With reduced and exempted duties, tax relief for manufacturing, and increased support for startups, this Budget addresses a broader range of issues within the Indian electronics ecosystem. The industry has mixed reactions.
Finance Minister Nirmala Sitharaman presented her eighth consecutive Union Budget for FY2025-26 today at the lower house of the Parliament. She announced that total receipts (excluding borrowings) are projected at ₹34.96 trillion, while total expenditure is estimated at ₹50.65 trillion. Capital expenditure for FY26 has been revised to ₹10.18 trillion, down from ₹11.1 trillion in FY25.
Emphasising the theme of ‘Viksit Bharat’ or developed India, the Finance Minister aimed to boost local manufacturing by proposing substantial changes to basic customs duties (BDC) on various components and critical minerals. The budget also includes increased funding to support startups and micro, small, and medium-sized enterprises (MSMEs). However, she did not specifically focus on the electronics and semiconductor sectors.
The lower and higher duties
One of the key proposals of the Union Budget 2025 is the increase in the BCD on interactive flat panel displays (IFPD) from 10 per cent to 20 per cent, aimed at boosting local manufacturing. At the same time, the BCD on Open Cells and related components has been reduced to 5 per cent to support critical production in the electronics sector.
Building on the 2023-24 budget, which reduced the BCD on Open Cell parts for LCD/LED TVs from 5 per cent to 2.5 per cent, this year’s budget went a step further by completely exempting the duties on these parts.
Additionally, the BCD on inputs for manufacturing wired headsets, microphones, fingerprint readers, USB cables, and similar mobile components has been slashed from 2.5 per cent, helping lower production costs.
Furthermore, the duties on carrier-grade Ethernet switches have been cut from 20 per cent to 10 per cent, making networking equipment more affordable and supporting domestic manufacturing growth.
Furthermore, the tariff rate on electricity meters for alternating current (smart meters) and electronic toys under selected items has been decreased from 25 per cent to 20 per cent. Still, the effective rate remains unchanged, with an additional 7.5 per cent applied through the additional customs duty.
More affordable EVs with duty-free battery waste?
In the Union Budget 2025-26, the government has fully exempted BCD on cobalt powder, lithium-ion battery scrap, lead, zinc, and 12 other critical minerals. This move aims to boost local manufacturing, reduce import dependency, and lower costs for electric vehicles (EVs), electronics, and renewable energy sectors. Additionally, 35 items used in EV battery production and 28 for mobile battery manufacturing will be duty-free, supporting industries and job creation.
Taxation eased for NRI electronics manufacturers
The Budget proposed a presumptive taxation regime for non-residents involved in electronics manufacturing in India. It also introduces a “safe harbour provision” for non-residents storing components for specified manufacturing units, ensuring tax certainty for those providing services to resident companies.
Mission for clean-tech manufacturing
Sitharaman announced the launch of a ‘National Manufacturing Mission’ to advance India’s manufacturing capabilities in renewable energy. It will prioritise sectors such as solar photovoltaic (PV) cells, electric vehicle (EV) batteries, motors and controllers, electrolysers, wind turbines, very high voltage transmission equipment, and grid-scale batteries.
All that is for startups and innovation…
The Union Budget also outlined significant support for startups and MSMES. The period for startups to avail benefits has been extended by five years, allowing incorporation until April 1, 2030. The government also plans to set up a new ‘Fund of Funds’ with an additional ₹100 billion to support startups, building on the ₹910 billion already committed to Alternate Investment Funds (AIFs).
Furthermore, a ‘Deep Tech Fund of Funds’ will be explored to promote the next generation of startups and their innovations. To enhance credit availability, the credit guarantee cover for MSMEs and startups will be increased, enabling additional credit worth ₹1.5 trillion over the next five years.
Sarvagya Mishra, Founder and Director at Superbot, a Gurugram-based AI-tech company welcomed this move, commenting on the governments focus on skill development, “We particularly commend the announcement of the Centre of Excellence for AI In Education, to be established with an outlay of ₹5 billion. Furthermore, the move to set up the Deeptech Fund of Funds is another significant move, directed at boosting innovation.”
India will be a global toy hub
Sitharaman announced plans to establish India as a global centre for toy manufacturing, building on the ‘National Action Plan for Toys.’ The scheme will focus on developing clusters, enhancing skills, and creating a sustainable manufacturing ecosystem to produce high-quality, innovative, and unique toys under the ‘made-in-India’ brand.
Skill development for school students
The Finance Minister revealed the establishment of 50,000 Atal Tinkering Labs (ATLS) in government schools over the next five years, aimed at encouraging curiosity, innovation, and a scientific mindset among students. These labs will provide hands-on learning experiences in science, technology, engineering, and mathematics (STEM) subjects, offering robotics, electronics, and 3D printing tools.
The budget also includes plans to provide broadband connectivity to all government secondary schools and primary health centres in rural areas through the Bharatnet project.
Post-session
Ahead of the Union Budget, the Indian electronics and semiconductor industry eagerly anticipated proposals to drive innovation, R&D, and exports. Many industry veterans suggested tax relief for R&D, an extended design-linked incentive scheme, export incentives, and greater support for MSMEs. Industry leaders also advocated for increased funding for semiconductor manufacturing and tax benefits for fabrication plants.
Post the session, many expressed concerns on the BCD reduction.
“The recent reduction in customs duties to nil on open cells and components manufacturing applicable only to industries with bonded manufacturing plants, creates an uneven playing field for TV manufacturers without access to such facilities. This policy is not welcomed by the broader TV manufacturing industry, and for true growth, these benefits should be extended more equitably across the sector,” stated Avneet Singh Marwah, CEO of Super Plastronics Private Limited.
On the other hand, Bharath Aitha, Vice President of Marketing at eInfochips of Arrow Electronics, welcomed the Budget as a “forward-looking blueprint”, identifying that the allocation of ₹200 billion for private sector-driven R&D and the proposed Deep Tech Fund would immensely benefit the semiconductor ecosystem.
As the Lok Sabha got adjourned at noon after the Budget, only time will tell how successfully these measures are implemented and whether they will effectively drive the growth of India’s electronics sector.