gig workers gain access to healthcare benefits under the PM Jan Arogya Yojana, improving financial stability. 
• Enhanced Travel & Tourism: Investments in domestic tourism make leisure travel more affordable and accessible.
  

For Businesses & Entrepreneurs: 

• Easier Access to Credit: MSMEs can now avail up to ₹10 crore in credit guarantee cover, empowering businesses to scale efficiently. 
• Startup Growth Support: The ₹10,000 crore Fund of Funds fuels innovation and early-stage business growth. 
• Tax & Compliance Relief: Simplified regulatory frameworks and KYC processes make doing business easier. 
• Boosted Export Potential: Increased credit limits for exporter MSMEs provide more opportunities to tap into global markets. 
• Manufacturing & Clean Tech Push: Incentives for solar PV, EV batteries, and wind turbines drive opportunities in sustainable manufacturing. 

This budget paves the way for stronger economic growth, financial stability, and business expansion—creating a future-ready India for all. 

Conclusion: A Future-Ready India 

The Union Budget 2025-2026 sets a bold agenda of accelerating Indian economic growth, focusing on inclusive development, innovation, and infrastructure. The fiscal plan acknowledges the need for holistic investment in agriculture, education, technology, and infrastructure. The government aims to build a self-reliant India while generating employment, promoting entrepreneurship, and improving the quality of livelihood for all citizens. 

The proposed budget serves as a clear roadmap for achieving sustainable and inclusive development, positioning India as a global leader in the coming decade. Considering, new taxation system can bring a transformative shift in the payroll management scene opting for payroll service providers like TopSource Worldwide can help. If you want to know more about the organization and services they cater to, consider contacting today!