Equity Echoes

Finance Minister Nirmala Sitharaman presented her block-buster 8th Union Budget.

Before we dive into the details, how the markets impacted and what are sectors to focus on.

Let’s revisit the key reforms from last year’s Union Budget and their current status!

Union Budget 2024 Reforms and its Status

The Prime Minister’s ₹2 lakh crore package includes five schemes aimed at employment, skilling, and opportunities for 4.1 crore youth over five years. These initiatives, implemented through EPFO, focus on recognizing first-time employees and supporting both employees and employers.

Status: The initiatives are actively being implemented, though full impact assessment is still pending.

The government’s push for ‘Viksit Bharat’ envisions sustained efforts across nine key priorities, focusing on employment, skilling, MSMEs, and middle-class development.

Status: MSMEs are availing credit guarantees to expand their operations.

Agricultural and Rural Development

The budget introduced 109 high-yielding, climate-resilient varieties across 32 field and horticulture crops, with a goal of initiating 1 crore farmers into natural farming over the next two years.

Status: Farmers have begun adopting these crop varieties, and certification and branding efforts for natural farming are ongoing.

A ₹1.52 lakh crore provision was announced for agriculture and allied sectors.

The Namo Drone Didi Scheme aims to empower 15,000 women SHGs with drones for rental services to farmers.

Status: Implementation is underway, with SHGs receiving drones.

To boost self-sufficiency in pulses and oilseeds, strategies are being formulated and executed.

Industrial Growth and Infrastructure

The upgrading of 1,000 Industrial Training Institutes (ITIs) aims to strengthen vocational education.

Status: The process is in progress.

The Purvodaya Plan is being formulated to drive industrial growth in Bihar, Jharkhand, West Bengal, Odisha, and Andhra Pradesh.

Status: The Bihar government, in collaboration with NICDC and BIADA, has signed agreements for an Integrated Manufacturing Cluster (IMC) in Gaya under the Amritsar-Kolkata Industrial Corridor (AKIC).

A ₹2.66 lakh crore investment has been allocated for rural development, including expressway projects like Patna-Purnia and Buxar-Bhagalpur.

Status: Significant progress has been reported in land acquisition and construction.

The Mudra Loan limit has been enhanced to ₹20 lakh from ₹10 lakh to facilitate greater access to credit for small businesses.

Status: The new limit is in effect.

Housing and Connectivity

The PM Awas Yojana Urban 2.0 (PMAY-U 2.0) has a ₹10 lakh crore investment to provide housing for 1 crore urban poor and middle-class families.

Status: The scheme is still in progress.

Phase IV of PMGSY was launched in September 2024 to provide all-weather connectivity to 25,000 rural habitations by 2029.

Status: Road and bridge construction is actively underway.

Space and Technology Advancement

The government has established a ₹1,000 crore venture capital fund to expand India’s space economy by five times in the next decade, aiming for growth from $8 billion to $44 billion.

Status: The fund is expected to become operational soon.

Taxation and Financial Reforms

Major relief has been provided to 4 crore salaried individuals and pensioners:

• Standard deduction increased from ₹50,000 to ₹75,000.
• Family pension deduction increased from ₹15,000 to ₹25,000.
• Over 58% of corporate tax receipts now come under the new tax regime.
• Two-thirds of individual taxpayers have switched to the new regime.
• Angel Tax abolished for all investor classes to promote startups.
• Corporate tax for foreign companies reduced from 40% to 35%.
• 5% TDS on multiple payments merged into 2% TDS.
• Capital gains exemption limit increased to ₹1.25 lakh per year for middle-income groups.

Status: These reforms have been enacted.

Customs & Duty Reductions

• Custom duty on X-ray panels, mobile phones & PCBAs reduced to 15%.
• Precious metals like gold and silver became cheaper, with duty reduced to 6%.

Status: Implemented, benefiting high-tech and renewable energy sectors.

Now, let us discuss the key reforms of Union Budget 2025-2026

Union Budget 2025-2026

1. Personal Income Tax Relief:

• Increased Tax-Free Income Threshold: The budget raises the tax-free income threshold to ₹1.2 million, aiming to boost the spending power of the middle class and stimulate consumption.

Let us decode the New Tax Regime for FY 2025-26

Key Highlights:

Zero Tax Up to ₹12 Lakh Income

Individuals earning up to ₹12 lakh will not pay any income tax under the revised new tax regime.

Salaried individuals get a standard deduction of ₹75,000, making the effective tax-free income ₹12.75 lakh.

To simplify this 12 lakh Nil tax issue :
•Suppose your income is upto 12 Lakhs
You pay O for the first 4L
→ From 4Lakh – 8Lakh i.e the next 4Lakh,
you pay 5% tax = 20,000.

• From 8Lakh – 12 lakh i.e. another 4Lakh,
  you pay 10% tax = 40,000.
  → Total Tax Payable= 60,000
  •Standard Deduction rebate = 75,000.So effectively, post rebate there is no tax for income upto 12 lakhs
  

How This Impacts Different Income Levels?

1. Income Up to ₹12 Lakh

New Regime Wins: Zero tax up to ₹12 lakh (₹12.75 lakh for salaried).
No need to claim deductions like 80C, 80D, or HRA.

2. Income Above ₹12 Lakh

New Regime Benefits Salaried Individuals:
Lower slab rates.
₹75,000 standard deduction.
Old Regime May Be Better for High-Investment Individuals:

Those claiming ₹1.5L under 80C, ₹50K in NPS, ₹25K under 80D (health insurance), and HRA benefit may save more tax.

Tax-Saving Strategies Under the New Regime

Since deductions like 80C, 80D, and HRA are not available, focus on:
✅ Employer Benefits: Maximize EPF, NPS, and other salary components.
✅ Tax-Free Investments: Consider tax-exempt PPF, ULIPs, ELSS Mutual Funds (though they don’t reduce taxable income).
✅ Health Insurance: Even though you don’t get a deduction under 80D, it’s essential for financial security.
✅ Capital Gains Planning: Invest in Long-Term Capital Gain (LTCG) tax-free instruments.

Which Tax Regime Should You Choose?

If you don’t claim deductions → New Regime is better.
If you use 80C, 80D, HRA, NPS, home loan benefits → Compare both before deciding.

2. Fiscal Consolidation:

• Fiscal Deficit Reduction: A target to reduce the fiscal deficit to 4.4% of GDP has been set, reflecting the government’s commitment to fiscal discipline.

3. Agricultural Development:

• High-Yield Crop Program: A six-year program has been launched to enhance the production of pulses and cotton, aiming to reduce import dependence and support farmers.
• Natural Farming Initiative: The government plans to promote natural farming practices among 1 crore farmers over the next two years to encourage sustainable agriculture.

4. Employment and Skilling:

• Comprehensive Skilling Programs: The budget introduces schemes to skill 20 lakh youth over a five-year period and upgrade 1,000 Industrial Training Institutes, aiming to enhance employability.
• Internship Opportunities: A comprehensive internship program will connect 1 crore youth with leading companies to provide practical experience.

5. Support for Micro, Small, and Medium Enterprises (MSMEs):

• Credit Support and Technological Assistance: The budget emphasizes support for MSMEs through a new self-financing guarantee fund offering up to ₹100 crore per applicant and initiatives to enhance technological capabilities.

6. Urban Development:

• Infrastructure Investment: Significant allocations are made to improve urban infrastructure, including housing, water supply, sewage treatment, and solid waste management in 100 large cities.

7. Energy Security:

• Renewable Energy Initiatives: The budget highlights the importance of nuclear energy and introduces the PM Surya Ghar Muft Bijli Yojana to install rooftop solar plants, providing free electricity to 1 crore households.

8. Infrastructure Development:

• Increased Capital Expenditure: A capital expenditure outlay of ₹11.1 trillion has been announced, marking a 16.9% increase over the previous year, focusing on roads, highways, and railway modernization.

9. Research and Development:

• Innovation Fund: A substantial fund has been established to support research and innovation across various sectors, encouraging technological advancements and entrepreneurship.

10. Next-Generation Reforms:

• Economic Policy Framework and Labor Reforms: Plans for an Economic Policy Framework, labor reforms, and simplification of Foreign Direct Investment regulations are outlined to spur economic growth.

These reforms reflect the government’s comprehensive approach to addressing economic challenges, promoting inclusive growth, and ensuring sustainable development across various sectors.

Key Sectors that can be Impacted by Union Budget 2025-2026!

Here are the sector to keep at your radar!!

• Agriculture

he government plans to raise agricultural spending by over 15%, marking the largest increase in six years.

This funding will be directed towards developing high-yielding seed varieties, enhancing storage and supply infrastructure, and boosting the production of pulses, oilseeds, vegetables, and dairy products.

Here are some of the Agriculture Stocks to consider –

• Consumer Goods and Automotive

Significant income tax cuts, including raising the tax-free income threshold, are expected to boost disposable incomes, thereby increasing consumption in sectors like fast-moving consumer goods (FMCG) and automobiles.

• Leather Stocks

The customs duty on these materials, used in manufacturing garments, footwear, and other leather products for export, has been reduced from 10% to zero.

This move is expected to lower production costs and enhance the competitiveness of Indian leather goods in international markets.

• Tourism

The budget allocates funds to promote tourism, aiming to boost this sector through various initiatives.

Here are Tourism Sector Stocks to keep on radar –

• Healthcare/ Pharma

The budget includes measures to improve access to healthcare and life-saving drugs, along with significant tax reliefs, which are expected to benefit the healthcare and pharmaceutical sectors.

• Renewable Energy

The budget introduces a Nuclear Energy Mission with the goal of achieving 100 GW of nuclear power by 2047, indicating a substantial investment in the renewable energy sector.

Conclusion

The Union Budget 2025-26 reflects a balanced approach between fiscal prudence and economic stimulus, aiming to support key sectors while maintaining financial discipline.

The Budget 2025-26 is pragmatic, with a strong focus on growth, consumption, and fiscal stability. While it avoids bold reforms, it takes incremental steps toward long-term economic development. Its success will depend on execution and global economic factors.