HomeNewsUnion Budget Speech Highlights: Nirmala Sitharaman’s Tax Exemption Announcement for the Middle...

Union Budget Speech Highlights: Nirmala Sitharaman’s Tax Exemption Announcement for the Middle Class

In her 74-minute speech, Finance Minister Nirmala Sitharaman presented the Union Budget for fiscal year (FY) 2025-26 on Saturday, marking her eighth consecutive Budget presentation. One of the key announcements was that individuals with an annual income of up to ₹12 lakh would no longer need to file income tax returns, a significant relief for middle-class taxpayers.

Prior to the Budget, Prime Minister Narendra Modi had hinted at special provisions for the poor and middle class, especially in the second full Budget of his third consecutive term, which began in June 2024.

Sitharaman’s Budget speech on February 1, 2020, was the longest in history, lasting 2 hours and 40 minutes. However, her speech in 2024 was only 56 minutes long due to the interim nature of the Budget, as the Lok Sabha elections were set for April-June.

As customary, the Budget was tabled in the Lok Sabha a day after President Droupadi Murmu’s speech to a joint session of both Houses.

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Key Takeaways from the 2025 Union Budget

Major Income Tax Cuts: Putting More Money in Taxpayers’ Hands   

The middle class had been voicing discontent over high taxes, and expectations were high for tax relief. The Finance Minister delivered by raising the tax rebate threshold to ₹12 lakh annually, up from ₹7 lakh. Additionally, the highest tax rate of 30% will now apply only to individuals earning above ₹24 lakh annually (₹2 lakh per month), providing significant relief for taxpayers. This measure aims to increase disposable income, which the government hopes will spur spending, fostering growth and encouraging companies to invest and create new jobs.

Maintaining Fiscal Discipline, Lower Deficit Despite Tax Cuts

While tax relief typically leads to higher government borrowing, the Finance Minister assured that fiscal discipline would be maintained. Despite an expected ₹1 lakh crore revenue shortfall due to the tax cuts, the fiscal deficit will be reduced to 4.4% of GDP in FY 2025-26.

Capital Expenditure Growth Stalls: A Shift from Previous Priorities

While capital expenditure (Capex) has been a focus in the Modi government’s second term, the growth in this area has stalled, signaling a shift in priorities. The government missed its capital expenditure target for the current year by nearly ₹1 lakh crore, and the budgeted Capex for the next fiscal year is slightly less than the previous one, although still high by historical standards.

Focus on Job Creation: Shifting Priorities to Employment Generation

The government has faced criticism for not focusing enough on employment generation. The Budget reflects a shift towards job creation, with a focus on sectors such as textiles and leather, which are labor-intensive and contribute significantly to job growth.

Push for Regulatory Reforms: A Much-Needed Step   

A committee has been formed to explore regulatory reforms aimed at making it easier for businesses and entrepreneurs to operate in India. While this initiative is seen as positive, it is a delayed move, coming 11 years after the Modi government first assumed power.

Overall, the Budget reflects a delicate balance of tax relief, fiscal prudence, and a renewed focus on employment generation and regulatory reform.

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