In his fourth budget as Finance Minister presented in the Lok Sabha, Jaitley also made some far-reaching changes in political funding, placing a cap of Rs 2,000 on the donation which any party can receive from one source in cash.

The budget, which pegs the total expenditure for 2017-18 at Rs 21.47 lakh crore -- with a 25.4 per cent jump in capital-side outlay -- continued with the government's focus on curbing black money by limiting cash transactions to less than Rs 300,000.

In his 110-minute budget presentation, Jaitley also assured a law to confiscate the assets of fugitive economic offenders.

On demonetisation, he said, it will have substantial long-term benefirs and spur growth, and added that with the current pace of remonetisation, the impact will not spill over to the next year.

Apart from the sops and substantial increase in allocation on affordable housing, job-guarantee scheme, agriculture sector, and the rural economy in general, Jaitley also sought to hike the defence budget for the next fiscal by 10 per cent to Rs 2.74 lakh crore.

He said the budget has 10 distinct themes: Farmers, rural population, youth, the poor, infrastructure, financial Sector, digital economy, delivery of public service, prudent fiscal management and a tax administration that honours the honest.

The total allocation for the rural, agriculture and allied sectors has been hiked by 24 per cent to Rs 1,87,223 crore, and infrastructure status has been accorded to affordable housing so that it can avail of the associated benefits such as low-cost project loans.

The latest exercise was the first time the date of presentation was advanced by nearly a month, even as it co-opted the Railway Budget into it, abandoning the practice that was started in 1924. The allocation for Railways was hiked by 20 per cent.

For individual tax payers, the tax rate for the slab between Rs 2.5 lakh and Rs 5 lakh has been cut to 5 per cent from 10 per cent, while a 10 per cent surcharge has been kept for those with annual income of between Rs 50 lakh and Rs 1 crore.

For those with higher income, the 15 per cent surcharge remains.

As regards small and medium enterprises, those with a turnover of less than Rs 50 crore will have to pay a tax of 25 per cent, against 30 percent. The tax rates for larger corporates have been left largely untouched.

The Finance Minister also did not tinker much with indirect taxes, though items like cashew nuts, cigarettes, bidis, pan masala and even mobile phones could become dearer.

"I have preferred not to make many changes in current regime of excise and service tax because the same are to be replaced by the Goods and Services Tax regime soon," he said, adding that all pending issues have been resolved by the GST Council overseeing its implementation.

Opposition parties said the budget is directionless, but India Inc. was happy with the proposals.

"Overall, the budget builds positive sentiments among Indian industry and overseas investors that the government would remain on the path of fiscal prudence while taking all possible measures to boost growth," CII Director General Chandrajit Banerjee said in a statement.

"I think the biggest takeaway from this budget is the reform in the area of political funding," said Pankaj Patel, President of FICCI, and added that while the demonetisation drive was an attack on black money, curbs on electoral funding will help attack the root cause of graft.

Jaitley also did not lose sight of market expectations.

He extended the concession on interest earned by entities in external commercial borrowings or in bonds by two years and included rupee bonds in this category.

Much to the relief of investors, he left the capital gains, securities transaction tax and other market levies also unchanged.

As a result of these steps, as also the resolve on fiscal prudence and Rs 10,000 crore capital infusion for state-run banks, key stock market indices staged a sudden rally, with the benchmark sensitive index (Sensex) of the BSE gaining nearly 500 points to regain the 28,000-point mark.

The key, 30-share index closed at 28,141.64 points, with a gain of 485.68 points, or 1.76 per cent, while the broader Nifty of the National Stock Exchange ended at 8,716.40 points, up 155.10 points, or 1.81 per cent.