Finance Minister Nirmala Sitharaman presented the Budget for 2025-26 on February 1, 2025, focusing on inclusive growth, private sector investment, employment, and economic expansion. This budget highlights significant reforms in Alternative Investment Funds (AIFs), MSMEs, decriminalization of business laws, income tax policies, and startup ecosystem to strengthen India's economic trajectory.

Key Benefits of Budget 2025-26

  1. Boosting Economic Growth: The budget aims to spur growth through investment-led development, infrastructure expansion, and policy reforms.
  2. MSME Support: Several initiatives have been introduced to enhance credit availability, ease regulatory burdens, and promote digital adoption.
  3. Start-up India Push: The government has announced an expansion of the Fund of Funds, tax incentives, and credit support for early-stage entrepreneurs.
  4. Mergers and Acquisitions (M&A): Regulatory simplifications and fast-track approvals have been proposed to facilitate corporate consolidations.
  5. Foreign Direct Investment (FDI): Increased sectoral FDI limits and policy relaxation aim to attract more international capital.
  6. International Financial Services Centres Authority (IFSCA): Policy enhancements will support India’s emergence as a global financial hub.
  7. Alternative Investment Funds (AIFs): Tax certainty for Category I & II AIFs ensures greater investor confidence.
  8. New Tax Slabs: Relief for the middle class with reduced tax rates and higher exemption limits.
  9. Alternative Investment Funds (AIFs)

       1.   Key Announcements for AIFs

  • Fund of Funds for Startups Expansion:
    • Additional ₹10,000 crore allocated to support AIF-backed startups.
    • Encourages financing for high-growth startups in deep-tech, AI, biotech, and fintech sectors.
  • Deep Tech Fund of Funds:
    • New initiative to support investments in AI, semiconductors, cybersecurity, quantum computing, and biotech.
    • Aims to catalyze innovation and job creation in advanced technology sectors.
  • Tax Certainty for AIFs:
    • Category I and II AIFs will receive tax clarity on capital gains and securities transactions.
    • Tax pass-through benefits for infrastructure-focused AIF investments.
  • Foreign Investment in AIFs:
    • Simplification of foreign investment rules to attract global institutional capital.
    • Strengthening AIFs’ role in long-term infrastructure projects and sustainable development.

Impact of AIF Reforms

  • Encourages private equity and venture capital funding in high-impact sectors.
  • Supports early-stage and growth-stage startups in becoming globally competitive.
  • Strengthens India’s position as a preferred investment destination.

  1. MSME (Micro, Small & Medium Enterprises) Sector

Revised MSME Classification

  • Investment and turnover thresholds increased by 2.5 times, allowing MSMEs to grow without losing government benefits.

Credit & Loan Enhancements

  • Credit Guarantee Limit Increase:
    • MSME credit guarantee raised from ₹5 crore to ₹10 crore.
    • Startups & exporters: Guarantee limit doubled to ₹20 crore.
    • Lower interest rates for MSMEs in key sectors.
  • Micro Enterprises Credit Cards:
    • ₹5 lakh limit credit cards for registered MSMEs via Udyam Portal.
    • 10 lakh micro-enterprises to benefit in the first year.

Schemes for Women & SC/ST Entrepreneurs

  • ₹2 crore term loans for 5 lakh first-time entrepreneurs from marginalized communities.
  • Online entrepreneurship training programs.

Manufacturing & Industry Growth

  • National Manufacturing Mission:
    • ‘Make in India’ support for MSMEs, medium & large industries.
    • Includes technology adoption, skilling, and business facilitation.
  • Toy Industry Development:
    • Cluster-based approach to establish India as a global toy hub.
    • Focus on high-quality, eco-friendly, and innovative toys.
  • Leather & Footwear Industry Support:
    • New ‘Focus Product Scheme’ with a target of ₹4 lakh crore turnover.
    • 22 lakh new jobs expected.
  • Food Processing & MSME Growth:
    • National Institute of Food Technology in Bihar to boost MSME involvement.

Expected Impact

  • Increased MSME competitiveness in global supply chains.
  • Greater financial inclusion & credit access for small businesses.
  • More jobs, higher exports, and enhanced industrial growth.

  1. Decriminalization of Business Laws

Jan Vishwas Bill 2.0

  • 100+ laws decriminalized, ensuring trust-based governance.
  • Business violations converted from criminal offenses to civil penalties.

Key Reforms

  • Simplified Corporate Governance:
    • Streamlined merger & acquisition processes.
    • Faster approvals for businesses.
  • Reduced Regulatory Compliance for Startups:
    • Eased labor laws, investment regulations, and business audits.
    • Startups to be exempted from minor procedural violations.
  • MSME & Trade Law Relaxations:
    • Reduced penalties for licensing & tax-related errors.
    • Encouragement for small traders to formalize their businesses.
  • High-Level Committee on Regulatory Reforms:
    • Will review licenses, permits, and approvals for streamlining regulations.
  • Investment Friendliness Index:
    • New ranking system for Indian states to promote competitive reforms.

Impact of Decriminalization

  • Boosts Ease of Doing Business rankings.
  • Encourages domestic and foreign investments.
  • Creates a business-friendly ecosystem for MSMEs & startups.

  1. Income Tax Reforms

New Income Tax Slabs (2025-26)

Income (INR)

New Tax Rate

0 - 4 lakh

Nil

4 - 8 lakh

5%

8 - 12 lakh

10%

12 - 16 lakh

15%

16 - 20 lakh

20%

20 - 24 lakh

25%

Above 24 lakh

30%

Key Benefits

  • No Tax up to ₹12 lakh (₹12.75 lakh for salaried individuals with standard deduction).
  • Major tax savings for middle-class taxpayers:
    • ₹12 lakh income → ₹80,000 saved.
    • ₹18 lakh income → ₹70,000 saved.
    • ₹25 lakh income → ₹1.1 lakh saved.

Higher TDS & Exemptions

  • Senior Citizens: Interest income exemption doubled to ₹1 lakh.
  • Rental income exemption increased from ₹2.4 lakh to ₹6 lakh.
  • Lower GST & Custom Duty on essential goods and medicines.

Housing & Investment Relief

  • SWAMIH Fund 2 (₹15,000 crore):
    • Completion of 1 lakh stalled housing projects.
    • Tax incentives for affordable housing investors.

Expected Impact

  • Encourages household savings and investment.
  • Supports middle-class purchasing power & economic growth.
  • Makes India’s tax system simpler & more progressive.

  1. Startup Ecosystem Support

Startup-Friendly Policies

  • Extended Tax Holiday:
    • Startups incorporated until 2030 eligible for tax benefits.
    • Encourages long-term investment in innovative businesses.
  • ₹10,000 Crore Startup Fund of Funds:
    • Supports early-stage & growth-stage startups.
    • Focus on AI, deep-tech, green energy, and biotech.
  • Lower Borrowing Costs:
    • Interest subsidies for startup loans.
    • Startup Credit Guarantee Scheme for financial stability.
  • Global Capability Centre (GCC) Framework:
    • Encourages MNCs to set up R&D hubs in Tier-2 cities.
  • BharatTradeNet for Startups:
    • A unified trade & documentation system to help startups scale globally.

Impact on Startups

  • Strengthens India’s startup ecosystem with funding, tax relief, and ease of business.
  • Encourages technology-led job creation.
  • Promotes India as a global startup hub.

  1. Mergers & Acquisitions

  • Simplified Approvals: Procedures for company mergers have been streamlined to enable faster corporate restructuring.
  • Fast-Track Mergers: Expanding scope for quick approval mechanisms.

  1. Foreign Direct Investment (FDI) Reforms

  • Insurance Sector: FDI cap raised from 74% to 100% for insurers investing fully in India.
  • Bilateral Investment Treaties: New investor-friendly agreements to attract long-term foreign investments.
  • Expanded Sectoral Limits: Increased FDI caps in key sectors such as infrastructure, financial services, and renewable energy.
  • Streamlined Approval Processes: Faster clearance mechanisms for FDI proposals to reduce bureaucratic delays.
  • Encouraging Domestic Investment: FDI regulations aligned with national interests to promote job creation and local entrepreneurship.
  • Simplification of Compliance: Regulatory requirements eased to facilitate smoother foreign investments.
  • Boosting Startups & Technology: Increased FDI focus on tech-driven sectors, including AI, fintech, and deep tech.
  • Enhancing Investor Confidence: Stable policy frameworks and dispute resolution mechanisms to attract global capital.

Conclusion

The Budget 2025-26 is a transformative blueprint for economic growth, focusing on AIFs, MSMEs, tax reforms, decriminalization, and startups. These reforms will:

  • Boost private investment & entrepreneurship.
  • Strengthen MSMEs & manufacturing.
  • Make taxation simpler & fairer.
  • Enhance ease of doing business.
  • Position India as a global innovation leader.