Budget 2025 summary and Capital Market

Overall Budget Theme 2025:

The Union Budget 2025 reflects a pragmatic and forward-looking vision fostering a resilient and globally competitive economy. Comprehensive program for vegetables, fruits and Sri anna (millets) will go a long way in ensuring the much-needed agriculture diversification to high value crops while meeting the need for nutritional security and improved income opportunities for farmer. By prioritizing private sector investment and strengthening the MSME ecosystem, the budget paves the way for sustained industrial growth and job creation. The significant boost in credit availability for MSMEs, establishment of the National Manufacturing Mission, streamlined tax structures, and targeted manufacturing incentives will drive entrepreneurship and innovation at scale. Equally transformative is the Government’s strong push for infrastructure, with accelerated urban development initiatives. This forward-looking budget strikes a balance between inclusive development and economic momentum, setting a strong foundation for a Viksit Bharat.

 

Budget in respect of Capital Market:

Securities held by investment funds referred to in Section 115UB of the Income-tax Act, which are invested in accordance with the regulations under the Securities and Exchange Board of India Act, 1992, will now be treated as “capital assets.”

This ensures that income arising from the transfer of such securities will be categorized as “capital gains” rather than “business income,” thereby providing certainty to investment funds.

Effective from April 1, 2026, applicable for assessment year 2026-27 onwards.

 

Rationalization of Taxation of Capital Gains:

Long-term capital gains tax rates for specified funds or Foreign Institutional Investors (FIIs) have been aligned with rates applicable to residents.

The income-tax rate on long-term capital gains (not referred to in Section 112A) will be calculated at the rate of 12.5% for both residents and non-residents, effective from April 1, 2026.

This amendment aims to bring parity and rationalize capital gains taxation.

 

Extension of Tax Exemptions for Sovereign Wealth Funds and Pension Funds:

The deadline for investments by Sovereign Wealth Funds (SWFs) and Pension Funds into Indian infrastructure projects has been extended from March 31, 2025, to March 31, 2030.

Exemption will be available for long-term capital gains, even if classified as short-term under Section 50AA.

Encourages long-term foreign investments in infrastructure and capital markets.

 

Tax Neutrality for Fund Relocation:

Transfer of shares, units, or interests during the relocation of funds (such as retail schemes or Exchange Traded Funds (ETFs)) to International Financial Services Centres (IFSCs) will not be considered a “transfer” for taxation purposes, making it a tax-neutral transaction.

Effective from April 1, 2026.

 

Development of Corporate Bond Market:

The National Bank for Financing Infrastructure and Development (NaBFID) will set up a “Partial Credit Enhancement Facility” for corporate bonds focused on infrastructure.

This initiative is expected to deepen the corporate bond market and attract more investments.

 

FDI Reforms in Insurance Sector:

The Foreign Direct Investment (FDI) limit in the insurance sector has been raised from 74% to 100%.

This move will attract more foreign investments into the insurance sector, potentially adding liquidity to the capital markets.

Budgetary Allocation:

Expenditure on major items	Rs. In crores
Defence	4,91,732
IT & Telecom	95,298
Agriculture and Allied activities	1,71,437
Rural Developments	2,66,817
Home Affairs	2,33,211
Health	98,311
Education	1,28,650
Commerce and Industry	65,553
Social Welfare	60,052
Energy	81,174
Urban Development	96,777
Scientific Departments	55,679

 

Budget Sectors Highlights:

Sr No	Budget highlight	Resemblance Companies
1	FDI limit raised from 74% to 100% for insurance sector	SBI Life, HDFC Life, ICICI Lombard
2	Government to develop top tourist destinations with key infrastructure	TFCIL, Lemon Tree, ITDC Praveg Communications, Eco Hotels, India Hotels
3	Government to focus on greenfield airport and connectivity	GMR Airports
4	Government to focus on special zone and eco system	Mazagaon Dock Shipbuilders, SCI, Cochin Shipbuilders, GE Shipping
5	Government to focus on energy transmission and nuclear energy	REC, IREDA, NTPC, Tata Power, NHPC
6	Government to allocate 1.5 trillion rupees as 50-year interest free loan for Infrastructure	Vatech, EMS, VPRPL, Ion Exchange, SEPC, HCC
7	Government to focus innovation, crop diversification, post-harvest, irrigation, long and short-term credit	Jain Irrigation, FACT, RCF, Paradeep phosphate
8	Government to make India global hub for toys. Development of clusters and manufacturing of toys	Archies
9	Digital form of Indian language book – to understand subject in their language	Satia Industries
10	Full exemption on lithium-ion batteries – helps EV and battery manufacturers	Nile

 

Overall Impact:

The Budget 2025-2026 focuses on making capital markets more investor-friendly with tax reforms, improved certainty for investment funds, and measures to deepen the corporate bond market.

Extension of tax exemptions and FDI reforms aim to attract long-term foreign institutional investments, boosting market liquidity.

Rationalization of taxation for capital gains and fund relocations will simplify tax compliance, ensuring a smoother operational framework for both domestic and foreign investors.

Overall budget focusing upliftment of middle-income group with more opportunity towards employment, skills, learning and wavering tax enhancing spending in economy and money flow rotation, which all in all will focus on Indian Banking sector to be positive.

 

Key Budget Other Announcements:

Dhan Dhanya Yojana 🌾 to be launched in 100 districts.	Increased focus on nuclear energy ⚛️ by 2047
Spcl 6-year mission for Tur, Urad, & Masoor dal 🌱	Special scheme for nuclear energy ⚛️
Makhana Board 🍘 to be set up in Bihar	Special scheme for the ship-breaking industry 🚢⚙️
Central agencies 🏢 to purchase pulses for 4 years	More cities 🏙 to be connected under the ‘Udaan’ 🛫 scheme
New schemes 🌱 for vegetable and fruit 🍏 production in collaboration with states.	New airport ✈️ to be constructed in Bihar as greenfield project in addition to Patna airport
Development of the marine sector 🐟	40,000 housing units 🏡 to be built under the SWAMIH scheme
Kisan Credit Card 💳 limit increased to ₹5 lakh	52 new tourist destinations 🏝 to be developed in collaboration with states
Urea plant 🏭 to be set up in Assam	New mining policy ⛏️ to be introduced
India Post 📦 to be developed as a major logistics organization 🚚	₹20,000 crore investment 💰 in R&D 🔬 for the private sector
Special credit card 💳 for small businesses	All government secondary schools 🏫 to be connected with broadband 🌐
Self-reliance in edible oils 🛢	New schemes to boost exports 📦
Special schemes for footwear 👞 and leather 👜	Buddha-related sites 🏯 to be developed
India in to become a global hub for toys 🧸	Special scheme for preserving Indian scripts 📜
Special scheme for women from backward classes 👩‍👩‍👧‍👦	Easier access to funds 💵 for export promotion
22 lakh new jobs 🏢👷 to be created under the Leather Scheme	New Income Tax Bill 📜 to be introduced next week
Launch of the National Manufacturing Mission 🏗	100% FDI limit 🌍 in the insurance sector 🏦
Increased emphasis on Indian languages 📖 in education	Simplification of RE-KYC process 📑
More IIT institutes 🎓 to be established	Changes in custom duty on electronic goods 📱
75,000 new seats 🏥 in the medical field in the next 5 years	100% FPI limit 📊 in the insurance sector subject to investment in India
Special AI 🤖 research centres to be set up	Custom duty removed 🚫💊 on 36 life-saving medicines
Health insurance 🏥💊 scheme for small workers	No primary duty on lead & zinc ⚒️
UPI-linked card 💳 for small vendors	Duty removed 🚫 on crust leather 👜
UPI-linked credit card limit set at ₹30,000 💰	New, simplified Income Tax law 🏦📜 to be introduced
Interest-free funds 🏗💵 for states to boost infrastructure development	TDS and TCS rates to be made simpler and rationalised 📉
₹1 lakh crore fund 💰 announced for urban development 🏙	Major tax relief for senior citizens 👴👵 Tax exemption limit for senior citizens increased to ₹1 lakh 💰
TDS exemption limit on rent 🏠 increased to ₹6 lakh	Income Tax returns Updated filing for 4 years
Biggest Announcement: No tax on income up to ₹12 lakh (+ ₹75k as standard deduction for salary class)

Disclaimer: Views presented above is only for educational purpose. Kindly do not rely on above and do not construe as any advisory.