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Key Takeaways from Union Budget 2025: Tax Updates and More

The Union Budget 2025-26, presented by Finance Minister Nirmala Sitharaman, focuses on economic growth, tax relief, infrastructure development, and support for various key sectors. With a clear emphasis on boosting disposable income, enhancing capital expenditure, and promoting domestic industries, this budget has the potential to shape India's economic future. This blog provides an easy-to-understand breakdown of the Union Budget 2025, highlights important reforms in income tax rules, and discusses its impact on the middle class and businesses.

Key Highlights of Union Budget 2025

1. Tax Reforms and Relief Measures

One of the most anticipated announcements in the budget was changes in income tax rules. The government has taken measures to ease the tax burden on salaried individuals and businesses.

  • Increased Tax Exemption Limit: Individuals earning up to INR 12 lakh annually are now exempt from paying income tax under the new tax regime.
  • Revised Tax Brackets: The tax slabs have been restructured to benefit those earning between INR 12 lakh and INR 24 lakh per year.
  • Higher Standard Deduction: To offer additional relief, the standard deduction limit has been increased, benefiting salaried employees and pensioners.

2. Focus on Infrastructure Development

To boost long-term economic growth, the government has increased capital expenditure by 10.1% for FY26.

  • Investment in Transportation: The budget has allocated funds to modernise highways, railways, and urban transport systems.
  • Smart Cities & Urban Development: The Smart Cities initiative has received a fresh push, aiming to improve urban infrastructure.
  • Affordable Housing Initiatives: Incentives for real estate developers and homebuyers will make homeownership more accessible.

3. Boost for Startups and Small Businesses

The government has announced tax incentives and financial support for startups and MSMEs to encourage entrepreneurship and job creation.

  • Extension of Tax Holiday: Startups registered before March 2027 can now avail of a tax holiday for an extended period.
  • Lower Compliance Burden: Simplified GST regulations and faster refund mechanisms have been introduced to improve ease of doing business.
  • Access to Credit: Additional funds have been allocated under the MUDRA scheme to provide easier access to loans for small businesses.

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4. Encouraging Second Home Ownership

  • Tax Benefits on Home Loans: Homebuyers purchasing a second home for investment or rental income can avail of the new tax incentives.
  • Reduced Stamp Duty: The government has slashed stamp duty on property transactions in select urban areas to boost the real estate market.

5. Fiscal Responsibility and Growth Measures

  • Fiscal Deficit Target: The government aims to bring down the fiscal deficit to 4.4% of GDP in FY26, thus ensuring sustainable financial management.
  • Asset Monetisation Plan 2025-30: The government will generate INR 10 lakh crore by monetising public assets and reinvesting it in new projects.
  • Sector-Specific Growth Initiatives: Additional focus will be given to healthcare, education, and green energy sectors to support long-term economic growth.

6. Customs Duty Exemptions to Boost Manufacturing

To promote domestic manufacturing and exports, several customs duty exemptions have been introduced:

  • Critical Minerals: Cobalt powder, lithium-ion battery waste, lead, zinc, and 12 other critical minerals are now exempt from basic customs duties.
  • Textile Industry Support: Two additional types of shuttle-less looms have been added to the list of fully exempted textile machinery.

Positive Impact on Middle Class

The Budget 2025 introduces measures that significantly impact middle-class taxpayers:

  • Income Tax Relief: The new income tax slabs ensure that salaried individuals and pensioners have higher take-home pay.
  • Housing Benefits: Encouragement for second home ownership will provide them with financial security through rental income or investment appreciation.
  • Cost of Living Adjustments: Initiatives in healthcare and urban infrastructure will aid in improving the quality of life.

Changes in Income Tax Slabs Union Budget 2025

The Union Budget 2025 announcement did not include any adjustments to the tax rates or slabs under the old tax regime. Under the new tax regime, the tax structure is revised as follows:

Income Tax Slabs Tax Rate
Up to INR 4,00,000 NIL
INR 4,00,001 - INR 8,00,000 5%
INR 8,00,001 - INR 12,00,000 10%
INR 12,00,001 - INR 16,00,000 15%
INR 16,00,001 - INR 20,00,000 20%
INR 20,00,001 - INR 24,00,000 25%
Above INR 24,00,000 30%

Conclusion

The Union Budget 2025-26 strikes a balance between economic growth, tax relief, and fiscal discipline. Key takeaways include income tax reductions, infrastructure expansion, incentives for startups and MSMEs, and support for the manufacturing sector.

Middle-class taxpayers stand to benefit the most, with increased disposable income and housing incentives. As financial planning becomes more crucial, individuals and businesses should assess how these changes will impact their finances.  


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