Hey folks!

We know you weren’t expecting this in your inbox today. It’s a Sunday, and you’re used to our usual Sunny Side Up editions. Trust us, that was the plan too, until the Finance Minister changed our mind. Her 74-minute speech had quite a few surprises, and we figured, why wait till Monday to break it all down for you? So here we are, with a quick (okay, let’s be honest, it will be slightly longer than our regular newsletters) and easy Budget breakdown.

And we know there’s nothing you’d rather hear about first than what the Budget has in store for you and me, especially the direct taxes bit.

By now, you’ve probably heard the big news. From FY26, you won’t have to pay any tax under the new tax regime if your income is up to ₹12 lakhs. Until now, that threshold was ₹7 lakhs. And just so you get an idea of what has changed, here’s how the tax slabs look now.

Now, we know what you’re thinking. The tax slabs show a 10% tax for those earning up to ₹12 lakhs. But here’s where a little thing called rebate under Section 87A of the Income Tax Act comes into play. This rebate lets you claim a discount on your taxes if your total taxable income stays within a certain limit.

So, let’s say you’re a salaried employee earning a taxable income of ₹12.75 lakhs. After factoring in the standard deduction of ₹75,000 (a flat deduction from salaried employees and pensioners income), you’d technically have to pay a tax of ₹60,000 (we haven’t considered the cess). But since your taxable income doesn’t cross the ₹12 lakh threshold, you get a rebate, end up saving the entire tax amount and pay nothing.

But now let’s assume that you also made ₹1 lakh by renting out a house. This means that your taxable income jumps to ₹13 lakhs. And just like that, you miss out on the rebate. Also, if your income only came from capital gains, say from the stock market or real estate, you have to pay taxes on this income separately at special rates even if it doesn’t cross the ₹12 lakh threshold. So again, no rebate here.

And if you’re still sticking to the old tax regime, nothing changes for you. Except for one new tweak. If you’ve been contributing to the NPS (National Pension Scheme) Vatsalya scheme, which lets parents and guardians open NPS accounts for minors, you can now claim a tax deduction of up to ₹50,000, just like with the regular NPS. A small win, but a win nonetheless!

That’s one part of it. The other good news is that the government has tweaked the thresholds for TDS (Tax Deducted at Source) — the tax that gets deducted upfront from earnings.

So now, if senior citizens earn interest income, say, from bank deposits or other sources, they won’t face any TDS deductions unless their total interest earnings cross ₹1 lakh. Earlier, this limit was just ₹50,000. So if your parents have ever grumbled about TDS eating into their bank interest, this should bring them some relief.

The same thing applies to rental income too. The TDS threshold has jumped from ₹2.4 lakhs to ₹6 lakhs, making things easier for landlords.

And that pretty much sums up the key direct tax updates.

Moving on to indirect taxes, there are quite a few duty reductions and exemptions aimed at boosting Make in India. For instance, scrap from lithium-ion batteries, lead, zinc and over a dozen other critical minerals will now be exempt from basic customs (import) duty to encourage manufacturing. Plus, customs duties have also been waived on a bunch of more capital goods for EV battery production and mobile phone battery manufacturing.

It doesn’t stop there. Life saving drugs for cancer and rare diseases have also been added to the customs duty exemption list.

And while all this is great for businesses and consumers alike, it comes at a cost. The government is set to forgo a massive ₹1 lakh crore in direct taxes and ₹2,600 crores in indirect taxes due to these and other tax breaks.

But there’s also something interesting. Despite all these sacrifices, the Finance Minister says that the fiscal deficit (government spending over earnings) is expected to drop to 4.4% of GDP (Gross Domestic Product or the total value of goods and services produced) in FY26 from the current 4.8%. So, if the government is letting go of so much tax revenue, how does it plan to pull that off, you ask?

Well, if you dig into the detailed receipts budget, you’ll see that the government is banking on non-tax revenue such as big dividends from public sector undertakings, banks and the RBI. In the coming year, it’s expecting them to pay about 10% more than before. Plus, the total tax direct revenue is projected to rise by 11%.

But wait… we just said that direct and indirect tax collections are taking a hit. So, how does tax revenue still go up?

Well, one way this could play out is that with lower direct taxes, people will have more money in their hands. More money means not just higher savings but also more spending. And when consumption rises, so does the GST (Goods and Services Tax) collection.

That’s not all. This Budget hasn’t really offered any tax relief for companies. So, if businesses see higher demand and make more sales, they’ll rake in bigger profits and in effect pay more corporate tax. In fact, the government expects to collect ₹10.8 lakh crores in corporate taxes, which is about 10% higher than what it anticipates for FY25.

Then there’s gold and silver. Unlike last year, when the import duty on gold was slashed from 15% to 6%, this time, there’s no such cut. Some analysts were hoping for a further drop to 3%, but that didn’t happen. Instead, with demand already rising and gold smuggling potentially decreasing, tax revenues from precious metals could see an uptick too.

So yeah, that’s how the government plans to balance the books.

And now that we’ve got taxes out of the way, let’s talk about what the Finance Minister had in store for the sectors and industries that drive India’s growth.

First up, Foreign direct investment (FDI) in insurance is going up from 74% to 100%. But the catch is that this only applies to companies that invest the entire premium within India. The idea is to attract foreign players with deep pockets who can introduce new products, expand insurance coverage and boost financial inclusion.

Then, there was a nuclear push for power. Currently, nuclear power makes up less than 5% of India’s electricity, which is far below the global average. To change that, the budget has set aside ₹20,000 crores to develop small modular nuclear reactors (SMRs), aiming for 100 gigawatts of nuclear energy by 2047. Five Made in India nuclear reactors are also in the works, set to be ready by 2033. If executed well, this could stabilise India’s power grid, cut emissions and reduce reliance on coal.

The niche factor

The gig economy has finally stepped into the spotlight. No longer a fringe sector, gig workers will now be officially recognised, with identity cards and more importantly, coverage under the Jan Arogya health insurance scheme. This is a huge win for a workforce that has long operated in the grey area, without the job security or benefits that many of us take for granted. This move could open doors to better benefits, skill development and even set new standards across online platforms.

On the industrial front, the toy industry is getting a dedicated incentive scheme to reduce its reliance on Chinese imports. Meanwhile, the footwear and leather industries are getting a productivity boost to make them more globally competitive. And let’s not forget the National Geospatial Mission, aimed at modernising urban planning and land records, tying into the broader PM Gati Shakti infrastructure push.

The macro picture

While the government is all about growth, it hasn’t forgotten the importance of fiscal discipline. As we mentioned earlier, the fiscal deficit target for FY26 has been reduced, which shows the government’s intention to rein in borrowing and control spending.

On top of that, India’s debt-to-GDP ratio is set to drop from 57% in FY25 to a more manageable 47%-52%. To further boost its coffers, the government plans to raise ₹50,000 crores through asset monetisation and launch a 2025-30 plan that aims to pump ₹10 lakh crores into new projects.

Infrastructure spending, however, took a bit of a hit. The capital expenditure for infrastructure in FY26 is only slightly up at ₹11.2 lakh crores, compared to ₹11.1 lakh crores in FY25. But here’s the thing. The government is counting on private sector investments to fill the gap. Plus, a ₹1.5 lakh crore, 50-year interest-free loan scheme will help states fund their own infrastructure projects.

So while the center may be tightening its belt, states have more breathing room to push their own growth plans forward.

Talking of spending cuts, one of the changes involves modifying the UDAN scheme (Ude Desh ka Aam Nagrik which literally translates into every common citizen shall fly), which aims to boost regional air connectivity. The government plans to expand the scheme to 120 new destinations and serve 4 crore passengers over the next 10 years.

For context, the scheme was launched back in 2016 and was originally set to run for 10 years. The goal was to make air travel more affordable and encourage airlines to fly on less popular routes. However, now that the scheme’s been extended beyond its original timeline, the allocation for UDAN has been slashed to ₹540 crores, down from ₹800 crores for FY25.

So far, UDAN has served about 1.5 crore passengers, but its success has been a bit mixed. Only around 60% of the original 600+ routes are operational. And we’ll only have to wait and see how the new extended plan will play out.

Okay, but what about Bihar?

You’ve probably seen memes about how many times the Finance Minister mentioned Bihar in her Budget speech.

Well, turns out, the state got quite a lot of attention this time around:

• First up, a Makhana Board to boost production and marketing of makhana (fox nuts). Bihar produces 85%-90% of India’s makhana, but farmers have struggled with outdated methods and low prices. This could change that.
• Then, there’s the Western Kosi Canal Project, which will benefit 50,000 hectares of farmland. Thumbs up for irrigation.
• IIT Patna is also getting an expansion as part of a broader effort to improve education infrastructure, even though it’s been around since 2008. And just in case you didn’t notice, when the Finance Minister talked about additional infrastructure for IITs in general, she specifically mentioned it would be focused on those set up after 2014.

And of course, we can’t ignore the timing of all this. With Bihar heading into elections later this year, some might say these moves are a mix of political strategy and genuine development. But, we’ll leave the political analysis to the experts on TV.

What we do know is that whether it’s politics or progress, Bihar, a state that has long struggled with underdevelopment and high migration rates, is set to be one of the biggest beneficiaries of Budget 2025.

But we’d be wrong if we only said Bihar. The Northeast also caught some much-needed attention, with a new urea plant being set up in Assam, expected to produce 12.7 lakh metric tonnes annually.

So yeah, the Union Budget 2025 packs a more diversified punch than many expected. And as always, how these announcements translate on the ground will be the real litmus test.

Until then…

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