Sun Feb 02 10:12:26 IST 2025: ## India’s Union Budget 2025: Significant Tax Cuts Aim to Boost Economy

**New Delhi, February 2, 2025** – Finance Minister Nirmala Sitharaman unveiled India’s Union Budget 2025-26 on Saturday, focusing on a significant ₹1 lakh crore tax stimulus for households to jumpstart slowing economic growth. The budget’s centerpiece is a major tax cut, eliminating income tax for annual incomes up to ₹12 lakh (approximately $146,000 USD), up from the previous limit of ₹7 lakh. This measure, under the new personal income tax regime, is projected to benefit one crore taxpayers, leaving more disposable income for consumption and investment.

The move addresses concerns about weakening domestic demand and sluggish growth, estimated at 6.4% this fiscal year. Economists and central bank officials have advocated for a consumption-led recovery, a strategy seemingly adopted by the government. The Finance Minister stated that the changes will result in ₹1 lakh crore in foregone revenue.

While the government revised its capital expenditure (capex) downward for the current fiscal year from ₹11.11 lakh crore to ₹10.18 lakh crore, it increased capex for 2025-26 by 10.1% to ₹11.2 lakh crore. Furthermore, the budget retains ₹1.5 lakh crore in 50-year interest-free loans for states to invest in infrastructure.

Other key highlights include a simplification of the customs duty structure, reducing seven of fifteen tariff rates. This move, according to the Finance Minister, aims to address concerns about high tariffs and potentially appease international trade partners. The budget also includes measures to ease business regulations, decriminalizing around 100 legal provisions and emphasizing a “trust first, scrutinize later” approach to tax collection.

The government projects a fiscal deficit reduction from 4.8% of GDP this year to 4.4% in 2025-26, slightly below the targeted 4.5%. Looking ahead, the government shifted its fiscal anchor from fiscal deficit to debt-to-GDP ratio, aiming for 50% (plus or minus 1%) by March 31, 2031.

While the opposition criticized the budget for failing to address structural economic challenges, the ruling BJP hailed it as a fulfillment of the aspirations of India’s citizens. Economists have offered mixed reactions, with some expressing cautious optimism about the stimulus’ effectiveness alongside other fiscal and monetary policies.

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