Union Budget 2025: From major tax cuts to job creation push | 9 key takeaways

Finance Minister Nirmala Sitharaman presented the second Budget of Prime Minister Narendra Modi's third term on Saturday (Feb 1). This Budget outlines key financial policies for the 2025-26 fiscal year.

The first phase of Parliament’s Budget session commenced on 31st January and is scheduled to conclude on 13th February 2025. The second phase will run from 10th March to 4th April 2025.

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Here are the key takeaways from the Union Budget for the financial year 2025-26:

Significant tax reductions and increased disposable income

Middle-class taxpayers had expressed concerns over excessive taxes. Addressing these concerns, the Finance Minister introduced significant income tax reductions, raising the tax rebate thresholdfrom an annual income of ₹7 lakh to ₹12 lakh.

The FM clarified: “To taxpayers with normal income up to ₹12 lakh (excluding special rate income such as capital gains), a tax rebate is being provided in addition to the slab rate reduction, ensuring no tax liability for them.”

The revised structure includes a nil tax rate for income up to ₹4 lakh, a 10% tax on earnings between ₹8-12 lakh, and a 15% tax on income between ₹12-16 lakh.

Additionally, adjustments to tax slabs mean the highest tax rate of 30% will now only apply to individuals earning ₹24 lakh per annum or more.

Additional benefits for senior citizens and renters

The tax deduction limit for senior citizens has been doubled from ₹50,000 to ₹1 lakh. The annual TDS limit on rental income has been raised from ₹2.40 lakh to ₹6 lakh.

Capital expenditure and job creation

The budget estimates for capital expenditure (capex) in 2025-26 stand at ₹11.21 lakh crore, a slight increase from ₹11.11 lakh crore in the previous fiscal year. A significant shift in focus has been towards employment generation.

In response to criticisms regarding previous policies prioritising capital-intensive industries over job creation, the Budget introduces steps to stimulate employment in sectors such as textiles and leather, which traditionally generate higher employment for similar levels of GDP contribution. The Modi government has set a target of creating 22 lakh jobs through a dedicated employment scheme.

UDAN: Expansion of regional air connectivity

The ‘UDAN’ scheme has been revised to enhance regional air connectivity. Under the modified programme, 120 new destinations will be linked, aiming to transport four crore passengers over the next decade. The initiative will also support helipads and smaller airports in hilly and underdeveloped regions, including the North East.

Development of Bihar’s makhana industry and airports

To boost Bihar’s Makhana industry, the government announced the establishment of a dedicated Makhana Board. This body will focus on enhancing production, processing, value addition, and marketing of the crop.

Additionally, it announced the development of greenfield airports in Bihar to accommodate future demand. These projects will add to the expansion of Patna Airport and the development of a brownfield airport at Bihta.

Promotion of tourism

The government has outlined plans to develop 50 top tourist destinations in collaboration with state governments. These sites will be selected through a competitive process to ensure high-quality infrastructure and tourism potential.

Boosting self-reliance in pulses

To enhance self-sufficiency in pulse production, the government has launched a six-year initiative focusing on tur, urad, and masoor. This programme prioritises the development of climate-resilient seeds, increased protein content, and enhanced productivity.

Support for first-time entrepreneurs

A new initiative will be introduced to assist five lakh first-time entrepreneurs, including women and individuals from Scheduled Castes and Scheduled Tribes. Under this scheme, term loans of up to ₹2 crore will be available over the next five years.

Increase in medical college seats

An additional 10,000 medical seats will be introduced in colleges and hospitals within the next year, contributing towards a larger goal of 75,000 new seats over the next five years.

(With inputs from agencies)