On February 1, 2025, Finance Minister Nirmala Sitharaman presented the Union Budget for the financial year 2025-26, outlining significant reforms aimed at stimulating economic growth, simplifying taxation, and enhancing public welfare. This article delves into the critical aspects of the budget and their potential impact on individuals and businesses.
Introduction of the New Income Tax Bill
A landmark feature of this year's budget is the introduction of a new Income Tax Bill, set to replace the Income Tax Act of 1961. This initiative aims to reduce the complexity of current tax laws by up to 60%, making compliance more straightforward for taxpayers.
Revised Income Tax Slabs Under the New Regime
The budget proposes a restructuring of income tax slabs under the new tax regime to provide relief to taxpayers:
- Up to ₹4,00,000: Nil
- ₹4,00,001 to ₹8,00,000: 5%
- ₹8,00,001 to ₹12,00,000: 10%
- ₹12,00,001 to ₹20,00,000: 15%
- Above ₹20,00,000: 20%
These adjustments are designed to increase disposable income, thereby boosting consumption and economic activity.
Goods and Services Tax (GST) Amendments
In alignment with decisions from the 55th GST Council meeting, the Central Goods and Services Tax (CGST) Act, 2017, has been amended. A notable change requires recipients to reverse input tax credit attributable to a credit note, enabling suppliers to reduce their output tax liability accordingly.
Economic Growth Projections
The Reserve Bank of India (RBI) anticipates that the Indian economy will benefit from increased rural demand and government-announced tax reliefs supporting urban consumption. The RBI's models predict GDP growth improving to 6.6% in the January-March 2025 quarter, with an overall growth forecast of 6.7% for the 2025-26 financial year.
Sectoral Allocations and Initiatives
The budget emphasizes investment in research and development, information technology, education, and urban development. Notably, the Uttar Pradesh state budget for 2025-26 reflects these priorities with an outlay of ₹8.08 lakh crore, focusing on artificial intelligence, education, and urban development.
Implications for Micro, Small, and Medium Enterprises (MSMEs)
Despite the comprehensive nature of the budget, concerns have been raised regarding its support for India's 63 million MSMEs. Critics argue that the budget may not adequately address the challenges faced by these enterprises, which are crucial to the nation's economic fabric.
Conclusion
The Union Budget 2025-26 introduces significant reforms aimed at fostering economic growth, simplifying tax structures, and promoting inclusive development. While the new Income Tax Bill and revised tax slabs are poised to benefit taxpayers, the actual impact will depend on effective implementation and responsiveness to the needs of all economic sectors, including MSMEs.
As the fiscal year progresses, continuous assessment will be essential to ensure that the budget's initiatives translate into tangible benefits for the economy and its stakeholders.