Union Budget 2025: Key Tax Reforms and Sector-Specific Incentives

The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, brings a transformative set of measures designed to simplify the tax structure, stimulate domestic manufacturing, and provide relief across various sectors including healthcare, textiles, electronics, and more. With a focus on bolstering economic growth, enhancing taxpayer relief, and promoting innovation, the budget outlines significant updates to tax slabs, TDS/TCS regulations, and sector-specific incentives. These measures aim to provide much-needed relief to individuals and businesses while fostering the growth of emerging sectors like electric vehicles and shipbuilding.

Here are the key highlights of the Union Budget 2025:

Direct Tax Reforms

  1. Zero Income Tax on Income Up to ₹12 Lakh
    Under the New Tax Regime, income up to ₹12 lakh will be exempt from income tax, excluding special rate incomes such as Capital Gains
  2. Revised Tax Slab Rates (New Tax Regime)
    • Income Range (₹) | Tax Rate
      • 0 – 4 lakh | Nil
      • 4 – 8 lakh | 5%
      • 8 – 12 lakh | 10%
      • 12 – 16 lakh | 15%
      • 16 – 20 lakh | 20%
      • 20 – 24 lakh | 25%
      • Above 24 lakh | 30%

3. TDS on Interest for Senior Citizens
The TDS deduction under Section 194A for interest (other than securities) for resident senior citizens has been increased from ₹50,000 to ₹1,00,000

 

4. TDS on Rent (Section 194-I)
The limit for TDS on rent has been increased from ₹2,40,000 to ₹6,00,000.

 

5. TCS on Money Remittances (LRS)
The TCS on remittances under the Liberalized Remittance Scheme (LRS) has been raised from ₹7,00,000 to ₹10,00,000. However, no TCS will be levied on remittances made for education loans.

 

6. No TCS on Sale of Goods (Section 206C(1H))
The proposal includes the removal of TCS on the sale of goods under section 206C(1H), and the decriminalization of delayed TDS payments took effect from July 2024.

 

7. Presumptive Taxation for Non-Residents
The Presumptive Taxation regime now applies to non-residents providing services to resident companies setting up or operating electronics manufacturing facilities.

 

8. Extended Benefits for Startups
The startup benefit period has been extended by 5 years, with eligibility for companies incorporated before April 1, 2030.

 

9. Investment in IFSC
The time limit for the commencement of business in IFSC units has been extended to March 31, 2030.

 

10. Sovereign and Pension Fund Investment
Benefits for investments in Sovereign and Pension Funds have been extended to March 31, 2030.

Indirect Tax Reforms

 

  1. Removal of Seven Tariff Rates
    The budget proposes the removal of seven tariff rates, reducing the existing tariff structure to just eight rates, including zero-rate exemptions.

 

2. Sector-Specific Proposals:

Healthcare

    • Full exemption of Basic Customs Duty (BCD) for 36 lifesaving drugs and medicines, especially for cancer, rare diseases, and chronic diseases.
    • Drugs and medicines under patient assistance programs by pharmaceutical companies are exempt from BCD, provided they are supplied free of cost to patients.

 

            Textiles

    • To promote domestic technical textile production, the budget adds two more types of shuttle-less looms to the list of exempted textile machinery.
    • The BCD rate on knitted fabrics is revised from 10% or 20% to 20% or ₹115 per kg, whichever is higher.

 

Electronics

    • The BCD on Interactive Flat Panel Displays (IFPD) will be increased from 10% to 20%, while BCD on open cells and other components will be reduced to 5%.

 

Lithium-Ion Batteries

    • 35 additional capital goods for EV battery manufacturing and 28 additional capital goods for mobile phone battery manufacturing will be exempted from BCD.

 

Shipping Sector

    • The exemption of BCD on raw materials, components, and parts for shipbuilding will continue for another 10 years, supporting the shipbuilding industry’s long gestation period.

 

Telecommunication

    • To resolve classification issues, BCD on carrier-grade Ethernet switches will be reduced from 20% to 10%, aligning it with non-carrier grade Ethernet switches.

 

Handicrafts

    • The export timeline for handicrafts has been extended from six months to one year, with a further extension of up to three months, if necessary.

 

Leather

    • Full exemption of BCD on Wet Blue leather to facilitate imports for domestic value addition and employment. Additionally, the export duty on crust leather is removed to support small tanners.

 

Marine Products

    • BCD on Frozen Fish Paste (Surimi) will be reduced from 30% to 5% to support the manufacture and export of its analog products. BCD on fish hydrolysate for shrimp and fish feeds will also be reduced from 15% to 5%.

 

Domestic MROs for Railway Goods

    • The budget proposes to extend the time limit for the export of foreign-origin goods imported for repairs from six months to one year, with a further one-year extension if needed.

 

The Union Budget 2025 aims to strike a balance between providing immediate relief and fostering long-term growth. Through targeted tax reforms, incentives for startups, and sectoral support, it creates a favorable environment for businesses and individuals. With a focus on healthcare, manufacturing, and innovation, the government is paving the way for a self-reliant, robust economy. These reforms not only offer relief to the tax-paying public but also lay the groundwork for future prosperity, making India an attractive destination for investment and growth.