Major Changes Announced in Union Budget By Nirmala Sitharaman in Her Tenure

Finance Minister Nirmala Sitharaman will present the eighth consecutive budget on 1st February 2025. She already created a record when she presented the 2024-25 budget last year. The previous record was held by Morarji Desai, who presented five consecutive full budgets and one interim budget between 1959 and 1964. Today, we look at the key changes brought by the current finance minister in her tenure.

Some Key Changes Brought By Nirmala Sitharaman

Here are some of the key changes:

Lowering corporate tax in the first Budget:

In her inaugural budget of 2019, Nirmala Sitharaman introduced a landmark reform by substantially reducing corporate tax rates in India. It aimed to align India’s tax framework with global benchmarks, creating a more competitive environment for businesses and encouraging higher investments. At the time, the Indian economy was facing a slowdown in private-sector investment, and this decision was viewed as a strategic move to stimulate economic activity and drive growth.

The tax reduction brought India’s corporate tax rates closer to those of other leading economies, positioning the country as an attractive destination for domestic and foreign investors.

At that time, the initiative was widely praised for its boldness and its potential to boost economic confidence. However, its direct impact on employment generation sparked debate. Critics pointed out that the anticipated rise in job opportunities fell short, primarily because the tax savings often fueled capital-intensive investments rather than labor-intensive ones. It underscored the challenge of balancing economic reforms with inclusive growth outcomes.

New Tax Regime:

FM introduced a new tax regime in India during the Union Budget 2020. It offered taxpayers an optional framework with reduced tax rates across various income slabs. The new regime aimed to simplify tax compliance and provide flexibility by allowing individuals to opt for lower tax rates if they forgo specific exemptions and deductions, such as investments in savings schemes and housing loan benefits.

The new system was designed to increase disposable income and boost consumer spending, supporting economic growth. However, the adoption rate has been mixed, as many taxpayers continue to prefer the old regime for its comprehensive deductions and exemptions.

Read:Changes in New Tax Regime Announced in 2024

GST rate cuts:

Over the past five years, coinciding with Nirmala Sitharaman's tenure as chairperson of the GST Council, several significant Goods and Services Tax (GST) rate reductions have been implemented across various sectors, aiming to provide relief to consumers and boost specific industries. These reductions targeted essential goods, healthcare, and environmentally friendly technologies. Key changes include:

  • Cancer Drugs: The GST rate on crucial cancer medications was lowered from 12% to 5%, significantly reducing the financial burden on patients and their families. It aimed to make essential treatments more accessible.
  • Electric Vehicles (EVs): To encourage the adoption of electric mobility and reduce pollution, the GST on electric vehicles was significantly lowered from 12% to 5%. This reduction aimed to make EVs more competitive in the market and promote their widespread use.
  • Orthopedic Appliances: Similarly, the GST on orthopedic appliances, vital for mobility and rehabilitation, was reduced from 12% to 5%, making these aids more affordable for those in need.

Focus on MSMEs and Startups:

Nirmala Sitharaman has placed significant emphasis on supporting MSMEs and startups in her budget speeches, recognizing their crucial role in driving economic growth and employment. Key measures included the extension of the Credit Guarantee Scheme for MSMEs, infused with additional funding to ensure affordable credit access and reduce the cost of borrowing for small businesses.

For startups, the Finance Minister has announced an extension of the tax holiday period (2021-22), providing them with more time to benefit from income tax exemptions. Measures were also introduced to ease compliance burdens, promote innovation, and foster the growth of the startup ecosystem.

Read: What do MSMEs and startups expect from the Union Budget 2025? 

Decriminalization of company law:

In the Union budget 2021-22, Nirmala Sitharaman announced significant reforms aimed at the decriminalization of company law provisions, signaling a shift towards fostering a business-friendly environment. The move was intended to reduce the regulatory burden on companies and promote ease of doing business in India.

By decriminalizing several minor offenses under the Companies Act, such as procedural lapses and technical defaults, the government aimed to remove the fear of criminal prosecution for non-malicious and unintentional violations. Instead, such offenses were to be addressed through civil penalties or in-house adjudication mechanisms, enabling businesses to focus on growth and compliance without undue legal interference.

We look forward to more key changes in the upcoming union budget from the finance minister.