Union Budget 2025-26: Key Highlights and Impact on Various Sectors

 Union Budget 2025-26: Key Highlights and Impact on Various Sectors

Defense Budget Sees a Significant Increase

The Union Budget 2025-26 has allocated over Rs 6.81 lakh crore for the Ministry of Defence (MoD), marking a 9.53% increase from the current financial year. This allocation underscores the government's commitment to strengthening national security and modernizing defense infrastructure.

Capital Expenditure Allocation Rises Marginally

A sum of Rs 11.21 lakh crore has been earmarked for capital expenditure in 2025-26, reflecting a 0.9% increase compared to the 2024-25 budget estimates. This rise is aimed at sustaining infrastructure development and boosting economic growth.

Urban Challenge Fund to Boost City Growth

To enhance urban infrastructure and transform cities into economic hubs, the budget has introduced a Rs 1 lakh crore Urban Challenge Fund. This initiative is expected to drive sustainable urbanization and improve living standards.

Basic Customs Duties Rejig: What Gets Cheaper and Costlier?

A major highlight of the budget is the revision of basic customs duties (BCD), impacting prices of several goods. The adjustments aim to bolster domestic manufacturing and reduce dependency on imports.

Relief on Import of Life-Saving Drugs

To support patients suffering from cancer, rare diseases, and chronic illnesses, Finance Minister Nirmala Sitharaman announced the addition of 36 drugs and medicines to the list of those fully exempt from BCD. Another six medicines will attract a concessional duty of 5%. Additionally, 37 more medicines and 13 new patient assistance programs have been included in the exemption list.

Support for Domestic Manufacturing and MSMEs

The government has fully exempted BCD on 25 critical minerals that are not available domestically. Further exemptions apply to cobalt powder, lithium-ion battery waste, lead, zinc, and 12 other minerals. These measures are designed to ensure resource availability for Indian manufacturers and generate employment opportunities.

Boost to Textile Industry

To promote domestic production of technical textiles such as agro-textiles, medical textiles, and geo textiles, the government has added two more types of shuttleless looms to the list of fully exempted textile machinery. Additionally, the BCD on knitted fabrics has been revised from "10% or 20%" to "20% or Rs 115 per kg, whichever is higher."

Make in India Push for Electronic Goods

Aligning with the 'Make in India' policy, the budget has increased the BCD on Interactive Flat Panel Displays (IFPD) from 10% to 20%, while reducing the duty on Open Cell and other components to 5%. The BCD on parts of Open Cells for LCD/LED TVs has been slashed from 5% to 2.5% to further incentivize local manufacturing.

Lithium-Ion Battery Industry Gets a Boost

The government has exempted 35 capital goods for EV battery manufacturing and 28 capital goods for mobile phone battery manufacturing from BCD. These exemptions aim to accelerate domestic lithium-ion battery production, benefiting both electric vehicle and mobile phone industries.

Shipping Sector Incentives

To support shipbuilding, the exemption of BCD on raw materials, components, and consumables for ship manufacturing has been extended for another ten years. A similar exemption applies to shipbreaking activities to enhance competitiveness.

Telecommunication Sector Reforms

To prevent classification disputes, the government has reduced the BCD on Carrier Grade Ethernet Switches from 20% to 10%, aligning it with Non-Carrier Grade Ethernet Switches.

Export Promotion Initiatives

• Handicrafts: Export time for handicrafts has been extended from six months to one year, with an additional extension of three months if required. Nine new duty-free inputs have also been added.
• Leather Industry: Wet blue leather is now fully exempt from BCD to facilitate imports for domestic value addition and employment. Crust leather has also been exempted from 20% export duty.
• Seafood Industry: The BCD on frozen fish paste (Surimi) has been reduced from 30% to 5% to boost exports. Fish hydrolysate used for fish and shrimp feed production now attracts a reduced BCD of 5% from 15%.

MRO Expansion for Railway Goods

Following the July 2024 budget’s focus on aircraft and ship maintenance, repair, and overhaul (MRO), similar provisions have been extended to railway goods, promoting domestic MRO development.

Big Relief for Middle-Class Taxpayers

In a major relief, the Finance Minister announced that no income tax will be payable on annual earnings up to Rs 12 lakh. For salaried taxpayers, this limit extends to Rs 12.75 lakh, factoring in a Rs 75,000 standard deduction. However, these exemptions apply only if taxpayers claim deductions under various sections like Rs 1.5 lakh under section 80CCC and home loan interest exemption.

A person earning Rs 18 lakh will save Rs 70,000 in taxes, while those earning Rs 25 lakh will benefit from a Rs 1,10,000 tax reduction. The estimated revenue loss due to these tax cuts amounts to Rs 1 lakh crore in direct taxes and Rs 2,600 crore in indirect taxes.

Fiscal Deficit Target for 2025-26

The government has set the fiscal deficit target at 4.4% for the financial year 2025-26, reflecting a focus on fiscal discipline and economic stability.

Increase in FDI Limit for Insurance Sector

The Foreign Direct Investment (FDI) limit for the insurance sector has been raised to 100%, aimed at attracting more investments and enhancing the sector’s growth.

Establishment of Makhana Board in Bihar

To promote Makhana (fox nut) production, a specialized Makhana Board will be established in Bihar, supporting farmers and boosting the region’s economy.

Union Budget 2025-26: Focus on Growth and Inclusive Development

The Union Budget 2025-26 emphasizes economic growth, infrastructure development, and inclusive policies to strengthen the Indian economy. The strategic allocation of funds and policy decisions reflect the government’s vision for sustainable progress and self-reliance.

This budget sets the stage for India’s economic resilience, focusing on key sectors such as defense, manufacturing, infrastructure, and social welfare, ensuring a balanced and progressive development trajectory.