Announces big bonanza on personal income tax in providing more money in hands, aimed at boosting consumption demand, purchasing power of aam aadmi as well as the growth of economy in the country.
New Delhi: Despite focussing on the four pillars of society — poor, women, youth and farmers in the Budget for 2025-26, the government on Saturday brought cheers in the faces of salaried, middleclass and elderly as it announced a big bonanza on their personal income tax in providing more money in hands, the move aims to boost consumption demand, purchasing power of aam aadmi as well as the growth of economy in the country. Besides, she also unveiled a blueprint for next generation reforms as she looked to shore up a slowing economy amid global uncertainties.
With some “hits and misses”, the Modi 3.0’s first full year budget also prioritised a prudent fiscal management to maintain its pace of the fastest growing economy of the world and announced measures for the growth, mainly through six engines, including MSMEs, agriculture, health, education and energy sectors among others as well. Apart from tax relief for the middleclass and others, a slew of projects were also announced for the state of Bihar as Union finance minister Nirmala Sitharaman tabled her eighth consecutive budget in Parliament. Notably, it is believed to be her second shortest speech, while she holds the record of delivering the longest budget speech of two hours and forty minutes in 2020.
Addressing the media after tabling the budget in the House, Sitharaman said that the Budget 2025 focuses on rural prosperity, urban development and reforms, particularly on workers and the government will continue to focus on its reforms. “The Budget, however, responded to people’s voices and tariffs are being brought down and simplified for the people as well. As far as tax relief is concerned, with the rejig in the income tax slab rates, the Centre has put more money in the hands of people and 1 crore more people will pay no income tax after the increase in limit of income tax rebate to Rs 12 lakh in the budget,” said Nirmala Sitharaman.
Reacting to the budget, Prime Minister Narendra Modi said that the Union Budget 2025 is a “people's budget” and it will boost investment and pave the way for the Viksit Bharat’, or developed India, goal. “The budget's focus on ‘savings for people’ refers to two big-ticket announcements by Ms Sitharaman — no income tax for individuals earning up to Rs 12 lakh (Rs 12.75 lakh including the standard deduction) and a revision of tax slabs applicable under the new regime,” he added.
The budget comes against the backdrop of the Indian economy growing at its weakest pace since pandemic and rising geopolitical risks particularly with the new US President Donald Trump threatening to impose widespread tariffs including on India. “The 6.4 per cent GDP growth estimated for the current fiscal and 6.3 to 6.8 per cent in the next are well below the 8 per cent growth needed to meet the ambitious goal of making India a developed nation by 2047. Our endeavour will be to keep the fiscal deficit each year such that the central government debt remains on a declining path as a percentage of the GDP,” she said, projecting debt at 50 per cent of GDP by March 2031.
The Budget 2025 has earmarked a total allocation of Rs 50.65 lakh crore, out of which the estimated capex expenditure is at Rs 11.21 lakh crore (3.1 percent of GDP) in FY 2025-26. However, the budget has some new ‘hits’ like introduction I-T bill, announcement of a slew of new projects for the states like Bihar and few for Delhi and Jammu & Kashmir, unveiled the eighteenth Cabinet’s plans for funding the integration of artificial intelligence etc, while it has ‘misses’ no increase of capital expenditure, no significant funds for other states, including NDA-led alliance government in Andhra and others.
When asked about the reduction on capital expenditure, the finance minister also said that there is no reduction in public spending on capital expenditure and fiscal prudence has aligned itself to the glide path announced in 2021. “Rather, we continue to place emphasis on the multiplier effect that capital expenditure done by the government has shown has sustained us. We continue on that, and with all this, our fiscal prudence has been maintained,” she said.
On the new income tax or I-T bill, the finance minister said that the government proposed to introduce a new I-T bill in Parliament next week, replacing the six-decade old income tax act of 1961. “The new I-T bill, which will be referred to a Standing Committee after that and new I-T Bill will carry forward the spirit of ‘Nyaya’ (justice) based on the concept of ‘trust first, scrutinise later,” she said, adding that on the energy sector, the energy security has had greater attention in this budget in this budget, in continuation to her July 2024 budget.
