Union Budget 2025: What’s New In Customs Duty Reforms, Startups & MSME Support, Infrastructure Boost?

Finance Minister Nirmala Sitharaman presented the Union Budget for 2025, marking her eighth consecutive Budget presentation in Prime Minister Narendra Modi’s third term. This significant move brings her closer to Morarji Desai’s milestone of 10 Budget presentations. The Union Budget comes at a crucial time when India’s economic growth has slowed to a four-year low, with global uncertainties—including U.S. tariff threats and rising geopolitical tensions—posing fresh challenges.

Despite these challenges, the Budget outlines a comprehensive plan for economic resilience, focusing on tax relief, infrastructure development, and sectoral reforms to bolster long-term sustainable growth. Below are the major highlights of the 2025 Budget:

New Income Tax Regime: Simplified and Progressive

A cornerstone of the Budget is the revamped income tax structure, which aims to provide substantial relief to middle-class taxpayers. The new regime includes:

• No Tax up to Rs 12 Lakh: Individuals earning up to Rs 12 lakh annually will be exempt from paying income tax.
• Relief for Higher Incomes: Those earning up to Rs 25 lakh will benefit from Rs 1.1 lakh in tax savings.

New Tax Slabs under the revised regime are as follows:

• Up to Rs 4 lakh: No tax
• Rs 4 lakh – Rs 8 lakh: 5%
• Rs 8 lakh – Rs 12 lakh: 12%
• Rs 12 lakh – Rs 16 lakh: 15%
• Rs 16 lakh – Rs 20 lakh: 20%
• Rs 20 lakh – Rs 24 lakh: 25%
• Above Rs 24 lakh: 30%

This simplified tax structure is expected to ease the burden on middle-income earners while encouraging higher compliance and economic growth.

Key Tax Reforms to Ease Compliance

Several measures have been proposed to make tax filing simpler and more taxpayer-friendly:

• TDS Rationalization: The number of Tax Deducted at Source (TDS) rates and thresholds will be reduced to make compliance smoother.
• Higher TCS Threshold for Remittances: The Tax Collected at Source (TCS) threshold for remittances under the Liberalized Remittance Scheme (LRS) has been increased from Rs 7 lakh to Rs 10 lakh.
• TDS Relief on Rent: The TDS threshold on rent payments has been raised to Rs 6 lakh, providing significant relief to businesses and individuals.
• Education Loan Exemption: TCS on education loans up to Rs 10 lakh will be removed, benefiting students and their families.

These reforms aim to reduce administrative burden while ensuring better support for individuals and businesses alike.

Focus on Startups and MSMEs

The government is taking steps to invigorate the startup ecosystem and support Micro, Small, and Medium Enterprises (MSMEs). Key initiatives include:

• Startup Tax Incentives: The period for startups to avail of tax benefits has been extended by five years.
• Credit Guarantee Cover for MSMEs: The credit guarantee cover for MSMEs will be increased from Rs 10 crore to Rs 20 crore.
• Fund-of-Funds for Startups: A new fund-of-funds with a Rs 10,000 crore corpus will be established to support innovative ventures.

These measures aim to provide financial relief and unlock growth potential in these vital sectors.

Customs Duty Reforms

The government has introduced several customs duty changes to support local manufacturing and reduce the cost of living:

• Exemption on Life-Saving Drugs: 36 life-saving drugs will be fully exempt from Basic Customs Duty (BCD).
• Increase in BCD on Flat Panel Displays: The BCD on flat panel displays has been raised from 10% to 20%.
• Customs Duty Reduction on Open-Cell Panels: Open-cell customs duty has been reduced to 5%.
• Critical Minerals Exemption: 12 more critical minerals will be exempt from BCD.

These reforms aim to reduce the cost of essential goods and encourage domestic manufacturing, particularly in the tech and pharmaceutical sectors.

Key Infrastructure and Development Initiatives

The Union Budget also focuses on extensive infrastructure development, setting the stage for long-term growth:

• Capital Expenditure (Capex) Boost: The revised capital expenditure for FY25 has been set at Rs 10.18 lakh crore, with a focus on projects in sectors like energy, transport, and urban development.
• Maritime Development Fund: A Rs 25,000 crore fund will support the development of India’s maritime sector.
• Nuclear Energy for 2047: Aiming for 100 GW of nuclear energy by 2047, the government plans to invest Rs 20,000 crore in research and development of small modular reactors.

These measures are designed to provide a boost to both urban and regional infrastructure and ensure energy security for India’s future.

Agriculture and Rural Development: Focus on Sustainability

Agriculture remains a top priority in the Budget, with several initiatives designed to boost productivity and support rural farmers:

• Dhan Dhanya Krishi Yojana: A new scheme focusing on 100 low-productivity districts will aim to assist 1.7 crore farmers.
• National Mission for High-Yielding Seeds: A mission will be launched to promote high-yielding seeds, boosting agricultural production.
• Fisheries Development: A new framework will promote the sustainable harnessing of fisheries in India’s Exclusive Economic Zone (EEZ).

The government’s focus on agriculture seeks to ensure food security and increase rural prosperity.

Healthcare and Social Welfare

The Budget also makes significant strides in improving healthcare and social security for the Indian population:

• Day-Care Cancer Centres: 200 new day-care cancer centres will be established across India by 2025-26.
• New Social Security Scheme for Gig Workers: A new scheme will provide gig workers with insurance and registration through the E-shram portal.
• Medical Colleges Expansion: 10,000 new seats in medical colleges will be added in FY26 to meet the growing demand for healthcare professionals.

These initiatives are aimed at improving public health infrastructure and ensuring social security for marginalized sections of society.

Geopolitical Challenges and Global Economic Outlook

The Budget comes at a time when global economic growth is slowing due to geopolitical tensions. However, India’s track record over the past decade has garnered global attention. The focus of the 2025 Budget remains on addressing these external headwinds while ensuring internal economic growth and stability.

Finance Minister Nirmala Sitharaman’s Union Budget for 2025 is a comprehensive roadmap for India’s future, focusing on tax relief, sectoral reforms, and infrastructure growth. While the country faces global challenges, the measures outlined in this Budget are designed to build resilience, promote sustainable development, and uplift India’s middle class, startups, and MSMEs. As the country steers through a period of slow growth, these reforms are aimed at creating a solid foundation for long-term prosperity.

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