DOSSIER ON UNION BUDGET- 2025

[Dr. Sanjiv Agarwal]

The Budget 2025 session of the Parliament begun on 31^st January, 2025 with the address of President of India and tabling of Economic Survey 2024-25.

The Union Finance Minister presented her 8^th consecutive Budget for the year 2025-26 1^st February, 2025 in the Parliament and also introduced Finance Bill, 2025 on the Lok Sabha. Along with Budget, a complete set of Budget documents is also presented to the Parliament.

This year’s Budget has been presented in the background of economic outlook tabled in the Parliament on 31^st January, 2025 in the form of Economic Survey 2024-25.

According to Economic Survey, GDP growth is forecast to be in the range of 6.3% to 6.8% for FY 2026 in the back drop of robust economic fundamentals. India will be the third largest economy in the world in next few years by 2030. Its median age of 28 years is the key driver of the growth. India’s economic prospects for FY 2026 are balanced.

This year’s Budget focuses to accelerate growth, secure inclusive development, enhance private sector investments, uplift household sentiments and enhance spending power of middle class in the country. Its underlying theme is to unlock nation’s potential for prosperity, global positioning and to march forward resolutely.

1. Budget Documents

The following is the list of Budget documents presented to the parliament on 1^st February, 2025 by Union Finance Minister:

1. Annual Financial Statement (AFS)
2. Demands for Grants (DG)
3. Finance Bill
4. Fiscal Policy Statements mandated under Fiscal Responsibility and Budget Management (FRBM) Act, 2003
   1. Macro-Economic Framework Statement
   2. Medium-Term Fiscal Policy cum Fiscal Policy Strategy Statement
5. Expenditure Budget
6. Receipt Budget
7. Expenditure Profile
8. Budget at a Glance
1. Memorandum Explaining the Provisions in the Finance Bill
10. Output Outcome Monitoring Framework
11. Key Features of Budget 2025-26
50. Implementation of Budget Announcements 2024-25

2. Union Budget – General 

• Budget makes further efforts to:
  1. accelerate growth
  2. secure inclusive development
  3. invigorate private sector investments
  4. uplift household sentiments, and
  5. enhance spending power of India’s rising middle class.

• Aspiration for a ‘Viksit Bharat’ encompasses:

1.  zero-poverty
2. hundred per cent good quality school education
3. access to high-quality, affordable, and comprehensive healthcare
4. hundred per cent skilled labour with meaningful employment
5. seventy per cent women in economic activities; and
6. farmers making our country the ‘food basket of the world’.

• Major areas of Budget focus:

1.  Spurring agricultural growth and productivity
2. Building rural prosperity and resilience
3. Taking everyone together on an inclusive growth path
4. Boosting manufacturing and furthering make in India
5. Supporting MSMEs
6. Enabling employment-led development
7. Investing in people, economy and innovation
8. Securing energy supplies
1. Promoting exports, and
10. Nurturing innovation.

• Major transformation in domains of:
  1. Taxation
  2. Power sector
  3. Urban development
  4. Mining
  5. Financial sector, and
  6. Regulatory reforms.

• Measures for agriculture- enhanced ACC credit, National Mission for high yielding seeds and cotton productivity, pulses.
• India Post to act as catalyst of rural economy.
• Measures for MSMEs, labour intensive sectors and manufacturing sector
• Enhanced credit guarantee to MSMEs and startups
• Centre of excellence in artificial intelligence for education, with a total outlay of Rs. 500 crore
• Lakh crore urban challenge fund for ‘cities as growth hubs’
• Focus on investing in people, economy, innovation and startup, labour welfare
• Measures for export promotion-Bharat Trade Net, framework for global supply chain, warehousing for air cargo
• Regulatory reforms – high level Committee for reforms, launch of investment index of states.

3. Economy

• Aspiration for a Vikisit Bharat by 2047
• Indian economic growth remains steady amid global uncertainties
• Indian Economy is the fastest growing economy among all major global economies
• Indian GDP to be 3.9 trillion USD in 2025; 6.3 trillion USD by FY 2030
• India’s economic growth to be between 6.3 to 6.8%  in FY 2025-26
• Fiscal deficit is estimated to be 4.4% of GDP
• Strong advocacy of de-regulation and reforms including labour reforms for ease of doing business and GDP growth
• Corporate profits and wage growth not in sync-needs improvement
• Agriculture is the sector of future and likely to grow by 3.8% in FY 2025

4. Direct Taxation

• New Income Tax Bill to be tabled next week which will be simple to understand, leading to tax certainty and reduced litigation.
• New Bill will be clear and direct in text, about half of the present law.
• Personal taxation made easy
• Major tax relief to middle class
• Salaried class to pay nil income tax upto Rs. 12.75 lakh per annum in new tax regime
• New tax structure will substantially reduce the taxes of middle class and leave more money in their hands, boost household consumption, savings and investments.
• TDS limit on senior citizens’ deposit interest raised to Rs. 1 lakh from Rs. 50,000 existing limit.
• TDS threshold on rental income increased to Rs 6 lakh from Rs 2.4 lakh existing
• TCS on remittance for education withdrawn, if loans taken from financial institutions.
• Higher TDS to apply only in non-PAN cases
• In case of upto two self occupied houses, annual value to be considered as nil.
• New proposed simplified Income tax slabs under New Regime of tax:

Income-tax slab	Income-tax rate
Rs 0-4 lakh	Nil
Rs 4-8 lakh	5%
Rs 8-12 lakh	10%
Rs 12-16 lakh	15%
Rs 16-20 lakh	20%
Rs 20-24 lakh	25%
Over Rs 24 lakh	30%

• Benefit on new slab rates on various level of income:      (all figures in INR)

Income Slab	Tax on Slabs and rates		Benefit of	Rebate benefit	Total Benefit	Tax after rebate Benefit
	Present	Proposed	Rate / Slab	Full up to Rs. 12 lacs
8 lac	30,000	20,000	10,000	20,000	30,000	0
9 lac	40,000	30,000	10,000	30,000	40,000	0
10 lac	50,000	40,000	10,000	40,000	50,000	0
11 lac	65,000	50,000	15,000	50,000	65,000	0
12 lac	80,000	60,000	20,000	60,000	80,000	0
16 lac	1,70,000	1,20,000	50,000	0	50,000	1,20,000
20 lac	2,90,000	2,00,000	90,000	0	90,000	2,00,000
24 lac	4,10,000	3,00,000	1,10,000	0	1,10,000	3,00,000
50 lac	11,90,000	10,80,000	1,.10,000	0	1,10,000	10,80,000

5. Indirect Taxes

E1. Customs Duty

• Changes made in Customs tariff rates and HSN Codes.
• Legislative changes in Customs Act, 1962 and Customs Tariff Act, 1975
• Rationalization of Customs Tariff structure for industrial goods removing seven tariff rates; to levy not more than one cess / surcharge
• Voluntary revision of entry after clearance of goods to allow importers / exporters  to revise entries.
• Relief on imports of drugs / medicines
• Measures to support domestic manufacture and value addition in minerals, textiles, electronic goods, lithium ion battery, shipping, telecom etc
• Measures for export promotion in handicrafts, leather, marine products.
• Time limit provided for provisional assessments – 2 years extendible by one year
• Time limit extended for end use of inputs – upto one year.

• Other Specific Changes

• Exemptions/concessional rates being extended till 31.3.2029 by making amendment in N. No. 50/2017 – Customs dated 30.06.2017 for below goods:

• Bulk drugs for manufacture of drugs or medicines
• Bulk drugs used in the manufacture of polio vaccine and Mono component insulins
• Bulk drugs used in the manufacture of life saving drugs or medicines
• Drugs, Medicines or Food for Special Medical Purposes (FSMP) used for treatment of rare disease

• 37 more drugs /medicines along with 13 new patient assistance programmes have been added to the list of medicines fully exempt from BCD subject to being supplied free to cost patients under Patience Assistance Programmes (PAP) – effective from 02.02.2025.

• Reduction in Tariff rates (w.e.f. 01.05.2025) –

• Rate reduced from 30% to 10% on Pharmaceutical Reference Standard, Certified / other reference materials (Covered under sub-heading 3822 90)
• Rate reduced from 30% to 20% on Sorbitol (classified under sub-heading 3824 60)

E2 . Goods & Service Tax (GST)

• Revenue collection from CGST / IGST

• Revised estimates (2024-25) Rs. 6506.46 crore
• Budget estimate (2025-26) Rs. 6870.52 crore

• Legislative changes proposed in CGST Act, 2017

The following amendments have been proposed to the Central Goods and Services Tax Act, 2017 which are briefly summarized below:

1. Amendment in Section 2 (Definition)

• Clause (61) is being amended to amend definition of input service distributor to explicitly provide for distribution of input tax credit by the Input Service Distributor in respect of inter-state supplies on which tax has to be paid on reverse charge basis, by inserting reference to Section 5(3)/5(4) of Integrated Goods and Services Tax Act. This amendment will be effective from 01.04.2025.
• Clause (69) (c) is being amended to insert an Explanation to provide for definitions of the terms 'Local Fund' and 'Municipal Fund' used in the definition of ‘local authority’ under the said clause so as to clarify the scope of the said terms.
• A new clause (112A) is being inserted to provide definition of Unique Identification Marking for implementation of Track and Trace Mechanism.

2. Amendments in Section 12 and 13 (Tim of Supply)

• Section 12(4) and Section 13(4) relating to time of supply in respect of Vouchers is being omitted.

3. Amendment in Section 17 (Input Tax Credit)

• Section 17(5)(d) is being amended to substitute the words "plant or machinery" with the words "plant and machinery" with effect from 01.07.2017.

4. Amendment in Section 20 (Input Service Distributor)

• Section 20(1) and Section 20(2) are being amended to explicitly provide for distribution of input tax credit by the Input Service Distributor in respect of inter-state supplies, on which tax has to be paid on reverse charge basis, by inserting reference of Section 5(3)/5(4) of Integrated Goods and Services Tax Act in section 20(1).
• The amendment will be effective from 01.04.2025.

5. Amendment in Section 34 (Credit Note)

• Proviso to section 34(2) is being amended to explicitly provide for requirement of reversal of corresponding input tax credit in respect of a credit-note, if availed, by the registered recipient, for the purpose of reduction of tax liability of the supplier in respect of the said credit note.

6. Amendments in Section 38 (Returns)

• Section 38(1) is being amended to omit the expression "auto-generated".
• Section 38(2) is being amended to omit the expression "auto-generated" and to insert the expression "including" after the words "by the recipient" in clause (b) to make the said clause more inclusive
• Section 38(2) is also being amended to insert a new clause (c) to provide an enabling clause to prescribe other details to be made available in statement of input tax credit.
• Section 39(1) is being amended to provide an enabling clause to prescribe certain conditions and restriction for filing of return.

7. Amendments in Section 107 and 112 (Pre-deposit / Appeals)

• Section 107(6) is being amended to provide for 10% mandatory pre-deposit of penalty amount for appeals before Appellate Authority in cases involving only demand of penalty without any demand for tax.
• Section 112(8) is amended to provide for 10% mandatory pre-deposit of penalty amount for appeals before Appellate Tribunal in cases involving only demand of penalty without any demand for tax.

8. Insertion of a new section 122B (Track & Trace Mechanism)

• A new Section 122B is being inserted to provide penalties for contraventions of provisions related to the Track and Trace Mechanism provided under Section 148A.
• Section 148A is being inserted to provide for enabling mechanism for a Track and Trace Mechanism for specified commodities.

1. Amendments in Schedule III (Non Supply Cases)

• Schedule III is being amended to insert a new Entry (aa) in paragraph 8 to provide that the supply of goods warehoused in a Special Economic Zone or in a Free Trade Warehousing Zone to any person before clearance for exports or to the Domestic Tariff Area shall be treated neither as supply of goods nor as supply of services. (w.e.f. 01.07.2017)
• Amendment in Explanation 2, w.e.f. 01.07.2017 to clarify that the said explanation would be applicable in respect of entry (a) of paragraph 8.
• New Explanation 3 to define the terms 'Special Economic Zone', 'Free Trade Warehousing Zone' and 'Domestic Tariff Area', for the purpose of the proposed entry (aa) in paragraph 8.
• To provide that no refund of tax already paid will be available for the transactions referred above.

Note: The above amendments shall be effective after enactment of the Finance Bill, 2025, unless otherwise specified.