Finance Bill 2025

The Finance Bill 2025 has been development in India’s fiscal policy. The Rajya Sabha returned the bill to the Lok Sabha after making 35 amendments, including the removal of a 6 per cent digital tax on online advertisements. This marks the completion of the budgetary exercise for 2025-26, which began on February 1, 2025.

Budget Overview

The Union Budget for 2025-26 proposes a total expenditure of Rs 50.65 trillion. This reflects a 7.4 per cent increase from the previous fiscal year. The budget aims to balance economic growth with fiscal responsibility.

Key Financial Figures

The budget outlines a gross tax revenue collection of Rs 42.70 trillion. It also anticipates gross borrowing of Rs 14.01 trillion. Capital expenditure is set at Rs 11.22 trillion, with an effective capital expenditure estimated at Rs 15.48 trillion.

Allocation for Schemes

The budget allocates Rs 5,41,850.21 crore for Centrally Sponsored Schemes, up from Rs 4,15,356.25 crore in the previous year. For central sector schemes, Rs 16.29 trillion is earmarked, compared to Rs 15.13 trillion for 2024-25.

Fiscal Deficit and Economic Growth

The fiscal deficit for FY26 is projected at 4.4 per cent, down from 4.8 per cent in the current fiscal year. The GDP for FY2025-26 is estimated at Rs 3,56,97,923 crore, indicating a growth of 10.1 per cent over the revised estimates for FY2024-25.

State Resources and Transfers

Total resources transferred to states in the 2025-26 budget amount to Rs 25,01,284 crore. This is an increase of Rs 4,91,668 crore from the actuals of 2023-24. The budget aims to strengthen state economies through enhanced financial support.

Focus on Taxpayer Relief

Finance Minister Nirmala Sitharaman brought into light the government’s intention to respect taxpayers. A new threshold of Rs 12 lakh has been set. Individuals earning below this amount will not be liable for tax, promoting economic inclusivity.

Economic Challenges and Considerations

The budget’s increase in expenditure is attributed to several factors. These include rising interest payments on loans, enhanced defence spending, and provisions for employment generation. These challenges necessitate careful fiscal management.

Implications for Future Fiscal Policy

The Finance Bill 2025 sets a tone for future fiscal policies. It aims to balance growth with prudence. The government’s approach reflects a commitment to sustainable development and economic stability.

Questions for UPSC:

1. Examine the impact of the Finance Bill 2025 on India’s economic growth.
2. Discuss the significance of the fiscal deficit target for FY26 in relation to economic stability.
3. What are Centrally Sponsored Schemes? How do they contribute to state economies?
4. Critically discuss the role of tax policy in promoting economic inclusivity in India.

Answer Hints:

1. Examine the impact of the Finance Bill 2025 on India’s economic growth.

1. The Finance Bill 2025 proposes a total expenditure of Rs 50.65 trillion, indicating government commitment to economic growth.
2. It includes increase in capital expenditure, set at Rs 11.22 trillion, aimed at infrastructure development.
3. The projected GDP growth of 10.1% signals optimism for economic expansion in FY2025-26.
4. Tax reforms, including raising the income tax threshold to Rs 12 lakh, enhance disposable income for consumers.
5. Increased allocations for employment generation schemes aim to reduce unemployment and stimulate economic activity.

2. Discuss the significance of the fiscal deficit target for FY26 in relation to economic stability.

1. The fiscal deficit target of 4.4% for FY26 is lower than the previous year’s 4.8%, indicating improved fiscal discipline.
2. A reduced fiscal deficit can lead to lower borrowing costs and increased investor confidence in the economy.
3. It reflects the government’s commitment to maintaining economic stability while managing public spending effectively.
4. Lower fiscal deficit may help control inflation, contributing to a stable economic environment.
5. Achieving this target is essential for sustainable economic growth and maintaining credit ratings.

3. What are Centrally Sponsored Schemes? How do they contribute to state economies?

1. Centrally Sponsored Schemes (CSS) are initiatives funded by the central government to support state-led development programs.
2. For FY26, Rs 5,41,850.21 crore is allocated to CSS, up from Rs 4,15,356.25 crore, enhancing state resources.
3. These schemes address local needs in areas like health, education, and infrastructure, promoting balanced regional development.
4. They provide financial assistance that enables states to implement programs effectively, boosting local economies.
5. CSS encourages collaboration between central and state governments, ensuring alignment of developmental goals.

4. Critically discuss the role of tax policy in promoting economic inclusivity in India.

1. The introduction of a Rs 12 lakh income threshold for tax exemption increases disposable income for lower and middle-income groups.
2. Tax relief measures encourage spending, which can stimulate economic growth and improve living standards.
3. Progressive tax policies aim to reduce income inequality by easing the tax burden on lower earners.
4. Tax policies that support small businesses can enhance job creation and entrepreneurial activity, encouraging inclusivity.
5. However, maintaining tax revenue while promoting inclusivity poses challenges for fiscal sustainability.