India’s Finance Minister, Nirmala Sitharaman, presented the 2025-26 Union Budget on February 1. There have been several important reforms impacting all of us. Let’s read reforms introduced in Budget 2025 and their impact through this article.
Impact of Latest Reforms Introduced under Budget 2025
More income for salaried persons and Less Taxes
The government has introduced No personal tax till ₹12,75,000 annual income. Thus, the new tax structure will substantially reduce the taxes of the middle class. It will also leave more money in their hands, boosting household consumption, savings and investment.
Tax Savings for Elderly
The limit for tax deduction on interest for senior citizens doubled from the present Rs 50,000 to Rs 1 lakh. Thus, the elderly can save more now.
TDS Relaxation on Rent
TDS now will be applicable only if rent exceeds Rs. 6 lakhs. Therefore, businesses can save on paying TDS on rent. Furthermore, it reduces the compliances for businesses.
TDS Relaxation on Foreign Remittance
The threshold limit for TCS on LRS remittances has been increased from ₹7 lakh to ₹10 lakh. As a result, foreign remittance is now much easier and saves you from paying additional costs.
No TCS on Businesses selling goods more than Rs. 50 Lakhs
Under Section 206C(1H) of the Income Tax Act, sellers were required to collect Tax Collected at Source (TCS) at 0.1% on the sale of goods exceeding ₹50 lakh. However, since TDS under Section 194Q also applies to such transactions, both TCS and TDS were sometimes applied simultaneously. To resolve this issue, the Union Budget 2025 proposes eliminating TCS on the sale of goods, effective April 1, 2025. This amendment aims to simplify tax compliance for sellers, provide clarity to buyers, and prevent unnecessary liquidity blockage.
Less Compliance Burden for Charitable Trusts
Compliance Burden has been reduced for small charitable trusts/institutions by increasing their period of registration from 5 years to 10 years.
Quarterly GST Return Filing for MSMEs instead of monthly
To ease compliance for small businesses, the government has introduced a quarterly GST return filing system for startups and MSMEs with a turnover of less than ₹5 crore. Previously, these businesses were required to file GST returns monthly, which added to their administrative burden. By shifting to a quarterly filing system, the Finance Bill 2025 aims to reduce compliance costs, improve cash flow management, and provide greater ease of doing business for small enterprises.
Long Term Tax Certainty for Businesses
The Finance Bill 2025 still has a corporate tax rate of 22% for domestic companies, which maintains consistency in the tax system. Also, newly set-up manufacturing companies will continue to avail the concessional tax rate of 15% which was introduced with the expectation of increasing investments and industrial activity in India’s manufacturing sector. This is designed to provide businesses with a moderate degree of tax assurance while helping implement the Make in India policy.
Startup India Tax Exemption Extended
The extension of the startup tax exemption under the new Finance Bill 2025 will significantly benefit qualified startups by three more years, till the year 2030. This alteration seeks to assist startups in scaling their operations by minimizing their tax burden which enhances their prospects for growth and sustainability in the long term.
100% R&D Expense Deduction for AI Startups
Startups dedicating resources towards AI, cloud computing and ML development will now benefit from a deduction of 100% of their expenses incurred for R&D activities from their income. This move is aimed at driving growth in emerging technologies and sectors.
Angel Tax Exemption for AI and Automation Startups
Startups in AI and automation will not be subject to the angel tax policy when receiving funds from venture capitalists, angel investors or foreign investors. This policy will ease the investment barriers for the growth of startups and help them attract capital more easily.
Funding Support for AI Collaborations
Startups in AI willing to partner with government departments, PSUs, and Indian enterprises will receive funding support of up to 50% in implementing AI based automation solutions. This program also seeks to enhance public private partnerships and the use of AI technology in various industries.
Ease in Crypto Taxation
A new section, 285BAA, has been added to the Income Tax Act, mandating entities dealing in crypto-assets such as exchange platforms to report transaction details to tax authorities. This includes exchanges, intermediaries, and other specified entities. a new yearly reporting obligation beginning April 1, 2026.
Furthermore, Virtual Digital Assets (VDAs), encompassing cryptocurrencies and NFTs, are now classified as part of undisclosed income during search and seizure operations, subjecting them to higher tax rates. Hence Undisclosed VDA holdings for up to six assessment years preceding the year may get tax and penalty implications.
ITR-U Filing Duration Extended
- Taxpayers can now file ITR-U for up to four preceding years.
- Previously, the time limit was restricted to two years.
- This provision helps rectify missed incomes or errors in past tax filings.
- However, Additional tax may be applicable based on the time elapsed since the original due date.
Important Highlights of Budget 2025
Agriculture as the First Engine of Development
- Prime Minister Dhan-Dhaanya Krishi Yojana: Targeting 100 districts to enhance productivity and benefit 1.7 crore farmers.
- Aatmanirbharta in Pulses: A 6-year mission focusing on self-sufficiency in pulses, with procurement support from NAFED and NCCF.
- National Mission on High Yielding Seeds: Aims to strengthen research and commercial availability of over 100 high-yield seed varieties.
- Enhanced Credit through KCC: Loan limit under the Modified Interest Subvention Scheme raised from ₹3 lakh to ₹5 lakh.
MSMEs as the Second Engine of Development
- Revised Classification Criteria: Investment and turnover limits for MSMEs enhanced to 2.5 and 2 times, respectively.
- Credit Cards for Micro Enterprises: Customized credit cards with a ₹5 lakh limit, targeting 10 lakh enterprises in the first year.
- Fund of Funds for Startups: New ₹10,000 crore fund to boost startup financing.
- First-time Entrepreneur Scheme: Provides up to ₹2 crore in term loans for 5 lakh women and SC/ST entrepreneurs over five years.
Read Also: How To Apply For Udyam Registration Certificate?
Investment as the Third Engine of Development
- Public-Private Partnership in Infrastructure: A 3-year pipeline for PPP projects announced, with states encouraged to participate.
- Urban Challenge Fund: ₹1 lakh crore allocated for urban development, including water and sanitation initiatives.
- Nuclear Energy Mission: ₹20,000 crore outlay for Small Modular Reactors (SMRs), with five indigenous SMRs to be operational by 2033.
- UDAN – Regional Connectivity Scheme: Expansion to 120 new destinations, with support for helipads and smaller airports.
Exports as the Fourth Engine of Development
- Export Promotion Mission: Sector-specific targets for exports, jointly managed by Commerce, MSME, and Finance Ministries.
- Bharat Trade Net (BTN): A unified platform for trade documentation and financing solutions to streamline international trade.
- National Framework for GCCs: A structured framework to encourage Global Capability Centres in emerging Tier-2 cities.
Tax Reforms and Financial Sector Developments
| Income Range (₹ Lakh) | Tax Rate (%) |
| 0 – 4 | Nil |
| 4 – 8 | 5% |
| 8 – 12 | 10% |
| 12 – 16 | 15% |
| 16 – 20 | 20% |
| 20 – 24 | 25% |
| Above 24 | 30% |
- Enhanced Standard Deduction: Salaried taxpayers receive ₹75,000 deduction, making ₹12.75 lakh tax-free.
- TDS/TCS Rationalization: Increased thresholds for rent, interest for senior citizens, and remittances.
- Simplified Tax Compliance: Charitable institutions now require re-registration every 10 years instead of 5.
Step Increase for Manufacturing, R&D and Innovations
- National Manufacturing Mission: Targets small, medium and large scale industries under ‘Make in India’”
- Deep Tech Fund of Funds: To enable funding for new age advanced technology startups.
- PM Research Fellowship: 10,000 fellowships in IITs and IISc for high end technological research.
- Gyan Bharatam Mission: Emphasis on research and collection for the preservation and digitization of India’s manuscripts.
Social Welfare and Healthcare
- Expansion of Medical Education: Next year, 10,000 medical seats will be added.
- Day Care Cancer Centres: 200 additional centers in district hospitals will be established during FY 2025-26.
- PM SVANidhi Revamp: Increased amount of loans for street vendors through UPI linked credit cards has been set to Rs. 30,000.
- Social Security for Gig Workers: Identity card, health coverage and registration on e-Shram portal for head loaders, construction workers and other informal workers.
Conclusion
In conclusion, the Union Budget 2025-26 highlights investment, regulatory changes, and tax reduction as key drivers of long-term economic growth. The government hopes to boost economic resilience, consumption, and private-sector engagement by encouraging innovation, making doing business easier, and bolstering local industries. Furthermore, these reforms stimulate economic growth, simplify compliance, and promote innovation, offering substantial benefits to businesses in India.
If you want any other guidance concerning Union Budget 2025 Highlights & Announcements, please feel free to talk to our business advisors at 8881-069-069.
Download E-Startup Mobile App and Never miss the latest and important updates relating to your business.