India's 2025-26 Budget: Key Highlights and Initiatives

The budget for the fiscal year 2025-26 was presented by Finance Minister Nirmala Sitharaman, marking a significant shift in her public perception from a 'villain' to a 'hero'. The presentation lasted for 1 hour and 14 minutes, and it is noteworthy that she holds the record for the longest budget speech, which was 2 hours and 40 minutes in 2020.

The term 'budget' is not explicitly mentioned in the Indian Constitution; instead, it refers to the 'annual financial statement' as outlined in Article 112. The fiscal year in India runs from April 1 to March 31.

The government anticipates earning ₹34.96 lakh crores in revenue receipts, excluding loans, with total expenditures projected at ₹50.6 lakh crores. This results in a fiscal deficit target of 4.4%, down from 4.9% in the previous year. The total income of the government is expected to be ₹28.37 lakh crores.

The government's revenue is derived from various tax sources, including direct taxes and indirect taxes. The major contributions come from income tax, GST (Goods and Services Tax), and corporation tax, with income tax contributing ₹22 lakh crores and GST contributing ₹18 lakh crores.

Government expenditures include payments to states, interest on loans, and various departmental allocations. The primary deficit is defined as the fiscal deficit minus interest payments, while the revenue deficit arises when revenue expenditure exceeds revenue receipts.

The budget is categorized into revenue and capital budgets. The revenue budget encompasses all revenue and expenditure, while the capital budget deals with long-term investments and capital expenditures.

The discussion begins with an overview of the budget, highlighting two main components: revenue and capital. Revenue consists of income and expenditure, while capital involves government income and expenditure as well. The government earns revenue primarily through tax and non-tax sources, including direct taxes such as income tax, gift tax, wealth tax, and corporate tax, with the latter being referred to as 'paper tax' due to their low collection rates.

The speaker elaborates on the types of taxes, distinguishing between direct and indirect taxes. Direct taxes include wealth tax, gift tax, corporate tax, and income tax, while indirect taxes encompass Goods and Services Tax (GST), customs duty, and excise duty. Non-tax revenue is also mentioned, such as interest earned from loans given by the government.

The conversation shifts to government expenditure, particularly revenue expenditure, which includes salaries, pensions, and interest payments on loans. The speaker explains the implications of a budget deficit, where expenditure exceeds income, leading to a fiscal deficit. Conversely, a balanced budget occurs when income equals expenditure, while a surplus budget arises when income surpasses expenditure.

The speaker discusses capital expenditure, emphasizing its role in asset creation or liability reduction. This includes disinvestment, where the government sells assets, and loans given to others, which generate interest income. The distinction between developmental expenditure, which is beneficial for future returns, and other types of expenditure is also made.

The discussion highlights the difference between loans and grants provided by the government. Grants, when given to states for infrastructure development, are classified under revenue expenditure. The speaker notes that reducing effective revenue expenditure can impact overall financial health, as it reflects on the balance between revenue and capital receipts.

The discussion begins with an overview of the fiscal deficit, which is currently at 4.4% of GDP, a reduction from 6.7% during the fiscal year 2021-22. The target set under the Fiscal Responsibility and Budget Management (FRBM) Act is 3.3%. The speaker notes that while revenue is stable, government expenditure, particularly on salaries and pensions, is increasing.

The PM Dhan Dhanya Krishna Yojana is introduced, aimed at enhancing productivity in 100 low productivity districts, benefiting 1.7 crore farmers. This six-year mission focuses on increasing pulse production to achieve self-reliance, despite India being the top producer of pulses yet still importing due to high consumption levels. The speaker emphasizes the importance of pulses as a primary protein source for the largely vegetarian population.

A National Mission on High Yielding Seeds is announced, reminiscent of the Green Revolution's introduction of HYV seeds. This initiative aims to improve agricultural productivity, particularly in cotton, with a five-year mission targeting 100 cotton-producing districts.

In Bihar, a focus on MSME startups is highlighted, with plans to issue 10 lakh cards to support entrepreneurs. A 'Fund for Funds' initiative will be established with an additional allocation of Rs 10,000 crore, providing loans up to Rs 2 crore to 5 lakh first-time entrepreneurs from SC/ST communities over the next five years.

A National Manufacturing Mission is announced to bolster medium and large industries under the Make in India initiative. The thresholds for MSMEs have been increased significantly: micro enterprises can now have investments up to Rs 2.5 crore (previously Rs 1 crore), small enterprises up to Rs 25 crore (previously Rs 10 crore), and medium enterprises up to Rs 125 crore (previously Rs 50 crore).

The government plans to establish 50,000 Atal Tinkering Labs within a year to foster innovation at the school level. Additionally, infrastructure improvements in five IITs will be supported with a Rs 500 crore fund, allowing for 6,500 more students. A Center of Excellence for Artificial Intelligence will be developed, and 75,000 new seats will be created in medical colleges and hospitals over the next five years.

To achieve energy self-sufficiency, the government is targeting a significant increase in nuclear energy production by 247%. A substantial allocation of Rs 20,000 crore is planned to reduce dependence on coal and enhance nuclear energy capabilities.

The Nuclear Energy Mission focuses on research and development primarily in Small Model Reactors, with an emphasis on indigenous production. The initiative aims to operationalize Small and Small Medium Reactors by 2033, with an allocation of ₹20,000 crore for this purpose.

A significant allocation of ₹10,000 crore has been made for a private sector-driven Research Development and Innovation Initiative, which was announced in the interim budget of July. This initiative will provide 10,000 fellowships for technological research at institutions like the Indian Institute of Technology (IIT) and the Indian Institute of Science.

The new tax regime, highlighted by Finance Minister Nirmala Sitharaman, exempts individuals from paying income tax on earnings up to ₹12 lakh. For salaried individuals, the threshold is slightly higher at ₹12.75 lakh due to a standard deduction of ₹75,000, which has increased from ₹50,000 in the previous tax regime. The new tax slabs include no tax for income up to ₹4 lakh, a 5% tax for income between ₹4 to ₹8 lakh, and a 10% tax for income between ₹8 to ₹12 lakh, with higher rates for incomes exceeding ₹12 lakh.

An example illustrates the tax calculation under the new regime: for an income of ₹16 lakh, the first ₹12 lakh is tax-exempt, while the income between ₹12 lakh and ₹16 lakh is taxed at 15%. This results in a total tax liability of approximately ₹60,000 for an income of ₹16 lakh, demonstrating the progressive nature of the new tax structure.

The discussion begins with the mention of an additional Rs. 4 lakhs that falls into the tax bracket at a rate of Rs. 15. The speaker clarifies that the tax-free income limit for salaried taxpayers is Rs. 12,75,000, which includes a standard deduction of Rs. 75,000. This standard deduction is a fixed amount that salaried individuals and pensioners can deduct from their gross income to reduce their tax liability.

The speaker provides a brief history of the standard deduction, noting its introduction in the Income Tax Act of 1961 under section 16. They highlight that the standard deduction was removed in 2006 by Finance Minister P. Chidambaram and reinstated in 2018 by Arun Jaitley, emphasizing the importance of this deduction in the current tax framework.

The speaker explains the concept of Tax Deduction at Source (TDS), which is applicable when earning income from salary, rent, or interest. They mention that the TDS limit for rent has been increased from Rs. 2.4 lakhs to Rs. 6 lakhs, indicating that landlords will have TDS deducted from their rental income if it exceeds this threshold. The speaker elaborates on how TDS is deducted by the payer and submitted to the government.

The discussion shifts to Tax Collection at Source (TCS), which is applicable when sending money abroad for purposes such as travel or education. The speaker notes that TCS must be deducted and submitted to the government when these transactions occur, and it can be availed by the recipient of the funds.

The speaker highlights an increase in the interest deduction limit for senior citizens, which has been raised from Rs. 50,000 to Rs. 1 lakh. This change means that senior citizens will not incur tax on interest income up to this new limit, providing them with greater financial relief.

In closing, the speaker poses a question to the audience regarding the year when the Railway Budget and the General Budget were merged, inviting comments and views on this historical change in budgetary practices.