Budget 2025: What Gets Cheaper, What Gets Expensive?

The Union Budget for 2025-26 was presented by Finance Minister Nirmala Sitharaman on February 1, marking her eighth consecutive budget. This budget is the second full budget under the Modi 3.0 government.

Union Budget 2025: Overview

The budget aims to accelerate economic growth, ensure inclusive development, invigorate society and industry, uplift household sentiment, and enhance the spending power of India's rising middle class. The budget also includes measures to boost critical sectors, offer relief, and manage customs duties. A key focus of the budget is providing relief to the middle class. It also focuses on agriculture, manufacturing, employment, MSMEs, rural development, and innovation. The Finance Minister has also proposed a new income tax bill, which she stated will be clear and direct, and which will be introduced in Parliament next week. The budget was presented against a backdrop of a projected 4-year low GDP growth rate of 6.4 percent in the current financial year.

Income Tax Relief Measures

A significant highlight of the budget is the exemption of income tax for individuals earning up to Rs 12 lakh annually under the new tax regime. For salaried employees, this nil tax limit is effectively Rs 12.75 lakh per annum after including a standard deduction of Rs 75,000. This measure is designed to provide substantial relief to the middle class and increase their disposable income. The government will forgo a substantial amount in direct taxes due to these changes, estimated at Rs 1 lakh crore.

Customs Duty Adjustments: What Gets Cheaper

The Union Budget 2025 introduced several changes to customs duties, aiming to benefit various sectors. Items that have become cheaper include:

• Medicines: 36 life-saving drugs for cancer and chronic diseases are fully exempted from basic customs duties.
• Electronic Goods: Basic customs duty (BCD) will be reduced to 5% for open cells and other components.
• Critical Minerals: Cobalt powder and waste, scrap of lithium-ion batteries, lead, zinc, and 12 other critical minerals are exempted from BCD.
• EV and Mobile Battery Manufacturing: Over 35 additional goods for EV battery manufacturing and 28 additional goods for mobile phone battery manufacturing are added to the list of exempted capital goods.
• Wet Blue Leather: Fully exempted from BCD
• Frozen Fish Paste (Surimi): BCD reduced from 30% to 5% for the manufacture and export of its analogue products.
• Raw materials for shipbuilding are now exempt from basic customs duty for an additional 10 years.
• Marine products.

Customs Duty Adjustments: What Gets Costlier

Some goods are set to become costlier, particularly in the tech and manufacturing sectors:

• Interactive Flat-Panel Displays: The Centre proposed to increase the Basic Customs Duty on interactive flat-panel displays from 10% to 20%.
• Knitted Fabrics
• Telecom equipment and plastic products.

Other Notable Changes

• Provisional Assessments: A time limit of two years has been introduced for provisional assessments to ensure quicker and more efficient customs clearance.
• Tariff Rates: The budget suggests eliminating seven tariff rates, building on the removal of seven rates in the 2023-24 budget.
• Social Welfare Surcharge: The Social Welfare Surcharge will be exempted on 82 tariff lines that are subject to a cess.
• The limit for filing income tax returns (ITR) has increased from two to four years.
• The Tax Collected at Source (TCS) threshold on Liberalised Remittance Scheme (LRS) remittances has been raised from Rs 7 lakh to Rs 10 lakh.
• The Tax Deducted at Source (TDS) limit on rent has been hiked to Rs 6 lakh.
• Kisan Credit Card loan limit increased to Rs 5 Lakh from Rs 2 lakh.
• The government also plans to support long-term industrial growth by focusing on research and development (R&D), micro, small, and medium enterprises (MSMEs), and capital goods.
• India will allow 100 percent FDI in the Insurance sector with new guidelines.

Economic Outlook

The Economic Survey 2024-25, presented in Parliament, projects India’s economic growth to be between 6.3% and 6.8% for the financial year 2025-26. The survey also noted that food inflation is expected to decrease in the last quarter of FY25. The fiscal deficit target is pegged at 4.4% for 2025-26. The survey indicated that India's economic fundamentals remain stable due to a strong external account, fiscal discipline, and private consumption.

Disclaimer: This content is solely for educational purposes.