Union Budget 2025 | Corporate Perspective and Overview

The Union Budget 2025-26, presented by the Finance Minister Nirmala Sitharaman, outlines the government’s financial plan for the upcoming fiscal year. This report aims to provide a detailed analysis of the budget from a corporate perspective, delving into its key proposals, implications for various sectors, and significant changes from the previous year’s budget.

Table of Contents

Recap of Budget 2024

The Union Budget 2024, presented in July 2024, set the stage for India’s economic trajectory with its focus on “Viksit Bharat,” a mission to achieve developed nation status by 2047. Key highlights from a corporate perspective included:

Emphasis on Manufacturing and Job Creation: The budget aimed to boost manufacturing capacity, incentivize job creation, and drive improvements in social indicators.
Tax Reforms: Notable tax measures included the abolition of the angel tax, providing relief to start-up investors, and adjustments to capital gains taxation.
Incentives for Employment: The budget introduced schemes to encourage job creation, including direct benefit transfers to first-time employees and reimbursements to employers contributing to the Employees’ Provident Fund Organization (EPFO).

Key Highlights of Union Budget 2025

The Union Budget 2025-26 builds upon the foundation laid by its predecessor, focusing on stimulating economic growth, promoting investment, and creating a favorable environment for businesses. Some of the key highlights include:

Fiscal Consolidation: The government remains committed to fiscal consolidation, with the fiscal deficit projected at 4.4% of GDP for 2025-262. This commitment to fiscal discipline provides a stable macroeconomic environment for businesses.
Increased Capital Expenditure: India’s capital expenditure (Capex) has been raised to ₹11.21 lakh crore for FY2025-26, up from ₹11.11 lakh crore in FY2024-25. This substantial investment in infrastructure is expected to boost economic activity and create new opportunities for businesses.
Focus on Infrastructure Development: The government has announced various infrastructure development initiatives, including the launch of a new UDAN scheme to enhance regional connectivity, support for greenfield airports, and the development of shipbuilding clusters. These initiatives will improve logistics, connectivity, and overall business efficiency.
Tax Reforms: A new income tax bill will be introduced, aiming to simplify the tax system and reduce litigation. The government has also proposed several tax relief measures, such as increasing the TDS threshold on interest earned by senior citizens from ₹50,000 to ₹100,000 and extending the time limit for filing updated tax returns. For other resident individuals, the TDS limit has been increased to ₹50,000 from ₹40,000. The TDS threshold on dividends from mutual funds has also been increased to ₹10,000 from ₹5,000.
Boost to Manufacturing: The budget emphasizes boosting domestic manufacturing through initiatives like the Production Linked Incentive (PLI) scheme for lithium-ion batteries. This focus on manufacturing will create new avenues for investment and job creation.
Support for MSMEs: The budget proposes measures to support the growth and development of Micro, Small, and Medium Enterprises (MSMEs), including easier access to credit and simplified regulatory processes.
Digitalization and Technology: The budget emphasizes digitalization and technology adoption across various sectors. Initiatives like the National Geospatial Mission and BharatradeNet will enhance efficiency and transparency in business operations.
Sustainability and Green Initiatives: The budget promotes sustainability and green initiatives, including a focus on clean energy and the development of a policy for recovering critical minerals from tailings.
Urban Challenge Fund: A significant allocation of INR 1 trillion has been made for the Urban Challenge Fund, focusing on urban redevelopment and water sanitation projects. This initiative presents opportunities for businesses operating in these sectors.
Jan Vishwas Bill 2.0: The government plans to introduce the Jan Vishwas Bill 2.0 to decriminalize over 100 legal provisions, further improving the ease of doing business. This move will reduce compliance burdens and foster a more conducive business environment.
Reduced Corporate Tax for Foreign Companies: The basic corporate tax rate for foreign companies in India has been lowered from 40% to 35%, excluding surcharge and cess. This reduction aims to attract foreign investment and enhance India’s competitiveness.

Nine Key Priorities

The Union Budget 2025-26 outlines nine key priorities that guide its proposals and aim to drive India’s long-term growth and development:

Innovations, research, and development: Fostering a culture of innovation and investing in research and development across sectors.
Infrastructure: Developing robust and modern infrastructure to support economic activity and improve connectivity.
Productivity and resilience in agriculture: Enhancing agricultural productivity and building resilience against climate change.
Employment and skilling: Creating employment opportunities and equipping the workforce with necessary skills.
Inclusive human resource development and social justice: Ensuring inclusive growth and social justice for all citizens.
Manufacturing and services: Strengthening the manufacturing and services sectors to drive economic growth.
Urban development: Promoting sustainable and inclusive urban development.
Energy security: Securing energy supplies and transitioning towards a cleaner energy mix.
Next-generation reforms: Implementing reforms to improve governance, enhance efficiency, and promote transparency.

Changes from Union Budget 2024

The Union Budget 2025-26 introduces several changes compared to the previous year’s budget:

Revised Tax Slabs: The budget proposes revised tax slabs under the new tax regime, with income up to ₹12 lakh drawing zero income tax. This change aims to increase disposable income and boost consumption, potentially benefiting businesses in various sectors.

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

Increased FDI Limit in Insurance: The FDI limit for the insurance sector has been raised from 74% to 100%, subject to the condition that companies invest the entire premium in India. This change is expected to attract foreign investment, increase competition, and potentially lead to product innovation in the insurance market.
Focus on Critical Minerals: The budget emphasizes the recovery and processing of critical minerals, with exemptions on customs duties and support for mining projects. This focus will boost the domestic mining sector and support the growth of industries reliant on these minerals, such as electric vehicle manufacturing and renewable energy.
Expansion of Ayushman Bharat: The Ayushman Bharat scheme has been extended to cover an additional 50 million people. This expansion of healthcare coverage could potentially lead to increased demand for healthcare services and pharmaceuticals.
Modified UDAN Scheme: The UDAN scheme has been modified to enhance regional connectivity and support smaller airports. This modification will improve accessibility to remote areas, potentially boosting tourism and economic activity in these regions.
Increased Deduction on Family Pension: The deduction on family pension for pensioners has been raised from ₹15,000 to ₹25,000. This provides additional tax relief to pensioners.
Withdrawal of Equalization Levy: The equalization levy on e-commerce operators has been withdrawn from August 1, 2024. This change impacts the e-commerce sector and may affect the tax liabilities of foreign e-commerce companies operating in India.
Rationalization of Capital Gains: The budget has rationalized the treatment of capital gains by modifying holding period rules and tax rates. This simplification aims to reduce complexity and promote clarity in capital gains taxation.
De-penalization of Non-reporting of Movable Assets: The budget has de-penalized non-reporting on movable assets of less than ₹20 lakh held overseas by professionals working with multinational corporations. This change provides relief to certain NRIs and aims to simplify compliance.
Changes in Customs Duties: The budget has introduced various changes in customs duties, including reductions on cellphone chargers, gold, and X-ray equipment. These changes aim to reduce costs for consumers and businesses in specific sectors.

Implications for Various Industries and Sectors

The Union Budget 2025-26 has significant implications for various industries and sectors:

Transportation: The new UDAN scheme, support for greenfield airports, and focus on shipbuilding clusters will benefit the aviation, logistics, and shipping industries. Improved regional connectivity will create new routes and markets for airlines, while the development of shipbuilding clusters will boost domestic shipbuilding capacity.
Mining: The exemption of duties on critical minerals and machinery for their mining will boost the mining sector and support the growth of related industries. This will encourage the exploration and extraction of critical minerals, essential for various high-tech industries.
Tourism and Hospitality: Initiatives to improve connectivity and tourist amenities will provide a boost to the tourism and hospitality sector. Increased accessibility to tourist destinations and improved infrastructure will attract more tourists, generating revenue and employment opportunities.
Agriculture: The budget proposes measures to enhance agricultural productivity and resilience, benefiting the agriculture and food processing industries. These measures will support farmers and promote the growth of the agricultural sector, which is crucial for food security and economic stability.
Real Estate: The establishment of SWAMIH Fund 2 will aid in completing stressed housing projects, providing relief to the real estate sector and homebuyers. This will help revive stalled projects, boost investor confidence, and contribute to the growth of the real estate market.
Technology and IT: The focus on digitalization and technology adoption will create opportunities for the IT and telecom sectors. Increased demand for digital solutions and infrastructure will drive growth and innovation in these sectors.
Manufacturing: The PLI scheme for lithium-ion batteries and other initiatives will promote the growth of the manufacturing sector. This will encourage domestic production, reduce reliance on imports, and create new jobs.
Insurance: The increased FDI limit in the insurance sector is expected to attract foreign investment, increase competition, and potentially lead to product innovation. This will benefit consumers by providing more choices and potentially lower premiums.
EV and Clean Energy: The budget’s focus on critical minerals and clean energy will have a positive impact on the electric vehicle (EV) industry and the government’s goal of achieving a clean energy ecosystem. Increased domestic production of critical minerals, such as lithium, will support the growth of the EV industry and contribute to the transition towards cleaner transportation.

Social Development Initiatives

The Union Budget 2025-26 recognizes the importance of social development and includes several initiatives aimed at improving education, healthcare, and social welfare:

Atal Tinkering Labs: The budget allocates funds to establish 50,000 Atal Tinkering Labs in government schools over the next 5 years. These labs will foster innovation and cultivate a scientific mindset among young people.
Broadband Connectivity: The budget aims to provide broadband connectivity to all government secondary schools and primary health centers in rural areas under the BharatNet project. This will improve access to information and healthcare services in rural communities.
Job Scheme for Footwear and Leather Sector: The government plans to generate 22 lakh jobs in the economy through a job scheme focused on enhancing the productivity, quality, and competitiveness of India’s footwear and leather sector. This initiative will boost employment and support the growth of this labor-intensive sector.
Internship Opportunities: A scheme has been announced to provide internship opportunities in 500 top companies to one crore youth over five years. This will provide valuable work experience and enhance the employability of young people.
Working Women’s Hostels: To enable more women to participate in the workforce, the government will support the establishment of working women’s hostels in collaboration with industry. This initiative will address a key constraint for women’s employment and promote gender equality.

Employment Incentives

The Union Budget 2025-26 includes several measures to incentivize job creation and support employment growth:

Direct Benefit Transfer to First-time Employees: The budget continues the provision for direct benefit transfer of one month’s salary, subject to a maximum of ₹15,000, in three instalments to first-time employees1. This provides financial support to new employees and encourages employers to hire fresh talent.
Reimbursement to Employers: The budget provides for reimbursement of up to ₹3,000 per month to employers in all sectors for two years for creating additional employment and contributing to EPFO. This incentivizes businesses to expand their workforce and contribute to social security.
Employment-linked Incentive Schemes: The budget includes employment-linked incentive schemes to encourage businesses to create more jobs in manufacturing and other sectors. These schemes provide financial support to businesses that generate employment and contribute to economic growth.

Affordable Housing Initiatives

The Union Budget 2025-26 acknowledges the need for affordable housing and introduces measures to promote housing affordability:

SWAMIH Fund 2: The establishment of SWAMIH Fund 2 will aid in completing stressed housing projects, providing relief to the real estate sector and homebuyers. This will help revive stalled projects and make housing more accessible.
PM Awas Yojna: Additional central assistance has been announced under PM Awas Yojna for urban and rural areas. This will support the construction of affordable housing units and improve access to housing for lower-income groups.
Stamp Duty Reduction: States will be encouraged to lower stamp duty for all, and further lower it for properties bought by women. This will reduce the cost of acquiring property and make homeownership more affordable.

Compliance and Penalties

The Union Budget 2025-26 introduces a new penalty provision for non-compliance in filing annual statements by non-residents having a liaison office in India. The penalty will be ₹1,000 for up to three months of delay and a fixed penalty of ₹1 lakh thereafter. This amendment will be effective from April 1, 2025. Businesses with liaison offices in India need to be aware of this provision and ensure timely compliance to avoid penalties.

International Financial Services Centre

The Union Budget 2025-26 includes a provision to relax interest expense deduction limits for finance companies set up in the International Financial Services Centre (IFSC) in India. This relaxation aims to promote the development of the IFSC and attract more financial institutions to set up operations in India.

Customs Duty Changes

The Union Budget 2025-26 introduces several changes in customs duties:

Reduction on Cellphone Chargers: The Basic Customs Duty (BCD) on cellphone chargers and adapters has been reduced by 15%.
Reduction on Precious Metals: Customs duties on gold and silver have been sharply reduced from 14.35-15% to 6%, and on platinum from 15.4% to 6.4%.
Reduction on X-ray Equipment: BCDs on X-ray tubes and flat panel detectors for X-ray equipment have been reduced significantly.
Exemption for Cancer Medicines: Three medicines have been made fully exempt from customs duties to help cancer patients.

These changes in customs duties aim to reduce costs for consumers and businesses in specific sectors, promote domestic manufacturing, and improve access to essential goods and services.

Pension Reforms

The Union Budget 2025-26 includes measures to encourage contributions to the New Pension Scheme (NPS) by employers and employees. These measures aim to promote retirement savings and provide a secure financial future for individuals.

Impact of Regulatory Reforms

The Union Budget 2025-26 emphasizes regulatory reforms to simplify compliance, expand services, and promote investment. Initiatives such as the establishment of a high-level committee for regulatory reforms, the development of an investment friendliness index of states, and the review of financial regulations by the Financial Stability and Development Council (FSDC) are expected to improve the ease of doing business and attract foreign investment.

NRI Taxation: Challenges and Opportunities

The Union Budget 2025 introduces a stricter tax framework for Non-Resident Indians (NRIs), including students and young professionals abroad6. This includes an expanded definition of residency for taxation, greater scrutiny of foreign-earned income, and potential revisions to tax treaties. While these changes aim to prevent tax avoidance and align with global tax standards, they may pose challenges for NRIs in managing their tax liabilities and could potentially impact remittances and foreign asset holdings. However, the budget also presents opportunities for NRIs to invest in India and contribute to the country’s economic growth.

Expert Opinions and Reactions

The Union Budget 2025-26 has received mixed reactions from experts and industry analysts. Some sources suggest that the budget is a positive step towards economic growth and development, with its focus on infrastructure development, tax reforms, and support for various sectors. However, concerns have been raised about the stricter tax framework for NRIs and the potential impact on foreign investment. Some experts also believe that the budget could have done more to address pressing issues such as unemployment and rural distress.

Final Remarks

The Union Budget 2025-26 presents a comprehensive plan for India’s economic growth and development. The budget’s focus on infrastructure development, tax reforms, and support for various sectors, including MSMEs, is expected to create a favourable environment for businesses and attract investment. The emphasis on digitalization, technology adoption, and sustainability will further enhance efficiency and competitiveness.

However, the long-term impact of the budget will depend on the effective implementation of the proposed measures and the government’s ability to address concerns regarding NRI taxation and global economic challenges. The stricter tax framework for NRIs needs to be carefully implemented to avoid unintended consequences and ensure that India remains an attractive destination for foreign investment and talent. Overall, the budget provides a roadmap for India’s economic progress, and its success will rely on collaborative efforts from the government, businesses, and citizens.

References

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