Union Budget 2025-26: Key Highlights and New Tax Slabs Explained

Finance Minister Smt. Nirmala Sitharaman presented the Union Budget for the financial year 2025-26 in Parliament on Feb 1, 2025. The budget recognises agriculture, Micro, Small and Medium Enterprises (MSMEs), investment, and exports as the primary drivers for economic growth! Let us take a look at some of the key highlights and themes from the Budget presentation:

1. Agriculture & Rural Development: Boosting Productivity & Farmer Welfare

The government has committed ₹1.52 lakh crore to modernising agriculture and improving rural development. Key initiatives include:

• PM Dhan Dhanya Krishi Yojana: Aims to improve crop diversification, irrigation, and storage in 100 low-productivity districts, benefiting 1.7 crore farmers.
• Kisan Credit Card Expansion: Loan limits have been increased to ₹5 lakh, providing better financial access to farmers.
• Self-Sufficiency in Pulses: India plans to achieve self-reliance in pulses within six years.
• Cotton Farmers' Support: A dedicated cotton farming mission aims to improve yields and incomes.
• Makhana Board for Bihar: A special board will promote Makhana production and marketing in Bihar.

2. Healthcare: Strengthening Accessibility & Affordability

The healthcare sector gets a ₹98,311 crore allocation, focusing on infrastructure and affordability. Key developments include:

• Ayushman Bharat Expansion: ₹4,200 crore allocated to extend health insurance coverage for vulnerable populations.
• Cancer Care Expansion: 200 new daycare cancer centers to be set up in district hospitals over the next three years.
• Medical Education: 10,000 new medical seats next year, with a target of 75,000 seats over five years.
• Gig Workers' Healthcare: 1 crore gig workers to receive health insurance coverage.

3. Defense: Modernisation & Indigenous Development

The defense budget rises to ₹6.81 lakh crore, with a focus on self-reliance and modernisation. Key announcements:

• 75% of capital procurement will be from domestic manufacturers, boosting the ‘Make in India’ initiative.
• Advanced Combat Aircraft & Submarines: More funding for Project P75(I) submarines and Advanced Medium Combat Aircraft (AMCA) development.
• Procurement Boost: Acquisition of six submarines to strengthen India’s naval capabilities.

4. Infrastructure: Enhancing Connectivity & Sustainability

The government has allocated ₹12 lakh crore for infrastructure development, with a focus on roads, highways, railways, and airports.

• Maritime Sector Development: ₹25,000 crore allocated for shipbuilding and port infrastructure.
• Greenfield Airports in Bihar: Improving regional connectivity.
• UDAN Scheme Expansion: 120 new domestic destinations added to strengthen regional air travel.

5. Education: Enhancing Access & Skill Development

The education sector sees a strong push for AI, research, and skill development. Key highlights:

• ₹500 crore for AI Research: Centres of Excellence to be established for AI-based learning.
• Expansion of IITs & Medical Colleges: More seats at IITs and 75,000 medical seats over five years.
• Atal Tinkering Labs: 50,000 new labs in government schools to encourage innovation.
• Skill Development Initiatives: New courses will equip graduates with industry-relevant skills.

6. Renewable Energy & Sustainability

India continues its push for clean energy with a ₹3 lakh crore allocation:

• Solar & Wind Energy: Increased funding for solar, wind, and green hydrogen projects.
• Net-Zero by 2070: Sustainability measures align with India’s long-term climate commitments.
• ₹1 lakh crore Urban Sustainability Fund: Supports green city planning and waste management.

7. Major Direct Tax Reforms in Union Budget 2025-26!

There's a big relief: No tax on income up to ₹12 lakh in the new tax regime!

📌 Here's the Revised Tax Slabs (New Regime):

Income Range	Tax Rate
Up to ₹4 lakh	Nil
₹4 lakh - ₹8 lakh	5%
₹8 lakh - ₹12 lakh	10%
₹12 lakh - ₹16 lakh	15%
₹16 lakh - ₹20 lakh	20%
₹20 lakh - ₹24 lakh	25%
Above ₹24 lakh	30%

Now the tax slabs may show a 10% tax for incomes up to ₹12 lakh, but Section 87A of the Income Tax Act offers a rebate that can wipe out your tax liability—if your taxable income stays within the limit. [A tax rebate is like a discount on your taxes. If your total taxable income is within a certain limit, the government reduces or cancels your tax amount.]

Let's look at a simple example: If you're a salaried employee earning ₹12.75 lakh, the ₹75,000 standard deduction brings your taxable income down to ₹12 lakh. That means zero tax (excluding cess), thanks to the rebate!

But the moment your taxable income exceeds ₹12 lakh—say, by earning an extra ₹1 lakh—the rebate disappears, and you pay full taxes.

Also, capital gains (from stocks or real estate) aren’t eligible for this rebate, even if your total income is below ₹12 lakh.

So plan your income sources wisely to maximise tax savings!

Other Updates:

• The capital gains tax rates and holding periods remain unchanged for assets like stocks, bonds, debt mutual funds, unlisted shares, and real estate in Budget 2025. Currently, the Short-Term Capital Gains (STCG) tax stands at 20%, while the Long-Term Capital Gains (LTCG) tax is set at 12.5%.
• There's an increase in the Tax Deducted at Source (TDS) threshold on rent from ₹2.4 lakh to ₹6 lakh to ease compliance.
• Senior citizens can now earn up to ₹1 lakh in interest income from bank deposits and other sources without facing TDS deductions. Previously, this limit was just ₹50,000.

Also Read: Income Tax Structure for Stock Market Investors & Traders

The Way Ahead

The Union Budget 2025-26 lays a roadmap for inclusive growth, modernization, and economic resilience. From agriculture and healthcare to defense, education, and infrastructure, key sectors receive significant investments.

This budget aims to drive economic expansion and long-term sustainability through strong tax incentives, employment initiatives, and renewable energy investments. People would have more money to spend and save due to lower direct taxes. Increased spending drives up Goods & Service Tax (GST) collections, thereby boosting government revenues.

On the other hand, businesses haven’t received any tax cuts. But with higher demand and sales, their profits could grow, leading to higher corporate tax payments. The government expects to collect ₹10.8 lakh crore in corporate taxes—10% more than its FY25 estimate.

Now, let’s look forward to how these plans take shape in the coming months! 🚀