• Expenditure: The government is estimated to spend Rs 50,65,345 crore in 2025-26, 7.4% higher than the revised estimate of 2024-25.  Interest payments account for 25% of the total expenditure, and 37% of revenue receipts. 

• Receipts: The receipts (other than borrowings) in 2025-26 are estimated to be Rs 34,96,409 crore, about 11.1% higher than the revised estimate of 2024-25.  Tax revenue which forms major part of the receipts is also expected to increase by 11% over the revised estimate for 2024-25.

• GDP: The government has estimated a nominal GDP growth rate of 10.1% in 2025-26 (i.e., real growth plus inflation).

• Deficits: Revenue deficit in 2025-26 is targeted at 1.5% of GDP.  This is lower than the revised estimate of 1.9% in 2024-25.  Fiscal deficit in 2025-26 is targeted at 4.4% of GDP, lower than the revised estimate of 4.8% of GDP in 2024-25.

• Debt: The central government aims to reduce its outstanding liabilities to around 50% of GDP by March 2031.  In 2025-26, outstanding liabilities are estimated to be 56.1% of the GDP.

Main Tax Proposals in the Finance Bill

Changes in new income tax regime:  Tax slabs under the new tax regime have been modified.  The proposed tax structure is shown in Table 1.  Annual income of up to Rs 12 lakh will receive 100% rebate on the taxable income.  Earlier, this only applied to income of up to seven lakh rupees.  The old tax regime remains unchanged. Compliance mechanism: Time-limit to file updated returns for any assessment year is increased from two to four years with a penalty of 60% and 70% of the income tax and interest payable for third and fourth year, respectively. Increase in limits for TDS and TCS: The annual limit for TDS on rent will be six lakh rupees.  The threshold for TCS on remittances has increased from seven lakh rupees to Rs 10 lakh.  TCS will not be levied on remittances for education upto the amount of loan taken from a specified financial institution.  The minimum threshold for TDS or TCS has also been increased for interest and dividends.	Table 1: Tax Slabs under New Tax Regime Tax Rate Current Income Slab Proposed Income Slab Nil Up to Rs 3 lakh Up to Rs 4 lakh 5% Rs 3 lakh to Rs 7 lakh Rs 4 lakh to Rs 8 lakh 10% Rs 7 lakh to Rs 10 lakh Rs 8 lakh to Rs 12 lakh 15% Rs 10 lakh to Rs 12 lakh Rs 12 lakh to Rs 16 lakh 20% Rs 12 lakh to Rs 15 lakh Rs 16 lakh to Rs 20 lakh 25% - Rs 20 lakh to Rs 24 lakh 30% Above Rs 15 lakh Above Rs 24 lakh

• Customs: Customs duty has been reduced on some items but Agriculture Infrastructure and Development Cess (AIDC) has been introduced.  The overall tax has remained similar to earlier levels.  However, there has been a shift from customs duty to cess, resulting in a lower proportion to be shared with states.  Items include solar cells and motor vehicles.

• Income tax exemption for startups: Startups incorporated up to April 1, 2025 can currently avail income tax exemption for three consecutive years during the first ten years of operation.  This period has been extended to cover startups incorporated upto April 1, 2030. 

• International Financial Services Centre (IFSC): For several tax exemptions, the commencement date of operations of an IFSC unit has been extended to March 31, 2030.  Tax exemptions have been granted or extended for some activities such as transfer of equity of ship-leasing units.

• NGOs: Tax exemption under Section 12A is valid for five years, and requires renewal after that.  The validity has been increased to 10 years for institutions with income up to five crore rupees in each of the previous two years. 

Policy Highlights

• Finance and Economy: The FDI limit for the insurance sector will be increased from 74% to 100% for companies which invest their entire premium in India.  A new income tax bill will be introduced.

• Governance: A high-level committee for regulatory reforms will be set up for reviewing all non-financial sector regulations, certifications, licenses, and permissions.  The committee will make recommendations within a year.  A mechanism will be set up under the Financial Stability and Development Council to evaluate the impact of current financial regulations.  It will also formulate a framework for development of the financial sector.  An investment friendliness index of states will be launched in 2025.  Jan Vishwas Bill 2.0 will be introduced to decriminalise over 100 provisions across multiple laws.

• Industry and Commerce: To improve credit access, credit guarantee cover will be increased: (i) from five crore rupees to Rs 10 crore for micro and small enterprises, (ii) from Rs 10 crore to Rs 20 crore for start-ups, and (iii) up to Rs 20 crore for exporter MSMEs.  Investment and turnover limits for classification of MSMEs will be at least doubled.  For micro enterprises registered on the Udyam portal, 10 lakh credit cards with a credit limit of Rs 5 lakh will be provided within the first year of the scheme. 

• Infrastructure: Each infrastructure-related ministry will formulate a three-year pipeline of projects that can be implemented in public-private partnership mode.  A second asset monetisation plan will be launched for 2025-30.  National Geospatial Mission will be started to modernise land records and urban planning.  India Post will be transformed as a large public logistics organisation and will be repositioned to provide several services in rural areas.  A modified UDAN scheme will be launched to improve connectivity to 120 new destinations and carry four crore passengers in next 10 years.  A Maritime Development Fund with a corpus of Rs 25,000 crore will be set up, with 49% contribution by the government.  Broadband connectivity will be provided to all government secondary schools and primary health centres in rural areas.

• Energy: Additional borrowing of 0.5% of GSDP will be allowed to states based on electricity distribution reforms and augmenting intra-state transmission capacity.  The Atomic Energy Act and the Civil Liability for Nuclear Damage Act will be amended to allow private sector partnerships for development of nuclear energy.  A Nuclear Energy Mission will be launched for the development of small modular reactors with an outlay of Rs 20,000 crore.

• Urban and Rural Development: Urban Challenge Fund of one lakh crore rupees will be set up to implement projects for development of cities.  A scheme worth Rs 15,000 crore will be established to complete the construction of one lakh housing units in stressed projects. 

• Agriculture: The central government will launch a six-year mission to achieve self-reliance in pulses.  Central agencies will procure three pulses, as much as offered, from farmers over the next four years.  In addition, programmes will be launched for availability of high-yield variety seeds and increasing cotton productivity.  Prime Minister Dhan-Dhaanya Krishi Yojana will be implemented to improve productivity and crop diversification in 100 low-productivity districts.  Loan limit under the Modified Interest Subvention Scheme will be increased from three lakh rupees to five lakh rupees for loans availed through the Kisan Credit Card.

• Labour and Employment: PM SVANidhi Scheme to provide affordable loans to street vendors will be revamped to provide UPI-linked credit cards with Rs 30,000 limit, enhanced bank loan, and capacity-building support.  Gig workers will be provided access to healthcare under Ayushman Bharat.  A scheme will be launched to provide loans up to two crore rupees to five lakh women, scheduled castes, and scheduled tribes first-time entrepreneurs.  Another scheme for socio-economic upliftment of urban workers will be implemented to help improve incomes.

• Education: In the next year, 10,000 additional seats will be added in medical colleges and hospitals with a goal of adding 75,000 seats in next five years.  Additional infrastructure will be created in five IITs started after 2014 to facilitate education for 6,500 more students.  Under the PM Research Fellowship scheme, 10,000 fellowships will be provided for technological research in IITs and IISc.

   

Total Expenditure: The government is estimated to spend Rs 50,65,345 crore in 2025-26.  This is an increase of 7.4% over the revised estimate of 2024-25.  Revenue expenditure is estimated to increase by 6.7% and capital expenditure by 10.1% over the revised estimate of 2024-25.  Allocation towards major schemes - MGNREGS and PM-KISAN is the same as the revised estimates for 2024-25.  Expenditure on subsidies is estimated to be similar to the revised estimate of 2024-25.  Establishment expenditure (which includes pension and salary) is estimated to increase by 3% over the revised estimate of the previous year. Total Receipts: Government receipts (excluding borrowings) are estimated to be Rs 34,96,409 crore, 11.1% higher than the revised estimate of 2024-25.  The gap between these receipts and the expenditure will be plugged by borrowings, budgeted to be Rs 15,68,936 crore, roughly the same as the revised estimate of 2024-25. Transfer to states: The central government will transfer Rs 25,59,764 crore to states in 2025-26, an increase of 12.5% over the revised estimate of 2024-25.  Transfer to states includes tax devolution of Rs 14,22,444 crore and grants worth Rs 11,37,320 crore.  Within this Rs 1,50,000 crore have been allocated for capital expenditure loans.   Deficits: Revenue deficit is targeted at 1.5% of GDP, lower than the revised estimate for 2024-25 (1.9% of GDP).  Fiscal deficit is targeted at 4.4% of GDP in 2025-26, lower than the revised estimate for 2024-25 (4.8% of GDP).  The lower fiscal deficit is on account of higher growth in receipts at 11.1% as compared to expenditure growth at 7.4%. GDP growth estimate: The nominal GDP is estimated to grow at a rate of 10.1% in 2025-26.

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