The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, introduces significant changes in income tax structure and certain incentives for MSMEs (Micro, Small, and Medium Enterprises). The budget focuses on economic growth, job creation, and strengthening India's manufacturing and entrepreneurial ecosystem. Here’s a detailed look at the income tax reforms and key MSME incentives announced in Budget 2025.

Income Tax Changes in Budget 2025

1. Increased Income Tax Exemption Limit

• Individuals earning up to ₹12 lakh per year will now pay zero income tax under the new tax regime.

• Salaried individuals get an additional ₹75,000 standard deduction, making the effective tax-free income ₹12.75 lakh.
  
  

2. Revised Tax Slabs for FY 2025-26

3. Tax Benefits for Different Income Levels

• ₹12 lakh income: ₹80,000 tax savings (0% effective rate).

• ₹16 lakh income: ₹50,000 tax savings (7.5% effective rate).

• ₹20 lakh income: ₹90,000 tax savings (10% effective rate).

• ₹50 lakh income: ₹1.1 lakh tax savings (21.6% effective rate).
  
  

4. Other Key Income Tax Reforms

• New Income Tax Bill: A simplified tax structure with 50% fewer provisions to reduce litigation and compliance burden.

• TDS/TCS Rationalization: Fewer tax deduction rates and increased thresholds for senior citizens and rental income.

• Startup Tax Benefits: Tax benefits for startups extended till 2030.

• Foreign Direct Investment (FDI) in Insurance: Limit increased to 100% for companies investing premium earnings within India.
  
  

MSME Sector Highlights in Budget 2025

1. Increased Credit Access for MSMEs

• Credit Guarantee Cover for Micro & Small Enterprises raised from ₹5 crore to ₹10 crore, enabling ₹1.5 lakh crore in additional credit over five years.

• Startups get a credit guarantee cover doubled from ₹10 crore to ₹20 crore, with a 1% fee for 27 focus sectors.

• Export-oriented MSMEs can avail of term loans up to ₹20 crore.
  
  

2. MSME Classification Revised

• Investment and turnover limits for MSME classification increased by 2.5x and 2x, allowing businesses to expand while retaining benefits.
  
  

3. New Financial Support for MSMEs

• Customized Credit Cards with a ₹5 lakh limit for 10 lakh micro-enterprises on the Udyam portal.

• ₹10,000 crore Fund of Funds to support startup growth.

• ₹2 crore loans for 5 lakh first-time entrepreneurs from SC/ST and women categories.
  
  

4. Focus on Labour-Intensive Sectors

• Footwear & Leather Industry: Aims to generate 22 lakh jobs and ₹4 lakh crore turnover.

• Toy Industry: Scheme to boost manufacturing clusters and skill development.
  
  

5. Export Promotion for MSMEs

• Export Promotion Mission to simplify credit access and reduce trade barriers.

• BharatTradeNet: A digital platform to facilitate global trade transactions.
  
  

6. Gig Workers & MSMEs Support

• 1 crore gig workers to receive identity cards & healthcare coverage under PM Jan Arogya Yojana.

• Social security benefits for online platform workers.
  
  

Conclusion

Budget 2025 offers significant tax relief for individuals while strengthening the MSME ecosystem through better credit access, export support, and growth incentives. These measures aim to boost entrepreneurship, job creation, and India's position as a global manufacturing hub. The tax reductions will also increase disposable income, spurring economic activity and business growth.

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