India’s middle class and business sectors are assured for their biggest windfall in years, as the 2025-26 Union Budget unleashes a bold cocktail of tax cuts and sector-specific stimuli. From slashing individual tax burdens to injecting fresh capital into manufacturing powerhouses, the Finance Minister Nirmala Sitaraman’s latest fiscal roadmap signals a decisive shift from cautious incrementalism to aggressive growth-oriented reforms.
While buried in the closing segments of her speech, the FM income tax overhaul appeared as the budget’s showstopper, sending waves of relief through India’s vast middle class. The FM’s tax announcements triggered a remarkable shift in public sentiment, as social media’s previously critical memes transformed into expressions of widespread approval on the budget’s personal finance measures.
Income Tax reforms
The 2025 Budget has significantly enhanced the appeal of the new tax regime by providing a full tax exemption for annual incomes up to Rs 12 lakh, increasing the basic exemption limit to Rs 4 lakh, and expanding the tax slabs. Additionally, it has introduced a new 25% tax bracket for incomes ranging from Rs 20 lakh to Rs 24 lakh.
For salaried individuals, up to Rs 12.75 lakh becomes effectively tax-free when accounting for the standard deduction of Rs 75,000, due to the tax rebate offered by the government under Section 87A.
For non-salaried individuals, the benefit of a standard deduction will be available in the form of marginal relief making income up to Rs 12.75 lakh. Even if the individual’s income is Rs 14 lakhs, he would be eligible for the marginal tax relief under 80 CCD (2) NPS (subject to investment) and standard deduction, eventually letting your taxable income fall between Rs 12 and Rs 12.75 lakhs.
Following the budget announcement, there was considerable confusion and uproar about the declaration of a tax exemption on incomes up to Rs 12 lakhs, alongside the existence of tax slabs for incomes below Rs 12 lakhs. These slabs remain necessary to calculate taxes for individuals whose taxable income exceeds Rs 12.75 lakhs and/or those qualifying for marginal tax reliefs.
The rebate applies to all sources of income, excluding special rate income like capital gains, which are taxed separately according to the relevant capital gains tax rates.
Other Sectors Receiving Strategic Boost
Agriculture
The budget increased funding aims to modernize farming, enhance irrigation, and promote organic practices. India is stepping up its efforts to make an impact on the global superfood market, much like the international staples such as quinoa and avocado that have found their way into the Indian diet. Notably, the “Makhana Board” is set up to boost Makhana production and international marketing, targeting a 40% rise in value-added exports and a fourfold increase in the organic market.
EV Manufacturing
Customs duty exemption on 35 capital goods for EV battery production, boosts the domestic electric vehicle ecosystem. This will help India reduce heavy reliability on neighbouring countries for critical components and raw materials needed for EV battery manufacturing. The vision is to have a self-sufficient domestic supply chain and decrease dependency on imports.
Telecom
Reduction of the Basic Customs Duty (BCD) on carrier-grade Ethernet switches from 20% to 10% is designed to lower costs for providers, potentially leading to more affordable services and improved network quality.
Healthcare
The budget removes customs duties on 36 lifesaving drugs and plans 200 new daycare cancer centres, alongside adding 10,000 medical seats to address the professional shortage.
Seafood Industry
The BCD on frozen fish paste and fish hydrolysate is cut drastically to boost the competitiveness of domestic seafood production, decreasing the cost of key raw materials for businesses.
Technology & Innovation
Increased funding for the India AI mission, a new AI Centre of Excellence in Education, and a Deep Tech Fund support tech innovation. Additionally, a national framework will develop Global Capability Centres in tier 2 cities, leveraging local talent.
Despite India being the world’s most populous nation with only about 3% of its population paying income tax, tax rebates have become possible due to a GST strategy that taps into broader expenditure patterns. Introduced amid initial resistance in 2017, the GST has now proven its efficacy, underpinning fiscal strategies that enhance both the ease of living and business operations. Budget 2025 lays down a definitive roadmap for India’s future economic growth, using these reforms to navigate the challenges ahead.
(The writer is an author, technologist and CTO/Co-founder of InBetween Software Development with over a decade of steering Goa’s digital growth)
