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 Table of Content
Union Budget: Understanding its Formulation and Implications...................................... 3

Key Components of the Budget.........................................................................................3

Key To Budget Documents....................................................................................................5

A. Annual Financial Statement (AFS) - Article 112............................................................. 6

B. Demands for Grants (DG) - Article 113..........................................................................6

C. Finance Bill - Article 110(1)(a)........................................................................................ 6

D. Fiscal Policy Statements mandated under FRBM Act, 2003.........................................6

E. Expenditure Budget....................................................................................................... 7

F. Receipt Budget...............................................................................................................7

G. Expenditure Profile........................................................................................................ 8

H. Budget at a Glance........................................................................................................8

I. Memorandum Explaining the Provisions in the Finance Bill........................................... 8

J. Output Outcome Monitoring Framework....................................................................... 8

K. Key Features of Budget 2025-26...................................................................................8

L. Implementation of Budget Announcements 2024-25.................................................... 9

Budget at a Glance: Important Indicators & Trends......................................................... 10

Rupee Comes From (Source)........................................................................................... 10

Rupee Goes To (Expenditure).......................................................................................... 11

Various Deficit Trends.......................................................................................................11

Trend in Capex................................................................................................................. 13

Budget Profile...................................................................................................................13

Sector-Wise Allocation.....................................................................................................15

Budget 2025 - 26: Important Takeaways............................................................................16

1. Budget 2025 -26: Theme & Vision............................................................................... 16

2. Agriculture & Rural Development................................................................................. 18

3. MSME & Manufacturing Growth.................................................................................. 19

4. Investment & Infrastructure.......................................................................................... 20

5. Social Welfare & Human Development........................................................................ 21

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6. Trade, Exports & Digital Economy................................................................................22

7. Taxation & Financial Reforms.......................................................................................22

8. Indirect Taxation & Sector-Specific Incentives.............................................................23

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 Union Budget: Understanding its Formulation and Implications

Key Components of the Budget

The Budget consists of three major components:
1.​ Expenditure
2.​ Receipts
3.​ Deficit Indicators

1. Expenditure

●​ Classified into two types:

○​ Revenue Expenditure: Covers daily operational costs, interest payments,
subsidies, and salaries.
○​ Capital Expenditure: Involves investment in long-term assets like
infrastructure, defence, and public sector projects.
●​ Other classifications:
○​ Plan vs. Non-Plan Expenditure (previously used classification)
○​ Development vs. Non-Development Expenditure:
■​ Development Expenditure: Includes transport, rural development,
agriculture, and education.
■​ Non-Development Expenditure: Covers defence, law & order, and
interest payments.

2. Receipts
Receipts refer to government income and are classified as:

●​ Revenue Receipts:
○​ Tax Revenue: Includes direct taxes (Income Tax, Corporate Tax) and
indirect taxes (GST, Excise, Customs).
○​ Non-Tax Revenue: Includes dividends, fees, and penalties.

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 ●​ Capital Receipts:
○​ Debt Creating: Loans from markets, external borrowings, and treasury
bills.
○​ Non-Debt Creating: Disinvestment proceeds, recoveries of loans.

3. Deficit Indicators

Deficit indicators show the shortfall between government spending and revenue.

●​ Types of Deficits:
○​ Fiscal Deficit: The gap between total expenditure and total revenue
(excluding borrowings).
○​ Revenue Deficit: The gap between revenue expenditure and revenue
receipts.
○​ Primary Deficit: Fiscal deficit minus interest payments.
○​ Effective Revenue Deficit: Revenue deficit excluding grants given for
capital creation.

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 Key To Budget Documents

The list of Budget documents presented to the Parliament, besides the Finance Minister’s
Budget Speech, is given below:

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A. Annual Financial Statement (AFS) - Article 112
●​ Estimated receipts and expenditure of the Government of India for 2025-26 along
with estimates for 2024-25 and also actuals for the year 2023-24.
●​ The receipts and disbursements are shown under three parts in which
Government Accounts are kept viz.,
1.​ The Consolidated Fund of India (Article 266)
2.​ The Contingency Fund of India (Article 267)
3.​ The Public Account of India (Article 266)
●​ The Union Budget can be demarcated into two part
1.​ Revenue Budget: the revenue receipts of the Government (Tax revenues
and Non-Tax revenues) and the revenue expenditure
2.​ Capital Budget: Capital receipts and capital payments.

B. Demands for Grants (DG) - Article 113

●​ The estimates of expenditure from the Consolidated Fund of India included in the
Annual Financial Statement and required to be voted by the Lok Sabha, be
submitted in the form of Demands for Grants.

C. Finance Bill - Article 110(1)(a)

●​ Presented in fulfilment of the requirement of Article 110 (1)(a) of the Constitution,
detailing the imposition, abolition, remission, alteration or regulation of taxes
proposed in the Budget.

D. Fiscal Policy Statements mandated under FRBM Act, 2003

Macro-Economic Framework Statement (Mandated under section 3 of FRBM Act)

●​ An assessment of the growth prospects of the economy( the GDP
growth rate, the domestic economy and the stability of the external
sector of the economy, fiscal balance of the Central Government and

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 the external sector balance of the economy) along with the statement of
underlying assumptions.

Medium-Term Fiscal Policy cum Fiscal Policy Strategy Statement

It sets out the three-year rolling targets for specific fiscal indicators in relation to GDP at
market prices, namely:
★​ Fiscal Deficit,
★​ Revenue Deficit,
★​ Primary Deficit
★​ Tax Revenue
★​ Non-tax Revenue and
★​ Central Government Debt.

E. Expenditure Budget
●​ The estimates made for a scheme/programme are brought together and shown on
a net basis on Revenue and Capital basis at one place.
●​ The Umbrella of Transfers to States/UTs includes the following 3
sub-classifications:
○​ Centrally Sponsored Scheme
○​ Finance Commission Transfers
○​ Other Transfer to States

F. Receipt Budget
●​ The document provides details of tax and non-tax revenue receipts and capital
receipts and explains the estimates.
●​ provides a statement on the arrears of tax revenues and non-tax revenues, as
mandated under the Fiscal Responsibility and Budget Management Rules, 2004.

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G. Expenditure Profile
●​ The document makes certain other refinements such as netting expenditure of
related receipts so that overstatement of receipts and expenditure figures is
avoided.

H. Budget at a Glance
●​ This document shows in brief, receipts and disbursements along with broad
details of tax revenues and other receipts.
●​ This document provides details of resources transferred by the Central
Government to State and Union Territory Governments.
●​ This document also shows the revenue deficit, the primary deficit and the fiscal
deficit of the Central Government.
●​ The document also includes a statement indicating the quantum and nature
(share in Central Taxes, grants/loans) of the total Resources transferred to
States and Union Territory Governments.

I. Memorandum Explaining the Provisions in the Finance Bill

●​ To facilitate understanding of the taxation proposals contained in the Finance Bill.

J. Output Outcome Monitoring Framework

●​ Output-Outcome Monitoring Framework (OOMF) for Central Sector Schemes
(CSs) and Centrally Sponsored Schemes (CSSs) with a financial outlay of `500
crore and more will be laid in the House along with Budget 2025-26.
●​ For CS and CSS schemes with an outlay of less than `500 crore the
output-outcome monitoring framework with an itemized expenditure of the
schemes is prepared by the respective Ministry/Department and the same will be
presented in the Parliament along with the Detailed Demand for Grants (DDG).

K. Key Features of Budget 2025-26

●​ A snapshot summary of the economic vision of the Government and the major
policy initiatives in the thrust areas of the economy for growth and welfare.

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L. Implementation of Budget Announcements 2024-25
●​ The Document summarises the status of the implementation of the
announcements made by the Hon’ble Finance Minister in the Budget Speech
2024-25.

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 Budget at a Glance: Important Indicators & Trends
This section covers a break-up of Government spending and trends that are useful for the
examination

Rupee Comes From (Source)

Highest to Lowest Source Order:

❖​ Borrowings: 24%
❖​ Income tax: 22%
❖​ Corporation Tax: 17%
❖​ GST and other taxes: 18%
❖​ Non-Tax Receipts: 9%
❖​ Union Excise Duties: 5%
❖​ Customs: 4%
❖​ Non-Debt Capital Receipts: 1%

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Rupee Goes To (Expenditure)

Highest to lowest Order of Spending:

❖​ The state share of taxes and duties: 22%
❖​ Interest payments: 20%
❖​ Central Sector Schemes: 16%
❖​ Defence: 8%
❖​ Centrally Sponsored Schemes: 8%
❖​ Finance Commission Transfers: 8%
❖​ Other Expenditure: 8%
❖​ Major Subsidies: 6%
❖​ Pensions: 4%

Various Deficit Trends

1. Fiscal Deficit Trends

●​ Declining Trend: Fiscal deficit reduced from 6.7% (2021-22) to 4.4% (2025-26
BE).
●​ Indicates Fiscal Consolidation: The government aims to gradually lower its
borrowing dependency.

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 ●​ Target for Stability: Reducing fiscal deficit aligns with FRBM (Fiscal
Responsibility and Budget Management) Act objectives.

2. Revenue Deficit Trends

●​ Reduction from 4.4% (2021-22) to 1.5% (2025-26 BE).

●​ Indicates improvement in revenue generation: Lower reliance on borrowings for
revenue expenditures.
●​ Growth in tax & non-tax revenue likely contributed to this decline.

3. Effective Revenue Deficit Trends

●​ The sharp decline from 3.3% (2021-22) to just 0.3% (2025-26 BE).
●​ Indicates improved capital expenditure efficiency: Reduced reliance on revenue
deficit grants.
●​ More funds are being allocated for asset creation rather than recurring expenses.

4. Primary Deficit Trends

●​ Reduced from 3.3% (2021-22) to 0.8% (2025-26 BE).

●​ Primary deficit measures government borrowing excluding interest payments.
●​ Declining primary deficit shows better fiscal discipline: Indicates government is
moving towards a sustainable financial model.

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Trend in Capex

●​ Effective Capital Expenditure is estimated at ₹15.5 lakh crore, marking the

highest level in the observed period.
●​ Direct Capital Expenditure constitutes the largest share at ₹11.2 lakh crore.
●​ Grants-in-Aid for Creation of Capital Assets contribute ₹4.3 lakh crore,
showing consistent growth in infrastructure-related grants.

Budget Profile

1. Capital Receipts

●​ Total Capital Receipts: ₹16.45 lakh crore

○​ Debt Receipts: ₹15.69 lakh crore
■​ Market Loans: ₹11.54 lakh crore
■​ Small Savings & State Provident Fund: ₹4.15 lakh crore
○​ Non-Debt Capital Receipts (NDCR): ₹0.76 lakh crore

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 ■​ Primarily includes disinvestment and asset sales.

2. Gross Tax Revenue

●​ Total Gross Tax Revenue: ₹42.70 lakh crore

○​ Taxes on Income: ₹14.38 lakh crore
○​ Corporation Tax: ₹10.82 lakh crore
○​ GST: ₹11.78 lakh crore
○​ Union Excise Duty: ₹3.17 lakh crore
○​ Customs: ₹2.40 lakh crore
○​ Others: ₹0.05 lakh crore

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 ●​ State Share of Taxes: ₹14.22 lakh crore (Transferred to states as part of federal
fiscal policy)

3. Non-Tax Revenue

●​ Total Non-Tax Revenue: ₹5.83 lakh crore

○​ Interest Receipt: ₹0.48 lakh crore
○​ Dividend & Profit: ₹3.25 lakh crore
○​ Others: ₹2.10 lakh crore

Net Tax Receipts

●​ Net to the Centre: ₹28.37 lakh crore
○​ After deducting the state share (₹14.22 lakh crore) from gross tax
revenue.

Sector-Wise Allocation

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 Budget 2025 - 26: Important Takeaways

1. Budget 2025 -26: Theme & Vision

●​ Objective: Accelerate growth, ensure inclusive development, boost private

investment and uplift household spending.

●​ Guiding principle: "Viksit Bharat" (Developed India) with goals including:

○​ Zero poverty
○​ 100% quality school education
○​ Affordable & comprehensive healthcare
○​ Full employment with skilled labour
○​ 70% of women in economic activities
○​ India as the global food basket

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Aspiration for Viksit Bharat (Developed India)

★​ Accelerate Growth
★​ Secure Inclusive Development
★​ Enhance the Spending Power Of India's Rising
★​ Invigorate Private Sector Investments
★​ Uplift Household Sentiments

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2. Agriculture & Rural Development

Prime Minister Dhan-Dhaanya Krishi Yojana:

●​ 100 low-productivity agricultural districts to receive support for:

○​ Crop diversification
○​ Irrigation
○​ Post-harvest storage
○​ Credit facilitation
●​ Expected to benefit 1.7 crore farmers.

Rural Prosperity & Resilience Program:

●​ Skilling, technology, and investment to reduce rural distress and migration.

●​ 100 districts in Phase 1.

Mission for Aatmanirbharta in Pulses:

●​ Focus on Tur, Urad, and Masoor; procurement by NAFED & NCCF.

●​ Six-year plan to achieve self-sufficiency.

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Other Important Announcements:

●​ Vegetables & Fruits Program: Support for processing, storage, and farmer
pricing, including for Shri-Anna (Coarse Cereals)
●​ Makhana Board in Bihar: Improve production, processing, and marketing of
Makhana.
●​ National Mission on High-Yielding Seeds: Strengthen research, develop
climate-resilient seeds, and commercialize over 100 varieties.
●​ Fisheries & Marine Economy: Harness fisheries from (Exclusive Economic Zone)
EEZ & High Seas; special focus on Andaman & Lakshadweep.
●​ Mission for Cotton Productivity: Five-year mission to increase yield & promote
extra-long staple cotton.
●​ Kisan Credit Card (KCC) Loan Limit on Interest Subvention: Enhanced from ₹3
lakh to ₹5 lakh.
○​ KCC to (7.7 crore):
■​ Farmers
■​ Fishermen
■​ Dairy Farmers
●​ New Urea Plant in Namrup (Assam): 12.7 lakh metric tons annual capacity.
○​ 3 dormant Urea Plant in the Eastern Region had been operationalised.

3. MSME & Manufacturing Growth

●​ MSMEs employ 7.5 crore people and contribute 36% to manufacturing & 45%
of exports.
●​ MSME Classification Revised: Investment & turnover limits enhanced to
promote growth.

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Credit Availability Expanded:

○​ Micro & Small Enterprises: Credit limit raised to ₹10 crore.

○​ Startups: Credit limit raised to ₹20 crore.
○​ Exporter MSMEs: Term loan limit up to ₹20 crore.

Other Important Announcements

●​ Micro Enterprise Credit Cards: ₹5 lakh credit limit for Udyam-registered

micro-enterprises.
●​ Fund of Funds for Startups: ₹10,000 crore additional contribution.

●​ Footwear & Leather Industry Support: Expected employment for 22 lakh

people; turnover of ₹4 lakh crore.
●​ Toy Manufacturing Scheme: Make India a global toy hub.
●​ National Manufacturing Mission: Clean tech manufacturing for EVs, batteries,
solar panels, wind turbines, etc.
●​ National Institute of Food Technology, Entrepreneurship and Management to
be set up in Bihar: to boost value addition & income for farmers.

4. Investment & Infrastructure

●​ ₹1.5 lakh crore for 50-year interest-free loans to states for capital
expenditure.
●​ Asset Monetization Plan 2025-30: ₹10 lakh crore capital for infrastructure.

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 ●​ Jal Jeevan Mission Extended: 100% rural tap water coverage by 2028.
●​ Urban Challenge Fund (₹1 lakh crore): Cities as Growth Hubs & Urban
Redevelopment.
●​ Nuclear Energy Mission: 100 GW by 2047, ₹20,000 crore for Small Modular
Reactors (SMRs).
●​ Maritime Development Fund (₹25,000 crore): Shipbuilding & logistics financing.
●​ UDAN Scheme Expansion: 120 new destinations; 4 crore passengers over 10
years.
●​ Greenfield Airports in Bihar: Capacity expansion in Patna, a new airport at
Bihta.

5. Social Welfare & Human Development

●​ Saksham Anganwadi & Poshan 2.0: 8 crore children, 1 crore women & lactating
mothers to benefit.
●​ 50,000 Atal Tinkering Labs: Encourage innovation in government schools.
●​ National Skilling Centres (5 planned): Global partnerships for workforce training.

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 ●​ Medical Education Expansion: 75,000 additional medical seats over 5 years.
●​ Day Care Cancer Centres in Every District Hospital: 200 centres in 2025-26.
●​ PM SVANidhi Scheme Expansion: Enhanced loans, ₹30,000 UPI-linked credit
cards for street vendors.
●​ Social Security for Gig Workers: 1 crore workers to receive ID cards &
healthcare under PMJAY.

6. Trade, Exports & Digital Economy

●​ Export Promotion Mission: Sectoral & ministerial targets for export growth.
●​ BharatTradeNet (BTN): Unified digital platform for trade documentation &
financing.
●​ Air Cargo Infrastructure Upgrades: Warehousing & streamlined customs for
perishable goods.

7. Taxation & Financial Reforms

●​ New Income Tax Structure:

○​ No tax up to ₹12 lakh (₹12.75 lakh for salaried individuals).
○​ Revised slab rates:

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 ●​ FDI in Insurance Increased: Raised from 74% to 100%.
●​ NaBFID Partial Credit Enhancement Facility: Boost corporate bond market.
●​ KYC Simplification & Digital Central KYC Registry: Easier compliance &
periodic updates.
●​ Tax Relief for Senior Citizens: TDS exemption limit on interest raised to ₹1
lakh.
●​ TDS/TCS Rationalization: Threshold for TCS on LRS increased from ₹7 lakh to
₹10 lakh.

8. Indirect Taxation & Sector-Specific Incentives

●​ Import Duty Reductions:

○​ Critical minerals, lithium-ion battery components, telecom & textile
machinery.
○​ Frozen fish paste, surimi, and hydrolysate imports to promote seafood
exports.
●​ Incentives for Manufacturing: Duty exemptions for EV batteries, solar panels,
and shipbuilding.
●​ Export Promotion: Duty-free imports for handicrafts & textiles.
●​ GST Reforms: Track & Trace Mechanism for tax compliance.

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