Union Budget 2025-26 Key Highlights - NEXT IAS PDF

Key Highlights by  UNION BUDGET 2025-26 Key Highlights by ABOUT The AFS also distinguishes between: Â Annual Financial Statement (AFS) ¾ Revenue Account: Regular government operations,...

Key Highlights by  UNION BUDGET 2025-26 Key Highlights by ABOUT The AFS also distinguishes between:  Annual Financial Statement (AFS) ¾ Revenue Account: Regular government operations, subsidies, grants, and interest payments. Mandated under Article 112, the Annual Financial Statement provides estimates of receipts and ¾ Capital Account – Expenditures on asset creation, investments, and loans. expenditure for 2024-25, along with estimates for 2023-24 and actuals for 2022-23. Revenue Budget Consists of: ¾ Revenue Receipts – Includes tax revenue It categorizes government accounts into three parts: (taxes, duties) and non-tax revenue (interest, ¾ Consolidated Fund of India (CFI) – Covers all dividends, fees). government revenues, loans raised, and loan ¾ Revenue Expenditure – Covers operational recoveries. Expenditures require Parliamentary costs, subsidies, and grants. It does not create approval. (Article 266) government assets. ¾ Contingency Fund of India – An imprest fund Capital Budget Comprises: under the President’s authority to meet urgent ¾ Capital Receipts – Includes market loans, unforeseen expenses. Requires ex-post-facto borrowings, foreign loans, and recoveries of loans. Parliamentary approval and is replenished from ¾ Capital Expenditure – Covers asset creation the Consolidated Fund. Current corpus: ₹30,000 (land, buildings, machinery), investments, and crore. (Article 267) loans to states, UTs, and public enterprises. ¾ Public Account of India – Holds trust funds  Demands for Grants (DG) (e.g., Provident Funds, Small Savings) that do Required under Article 113, these estimates detail not belong to the government and must be government expenditures from the Consolidated repaid. Parliamentary approval is not required Fund of India that require Lok Sabha approval. for withdrawals. (Article 266) Presented alongside the Annual Financial Statement. 2 P A G E UNION BUDGET 2025-26 Key Highlights by 3 P A G E  UNION BUDGET 2025-26 Key Highlights by KEY HIGHLIGHTS  Tax Reforms Senior Citizens: The tax-free interest income threshold for senior citizens has been increased to ₹1 lakh. TDS on Rent: The TDS exemption limit on rent has been raised from `2.4 lakh to `6 lakh. Education Remittances: TCS will be removed for education-related remittances if funded through a loan from a specified financial institution. Higher TDS: Will apply only in cases where PAN is not available. LRS Remittances: The TCS threshold for remittances under RBI’s Liberalized Remittance Scheme (LRS) has been increased from `7 lakh to `10 lakh.  Fiscal Deficit:  Cess and Tariff Reforms Revised fiscal deficit for FY25: 4.8% Customs Tariff Simplification Fiscal deficit target for FY26: 4.4% ¾ The government will streamline the customs  Receipts for 2024-25: tariff structure to correct duty inversion, support Total receipts (excluding borrowings): `31.47 lakh domestic manufacturing, and boost exports. crore ¾ Seven more tariff rates will be eliminated, Net tax receipts: `25.57 lakh crore leaving only eight, including a zero rate.  Expenditure for 2024-25: Total expenditure: `47.16 lakh crore Capital expenditure: `10.1 lakh crore Income Tax  No income tax is payable for income up to ₹12 lakh under the new tax regime. Revised tax slabs will be implemented across all income groups. Individuals earning above ₹24 lakh per year will be taxed at 30%. Cess & Surcharge: No more than one cess or surcharge will be levied, and the social welfare The tax return filing window will be extended from surcharge will be exempted on 82 tariff lines. 2 years to 4 years. Customs Duty Exemptions: ¾ Full exemption on Basic Customs Duty (BCD) for cobalt powder, lithium-ion battery waste, scrap, and 12 other critical minerals. ¾ 37 new medicines and 13 patient assistance programs added to the exemption list. ¾ Six life-saving medicines to have a concessional 5% customs duty. ¾ BCD fully extended on wet blue leather, and 4 crust leather exempted from the 20% duty. P A G E  UNION BUDGET 2025-26 Key Highlights by Tariff Reductions: Fund 2 will be established to support affordable ¾ BCD on frozen fish paste reduced from 30% to housing projects. 5% and on fish hydrolysates from 15% to 5%. ¾ SWAMIH Fund is a social impact fund specifically ¾ BCD on interactive flat panel displays increased formed for completing stressed and stalled from 10% to 20%. residential projects. ¾ BCD on open cell and components for LCDs & Medical Education Expansion LEDs reduced to 5%. ¾ Increase in Medical Seats: The government  Financial Reforms will add 10,000 medical undergraduate and FDI in Insurance: Foreign Direct Investment (FDI) postgraduate seats over the next year as part of limit for insurance firms investing their entire a broader initiative to increase the total number premium in India will be raised from 74% to 100%. of seats by 75,000 over five years. Central KYC Registry: A revamped central KYC ¾ Growth in Medical Seats: Over the past decade, registry will be introduced to align regulations the number of MBBS seats has grown from with technological advancements and the global 51,384 in 2014 to 1,12,112 in 2024, and PG seats regulatory landscape. have risen from 31,185 to 72,627. Ease of Doing Business: The government will ¾ Geographical Distribution: There has been an implement faster approvals for company mergers imbalance in the distribution of medical seats, and expand related regulations, aiming for a with some regions like Karnataka and Puducherry modern, trust-based regulatory framework. having more than their required share. Investment Friendliness Index: A state-wise ¾ New Norms: To address this, the National Investment Friendliness Index will be launched Medical Commission has introduced a norm of in 2025 to promote competitive cooperative 100 MBBS seats per 10 lakh population. federalism.  Nuclear Energy Reforms Regulatory Evaluation: Under the Financial Stability Nuclear Energy Mission: A Nuclear Energy Mission and Development Council (FSDC), a mechanism will be introduced to accelerate India’s transition will be established to assess the impact of financial to clean energy, with a target to develop 100 GW of regulations and improve sectoral responsiveness nuclear power by 2047. and growth. Private Sector Involvement: Amendments will be  Infrastructure Reforms made to the Atomic Energy Act and the Civil Liability Urban Challenge Fund for Nuclear Damage Act to encourage private sector participation. ¾ A ₹1 lakh crore fund will be launched to transform cities into growth hubs, support redevelopment, SMR Development: A ₹20,000 crore initiative will be and improve water & sanitation infrastructure. launched for the research and development of Small Modular Reactors (SMRs), with the goal of having at ¾ It will cover up to 25% of the cost for bankable least five indigenously developed SMRs operational projects, with at least 50% funding required by 2033. from bonds, bank loans, or PPPs.  MSME Reforms PPP Initiatives: Each infrastructure ministry will present a three-year PPP project list, focusing on Growth Contribution: MSMEs are recognized as three key proposals per ministry. An initial ₹10,000 the second engine of growth in India, contributing crore is allocated for FY26. 45% of the country’s exports. Capital Expenditure: The government will provide Support Initiatives: To boost their development, the ₹1.5 lakh crore in interest-free loans for capex and Finance Minister introduced: introduce incentives to drive reforms. ¾ Customized credit cards for MSMEs. Affordable Housing ¾ A fund of funds for startups. ¾ 40,000 additional housing units will be ¾ An expanded fund-of-funds (f-o-f) with a broader completed in FY26, and a ₹15,000 crore SWAMI scope to improve capital access. 5 P A G E  UNION BUDGET 2025-26 Key Highlights by High Yielding Seeds Mission: The government will launch a National Mission to develop high- yield, pest-resistant, and climate-resilient seeds, ensuring availability of 100 seed varieties by 2024. Fisheries Growth: India’s fisheries sector will receive a framework for sustainable growth, Investment & Turnover Limits: The government will focusing on the Indian Exclusive Economic Zone increase MSME investment and turnover limits by and Andaman & Nicobar Islands. 2.5 times and 2 times, respectively, to drive their Cotton Productivity Mission: A 5-year mission will growth and enhance operational efficiency. aim to improve cotton productivity, promote ELS  Agriculture Reforms cotton varieties, and provide scientific support aligned with the Farm to Fiber to Fashion vision. Han Dhanya Krishi Yojana Urea Production: The government is reviving three ¾ A new initiative under the Prime Minister Krishi dormant urea plants and setting up a new urea Yojana will focus on 100 districts with low plant in Assam to reduce import dependency. productivity, moderate crop intensity, and India Post for Rural Economy: India Post, with its limited credit access. vast network of rural post offices and Dak Sevaks, ¾ It will promote crop diversification, improve will be transformed into a key player for artisans, storage, enhance irrigation, and facilitate both entrepreneurs, and MSMEs, driving rural economic short and long-term credit for farmers, benefiting growth. an estimated 1.7 crore farmers.  Modified Interest Subvention Scheme (MISS) Pulses Self-Reliance Mission: A 6-year mission Loan Limit Increase: The loan limit under MISS will will aim for self-reliance in pulses, especially tur be raised from ₹3 lakh to ₹5 lakh. and masoor, alongside strengthening domestic Current MISS Scheme: Farmers engaged in production of edible oils and seeds. Agriculture and allied activities can currently obtain Makhana Board: A Makhana Board will be Kisan Credit Card loans up to ₹3 lakh at an interest rate established in Bihar to enhance production, of 9%, with the government providing 2% interest processing, and market linkages, with support for subvention, reducing the effective rate to 7%. An farmers through FPOs. additional 3% concession for timely repayment Kisan Credit Cards: The government will increase further reduces the interest to 4% per year. loan limits for Kisan Credit Cards (KCC) from `3 Post-Harvest Loans: The scheme also applies lakh to `5 lakh, continuing to support 7.7 crore to post-harvest loans (for up to six months post- farmers, fishermen, and dairy farmers with short- harvest) for small and marginal farmers with Kisan term credit. Credit Cards, helping prevent distress sale of their produce.  Leather and Footwear Reforms Footwear & Leather Sector: New new scheme to enhance productivity, quality, and competitiveness in the footwear and leather sector, focusing on design, component manufacturing, and machinery for both non-leather and leather footwear. ¾ This initiative is expected to create 22 lakh jobs, generate ₹400 crore, and boost exports to over ₹1.1 lakh crore. Toy Sector: A new scheme will be launched to 6 position India as a global hub for toys, with a P A G E  UNION BUDGET 2025-26 Key Highlights by focus on developing clusters, improving skills, and Support for SC/ST Women Entrepreneurs building a sustainable manufacturing ecosystem ¾ New Scheme: A new scheme will be launched for high-quality, innovative toys. to support 5 lakh SC/ST women entrepreneurs by  Investing in People providing term loans up to ₹2 crore over the next five years. ¾ Learning from Stand-Up India: The new scheme will incorporate lessons from the Stand-Up India scheme, which was launched on April 5, 2016, to empower women entrepreneurs, particularly from the SC/ST communities. Š Stand-Up India Scheme: The scheme offers loans between ₹10 lakh and ₹1 crore to at least one SC or ST borrower and one woman borrower per bank branch for setting up greenfield enterprises in manufacturing, services, or trading, as well as agriculture- related activities. Focus on Growth: The Finance Minister highlighted Š Extension: The scheme was extended until investment in people as the third engine of growth, 2025, and it is not clear whether the new emphasizing people, the economy, and innovation. scheme will be integrated with or replace Nutritional Support the existing one. ¾ The government is prioritizing the Sashakt ¾ Loan Data: As of June 2024, 40,002 SC women Anganwadi and Poshan 2.0 programs to provide and 13,424 women have received loans under nutritional support to over 8 crore children, the Stand-Up India scheme. pregnant women, lactating mothers, and 20 lakh  Aviation Reforms adolescent girls in aspirational districts and the UDAN Scheme: The UDAN scheme has successfully Northeast. connected 1.5 crore middle-class people to 88 Educational Infrastructure: Infrastructure will be airports through 619 routes. expanded in 5 IITs established post-2014, adding Expanded UDAN: A modified version of UDAN will space for 6,500 more students. be launched, extending to 120 new destinations Skilling Initiatives: 5 National Centres of Excellence and aiming to accommodate an additional 4 crore for skilling will be established to support workforce passengers. development. New Airports: Greenfield airports will be developed Gig Worker Support: The government plans to in Bihar to further enhance regional connectivity. issue identity cards and register gig workers on the e-Shram portal, with an aim to assist 1 crore workers. 7 P A G E  UNION BUDGET 2025-26 Key Highlights by KEY INFORGRAPHICS 8 P A G E UNION BUDGET 2025-26 Key Highlights by 9 P A G E  UNION BUDGET 2025-26 Key Highlights by 10 P A G E UNION BUDGET 2025-26 Key Highlights by 11 P A G E  UNION BUDGET 2025-26 Key Highlights by BASICS ABOUT THE BUDGET  Introduction Origin: The term 'budget' originates from the Old French word ‘bougette’, meaning a pouch or bag. Traditional Presentation: Budget documents were traditionally carried in a leather bag or briefcase. Definition: Budget is the government's estimated financial statement for a year, running from April 1 to March 31. Official Term: Known officially as the Annual Financial Statement, not explicitly called 'budget' in the Constitution. Responsible Division: The Budget Division of the Department of Economic Affairs, Ministry of Finance, prepares the Budget.  Old and New Trends: Change in Tradition: From 2019, the briefcase was replaced with a 'Bahi-Khata' or a traditional ledger wrapped in red cloth. Merger of Rail and General Budget: The Rail Budget was merged with the Union Budget from 2017-18, based on the recommendations of the Bibek Debroy Committee. This ended a 92-year-old practice initiated by the Acworth Committee in 1924.  Constitutional Provisions: Annual Financial Statement is provided for under Article 112 of Part V of the Constitution. NOTE: If the Lok Sabha fails to pass the annual Union Budget, the Prime Minister tenders the resignation of the Council of Ministers. 12 P A G E  UNION BUDGET 2025-26 Key Highlights by DIFFERENCE BETWEEN REGULAR AND INTERIM BUDGET A detailed financial statement for a full A temporary financial statement, usually in an election year. Definition fiscal year. There is no constitutional provision for an interim budget. Outlines the government's revenue and Primarily for seeking Parliament's approval for essential Purpose expenditure for the entire year. expenditure for a part of the year. Covers a part of the fiscal year, until a new government Duration Covers the entire financial year. presents the full budget. Includes a complete account of expenses Expenditure Only essential expenditures are covered. and allocations. Policy Contains major policy decisions, new Generally avoids major policy decisions or new schemes. Decisions schemes, and long-term plans. Typical Usually presented at the beginning of the Occurs when the tenure of the current government is Occurrence financial year. ending and new elections are due. KEY TERMS Capital  Expenditure of a capital nature is broadly defined as expenditure incurred with the object of either Expenditure increasing concrete assets of a material and permanent character or of reducing recurring liabilities.  Capital receipt comprises of loans raised by the Government, borrowing from the Reserve Bank of India and loans taken from foreign Governments/institutions. It also embraces recoveries of loans Capital Receipt  advanced by the Government and sale proceeds of government assets, including those realized from divestment of Government equity in PSUs.  Effective Revenue Deficit is the difference between revenue deficit and grants for creation of capital assets. It can be interpreted as the difference between the government’s current expenditure (on Effective revenue account) and revenue receipts less grants for creation of capital assets which is recorded Revenue Deficit as revenue expenditure.  Effective Revenue Deficit = Revenue Expenditure - Grants for Capital Expenditure  Excess of total disbursements from the Consolidated Fund of India, excluding repayment of debt Fiscal Deficit over total receipts in the Fund, excluding the debt receipts, during a financial year.  Fiscal Deficit = Total Expenditure - Total Revenue (excluding borrowings) Revenue Deficit  Excess of revenue expenditure over revenue receipts.  Charges on maintenance, repair, upkeep and working expenses, which are required to maintain the assets in a running order and also all other expenses incurred for the day to day running of Revenue the organisation, including establishment and administrative expenses are classified as revenue Expenditure expenditure. Grants given to State/UT Government and other entities are also treated as revenue expenditure, even if some of the grants may be meant for creating capital assets.  These include proceeds of taxes and duties levied by the Government, interest and dividend Revenue on investments made by the Government, fees and other receipts for services rendered by the Receipts Government.  It is a financial metric that assesses a government's fiscal health by focusing on the fiscal gap excluding interest payments on existing debt. Primary Deficit  It indicates the government's ability to meet its current spending needs without relying on additional borrowing to cover interest expenses.  Primary Deficit = Fiscal Deficit−Interest Payments on Previous Borrowings 13 P A G E