"The most far-reaching announcement by the Finance Minister was the planned introduction of a new income-tax bill in the coming week. Her statement that the new law will be simple, easy to understand, and only about half the size of the present Act is very welcome. Even though this announcement had the potential to overshadow everything else in the budget on the direct tax front, there are quite a few bold and far-reaching changes in the Finance Bill as well.

The overhaul in the tax slabs and rates under the new regime is bold and perhaps went beyond what many people were expecting. The Rs. 12 lakh limit, as well as the rationalisation of all slabs, should help boost private consumption and savings, giving an impetus to the economy. The moves to rationalise TDS through an increase in limits are a step in the right direction. This could have been supplemented with a rationalisation of TDS rates as well. One hopes that this is addressed in the new Bill.

Two other changes are noteworthy. The first is the amendment to section 72A to limit losses from getting a fresh lease of life upon amalgamations. The practical application of this provision could, however, pose certain challenges, especially in cases where there have been multiple amalgamations. The introduction of a block assessment concept to transfer pricing matters will also help mitigate the need for recurring litigation on the same issues.

Finally, the Finance Minister's reiteration of the Tax Department's commitment to 'trust first, scrutinise later' was encouraging. One hopes that legislative changes happening through the Finance Bill, as well as the new Income-tax law, will be accompanied by administrative reforms that will help realise this vision."

"Budget 2025 proposes a significant shift in the settlement scheme under the Customs Act, 1962 with the creation of an Interim Board for Settlement. The Board will consist of three senior officers, all of the rank of Chief Commissioner or above, nominated by the Central Board of Indirect Taxes and Customs. Notably, this Board will operate without judicial members, marking a departure from the previous structure of the Settlement Commission. This change signifies a shift of the settlement process from a judicial to an executive function. Effective from 1st April 2025, the Settlement Commission will cease to function, and all pending applications will be taken over by the Interim Board from the stage at which they stood, ensuring continuity and efficiency in the settlement process."

"The budget proposals are impactful - material tax relief to the middle-class boosting consumption and confidence, “helps, no hurts” outcome for the capital markets and investor community, strong emphasis on tax simplifications and business reforms, all delivered with a sensible slide path for fiscal deficit to 4.4 percent for FY26. The wide-ranging and detailed proposals demonstrate that the Government has its ears to the ground and the resultant roadmap is robust to accelerate the economic momentum.  And kahani abhi baki hai…..with the new simple tax code announced for the coming week."

“Budget 2025 lays a strong foundation for India's growth by putting people at the center of economic progress, fostering innovation, and strengthening the manufacturing ecosystem. The government’s push to make India a global hub for manufacturing signals a transformative shift—boosting employment, encouraging local enterprises, and fostering cutting-edge technology to create high-quality, sustainable products. The aim is to establish India as a powerhouse with a robust manufacturing ecosystem renowned for quality, thereby driving growth and innovation in high-potential industries. For individuals, the budget delivers a significant relief with enhanced tax rebates, ensuring more disposable income, stimulating consumption, and fuelling economic activity. Innovation takes center stage across sectors, with forward-looking policies supporting agricultural resilience, skill development, and digital transformation. From targeted agri-districts to a revitalized India Post serving as a rural economic catalyst, the emphasis is on sustainable, technology-driven progress.  The Finance Minister’s announcement of the new Direct Tax Bill being presented next week, is a fulfilment of last year’s promise for a simplified tax code to enhance certainty, where tax would play a key role in  improving the ease of doing business in India.”

"The Union Budget has been presented in the backdrop of major upheavals in the geo political landscape and also trade and supply chain disruptions likely as a result of the new administration in the US.  Surprisingly, there was no reference to either, but one is sure that this has been at the back of the mind of the Government in presenting the Budget proposals. 

The middle class has been significantly impacted due to inflation and tax rates and limits, which are out of sync with reality.  In this context, increasing the non taxability to 12 lacs (under the new regime) and having the maximum rate kick in at income over 24 lacs (as opposed to 15 lacs currently) will certainly be a boost to consumption.  However, one would have wished that some key areas which impact the middle class significantly had been specifically addressed in terms of targeted invention.  These are Housing (where interest deduction could have been increased from a measly 2 lacs to at least 5 lacs), Education (where the costs have spiralled and some deduction should have been provided, especially since it is a key long term answer to India’s development and growth) and Medical (where again, extremely high costs require a much higher mediclaim deduction).

The Income Tax Bill likely to be presented next week is obviously the Elephant in the room, but given the original mandate of the committee of simplification of language and only certain aspects to be focussed on, one does not know whether critical long pending amendments will be made; if that is not done, that would be very unfortunate, because the Government could then say that with the law just having been “simplified”, one cannot make frequent amendments and that will impact the fate of long standing recommendations for amendments.  The TDS and TCS provisions relaxation is welcome, but it is important to bear in mind that both these are situations of citizens (corporate or otherwise) doing the Government’s job of tax collection and therefore, much more liberalisation is needed on these fronts also.

All in all, at least on the direct tax front, whilst the tax slabs and rates relaxation are very welcome, but, especially on the areas mentioned above, much more needs to be done."

GST

The budget proposals from a GST standpoint are primarily aimed at implementing the recommendations of the 55th GST Council meeting.

Welcome proposals

The proposal to insert specific exclusions for supplies made prior to the clearance of goods by Special Economic Zones (SEZs) and Free Trade and Warehousing Zones (FTWZs), from levy of GST, is a positive step. The removal of provisions related to the time of supply for vouchers is another welcome change. The reduction in the pre-deposit requirement for Section 129 penalty matters is also step towards affording ease of doing business.

Changes in compliance landscape

Starting April 1, 2025, the mandatory Input Service Distributor (ISD) mechanism and the introduction of Input Management System (IMS) provisions are two significant changes that could greatly affect GST compliance for businesses. To adapt to these amendments, the industry must prepare by upgrading IT infrastructure and providing adequate training to employees.

Two amendments, in particular, may pose significant challenges for the industry:

 Amendment to overcome Supreme Court Judgement in Safari Retreats’ Case

This amendment aims to counter the Supreme Court's decision in the Safari Retreat case, which could adversely affect industry players with blocked credits related to buildings, civil structures, etc. This change was anticipated following the proposals made during the 55th GST Council meeting in December 2024. Businesses would need to promptly conduct a detailed, fact-specific examination of their properties to determine if they qualify as 'plant and machinery' under GST law, thereby making them eligible for credit.

Amendment in credit note provisions

The amendment stipulates that tax adjustments via credit notes will require corresponding credit reversals by the recipient in the case of supplies to registered persons. For other cases, the tax incidence on supply must not be passed on. This change necessitates careful monitoring and documentation to ensure compliance.

Customs

The budget's alignment with Govt's Make in India agenda is clearly reflected through 3 broad themes, - (i) Incentivizing manufacturing through customs duty reduction on inputs and capital goods in critical sectors such as those with MSME presence (textile, leather, footwear), export push (Mobile phone manufacturing), and sectors with green push (EV battery); (ii)  Simplification of tariff structure, wherein, the number of customs tariff rates have been reduced from more than a dozen prevailing rates to only 7 (iii) and Increasing certainty through procedural ease, with measures such as defined timelines to close provisional assessment and allowing extended time period for utilization of duty free products for manufacturing purposes.

While the demand for a customs amnesty scheme to settle past disputes has not been met, the industry would welcome the customs and trade related proposals in the budget.

Importantly, from policy direction perspective, the Government has clearly chosen not to use tariff as a protectionist tool despite the increasing geopolitical headwinds to this effect. India thus remains keen to be a more integral part of global supply chains, as highlighted in the budget speech.

"Key Budget Amendment: Simplifying Undisclosed Income Computation under search and seizure proceedings.

The Budget 2025 introduces significant amendments to Section 158BB, streamlining the computation of undisclosed income for block periods.

Two crucial changes:

1. Rationalized computation mechanism: Manner of computing total income of block period amended  to address issue of double taxation of income (already disclosed by the taxpayer)
2. The exclusion of Transfer Pricing adjustments reaffirmed: "The Finance Bill 2025 introduces a significant amendment to the transfer pricing provisions under Section 92CA, aiming to reduce duplication of efforts and promote consistency in transfer pricing assessments. The amendment provides taxpayers with the option to opt for a block assessment of transfer pricing assessments for a period of three years, based on the arm's length price determined for the first year in respect of an international transaction or specified domestic transaction. This change aligns India's transfer pricing regulations with global best practices, reducing the administrative burden on taxpayers and transfer pricing officers. By allowing block period assessments the budget promotes consistency and tax certainty which has always been a vexed issue in India."

"The Budget aims at inclusive growth and simplification of laws for achieving ease of doing business. The tax benefits to the middle class will have a butterfly effect on consumption. The concession extended for clean tech and EV sector will help in development of a self-reliant ecosystem. The budget sets a right step for increasing manufacturing of goods in India in alignment with the Viksit Bharat 2047 mission. With the simplification and expansion of the fast-track merger route under the company law regime, companies will be benefited through this faster and tax efficient restructuring method. The proposal to provide social security benefit to gig workers is also a welcoming labour welfare measure which is a step towards formalising the gig-economy."

"Hon’ble Finance Minister (FM) Ms. Nirmala Sitharaman presented the Union Budget 2025-26, which sets a new benchmark by showcasing India's focus and spirit towards accelerating growth, productivity and sustainability. It distinctly outlines priorities for a Viksit Bharat, with a strong emphasis on enhancing ease of doing business, tax simplification and streamlined tax litigation processes. It also focuses on enhancing foreign direct investments, exports, bolstering agriculture, empowering women, and investing in people and economy. The budget aims to uplift common man with middle class incomer, women, youth, and farmers. Additionally, proposals were introduced to enhance investment and turnover limit for Micro, Small and Medium Enterprises and Centre of Excellence in Artificial Intelligence to make significant improvement to Indian economy.

Next week marks a pivotal as the Government prepares to unveil a New Income Tax Bill potentially reshaping the financial landscape for years to come. The consistent approach of Government to enhance the clarity and certainty, reduction of litigation and simplifying of The Income Tax Act, 1961, making it more accessible to the taxpayer at large. Additionally, there is a strong focus on streamlining processes related to TDS and TCS, assessments and expanding the tax base.

Emphasizing on the good governance with continuing a historical trend, key direct tax proposals include:

Key highlights -

• New Income Tax Bill to be announced in the next week.
• No tax payment upto INR 12 lacs on the total income (other than capital gains / special income) for the Individual taxpayers under the new regime making it total saving of INR 1,10,000 for the taxpayer having income of INR 24 lacs. Such relief measure benefits middle-income groups, resulting in a net INR 1,00,000 crore tax foregone by the Revenue Department.
• The sunset dates for commencement of operations of IFSC units for several tax concessions, or relocation of funds to IFSC, etc. is proposed to be extended to 31st day of March, 2030.
• Rationalization of TDS and TCS provisions including enhancing limit of TCS on liberalized remittance scheme payments from INR 7 lacs to INR 10 lacs.
• Enhancing coverage of MSMEs while enhancing limits of investment and turnover may have an impact under section 43B while making payment to such MSMEs.
• Plugging loophole for amalgamations for indefinite carry forward of losses if there is a series or chain of amalgamations.
• The filing deadline for updated returns has been extended to 4 years, in line with rectifications, to make it more favourable for taxpayers to avail the benefit and pay taxes without undergoing assessment and scrutiny.
• Harmonization of significant economic presence by amending provisions to exclude
• activities of a non-resident which are confined to the purchase of goods for the purpose
• of export shall be out of SEP radar. This was already addressed by tax treaties.
• Extension of sunset clause to Indian start ups upto 2030 is good move towards ‘Make in India’ project.

International Tax Proposals:

• A significant update from the Transfer Pricing (TP) front brings good news not only for taxpayers but also for the tax administration community. This change aims to rationalize TP litigation by considering the arm's length price over a block period of three years, while also expanding the scope of Safe Harbour Rules.
• Presumptive taxation of non-residents providing services to domestic companies engaged in electronics manufacturing facility will boost manufacturing sector in India.

Overall, these tax proposals guided by spirit aim to simplify tax compliance, rationalize withholding of tax provisions, reducing litigations and enhance tax savings amongst middle class group.

Interestingly, the Government / CBDT have also issued FAQs to understand various tax provisions. This marks a departure from past to bring certainty and reduce / avoid tax litigations in the future.

Overall, direct tax proposals bring certainty and stability to tax policies, which is crucial in creating a positive foreign and domestic investment climate in India. The clear trajectory of fiscal consolidation, with the fiscal deficit of 4.4% to GDP from 4.9% and 5.6% in FY 25 and FY 24, respectively, will significantly boost India’s economy and its position in the global market."

Journey towards a ‘Vikisit Bharat’

"This Budget serves as a catalyst, propelling us toward the envisioned destination of ‘Viksit Bharat’. To navigate this developmental journey, Agriculture, MSMEs, Investment, and Exports are identified as the four dynamic pillars, while reforms serve as the vital propulsion needed to achieve the goal of a Developed India.

Echoing the words of a revered poet, the Honourable Finance Minister emphasized that a nation is defined not merely by its land but by its people. Reflecting this sentiment, the Budget outlines a series of developmental initiatives across ten key areas, all aimed at uplifting the impoverished, empowering the youth, supporting farmers, and advancing the status of women in our society.

On the Direct Tax front, the changes to slab rates coupled with an increased rebate threshold, resulting into individuals with an income up to INR 12,75,000 being exempted from taxes is a blockbuster change. These changes will affect most taxpayers and substantially boost the spending capacity and result in an overall economic growth.

For corporates and startups, the extension of the sunset clauses for various tax incentives related to certain International Financial Services Centres (IFSC)/(GIFT City) and tax holidays for startups being incorporated until 2030 will greatly benefit many new players in the Indian market by providing them with tax reliefs. Infrastructure continues to be focus area with noteworthy announcements pertaining to the Nuclear energy sector, Ship building and development of top tourist destination sites.

The planned enhancements to various Tax Deduction at Source (TDS) thresholds, along with the elimination of elevated TDS/Tax Collected at Source (TCS) rates for those who have not filed income tax returns and TCS on sale of goods, are set to simplify the tax compliance process for taxpayers. Similarly, the concept of completing transfer pricing assessments for 3 years at a time is a welcome change.

Corporates contemplating mergers as a strategy to rejuvenate their losses might be challenged by the new amendment, which restricts the extended carry-forward life of such losses. However, the Finance Minister's proposal on speedy approvals of company mergers by widening the eligibility for ‘Fast-Track’ mergers is a welcome change which shall enable corporates to expedite their restructuring.

The biggest change is the announcement by the Finance Minister of a new Direct Tax Bill in a week’s time. This will be half in size and will be simple to understand for both taxpayers and tax administrators leading to tax certainty and reduced litigations. Taxpayers will eagerly await the fine print of this Bill. This is also probably one of the reasons why the changes in Income-tax Law are not very extensive in the current Finance Bill."

Union Budget 2025: Growth Acceleration, and a Stronger Middle Class

"The Union Budget 2025 delivers a pragmatic mix of fiscal discipline and pro-growth measures, attending to the middle-class, businesses, and investors. The Hon’ble Finance Minister has provided targeted tax reliefs, increased infrastructure spending, and strong policy support for MSMEs and startups that reinforces the government's commitment to sustain economic growth.

A highlight announcement is the new Income Tax Bill, which aims to simplify and rationalize India’s tax framework. The government has taken meaningful steps to reduce the tax burden on salaried individuals and pensioners by increasing the basic exemption limit, raising the standard deduction from ₹50,000 to ₹75,000. 

Notably, middle-class taxpayers’ earning up to ₹12 lakh per annum will now benefit from tax exemption, effectively reducing their tax burden to Nil under the new tax regime, ensuring greater disposable income and higher consumption. These measures will ease financial pressure on middle-class households while stimulating economic demand.

For businesses, the extension of tax holidays for startups, MSME-friendly tax policies, and a ₹10,000 crore Fund of Funds reflect the government’s focus on entrepreneurship and job creation.

On the investment and infrastructure front, the ₹1.5 trillion interest-free loan scheme to states, higher capital expenditure for transport and energy, and investment in emerging industries is likely to accelerate India's economic growth and sustainability initiatives.

Overall, Budget 2025 is a strategic, investment-driven blueprint, striking a balance between short-term tax relief and long-term economic development. It empowers the middle class with higher savings, boosts business confidence, and lays a strong foundation for India's growth trajectory. With a renewed focus on digital transformation, sustainability, and financial inclusion, the budget underscores India’s ambition to become a global economic powerhouse in the years to come."

"A very balanced budget with focus on all sectors.On the indirect tax the introduction of time limits for provisional Assessments and the new provisions to facilitate voluntary payment of duty with interest are industry friendly. Amendments to GST are based on devious at the 55th Council Meetjng.it is unfortunate that the decision in Safari Retreats has been nullified through amendments and that too with retrospective effect

On the Direct Tax 12 lakh of income being exempt is huge and a clear date has been set for the New Bill. Amendments in SEP and TP are welcome"

"The much-awaited Budget 2025 is out now. Directionally it focusses on inclusive development, enhancing consumer spending and measures to enhance employment opportunities. It announces transformative policy reforms in 6 Key sectors, viz Power, Mining, Urban Development (emphasis on water sector) Financial sector, Easing Regulatory compliances and reduction of taxes leaving more monies in hand of individual. An interesting announcement to make India post into a large Public Logistics organization will improve lives of thousands of Postmen. Two important announcements in Agri Sector (cover 100 districts to increase productivity), Mission to improve pulses productions will touch lives of serval farmers. On Manufacturing, making India Global hub for toys manufacturing and new focus on footwear & Leather sector with employment generation potential of 22 lacs Jobs, investments of Rs 4 lac crores and exports of Rs 1 lac plus crores. On the education front there is additional funds allocation for IITs and medical education. Announcement of outlay of Rs 500 cr for AI education reveal government focus on enhancing skill sets in critical sectors. Further the UDAAN regional scheme with 120 new destinations to carry 4 cr additional passengers will help generate employment in newer areas. Also, medical tourism (under PPP mode) and employment in tourism (50 new sites) will open new opportunities for the employable youth.

There will be no taxes payable by individual earnings up to Rs 12 lacs as per a path breaking announcement. Hopefully taxes saved will enhance consumer spending with higher GST collections for government. Again, rationalization of TDS provisions (increase in threshold limits) will reduce some compliance burdens. Announcement to include inland vessels under the Tonnage Tax Scheme will help domestic shipping companies. Again, the facility to amend tax returns currently available for 2 years is being extended to 4 years by amending section 139 (8A) of the Act. This of course entails payments of additional taxes depending upon the time period within which the original return is amended.

The tax fraternity and taxpayers will of course wait for the new tax bill proposed to be released next week of what additional compliance burdens get reduced and / or rationalized resulting in easing compliance burden."

“The Hon. Finance Minister has in the Finance Bill 2025 proposed a reduction in the income-tax burden for the middle class and a rationalisation of the threshold limits for Tax Deduction at Source (TDS), which was long overdue. Credit must be given for not proposing too many amendments. In fact I could not see a single amendment that overrules any court decision. The clear direction to incentivise manufacturing and ‘make in India’ is evident from the presumptive tax scheme proposed for a non-resident service provider to a resident electronics manufacturer. One thing that could have been done was to extend the time limit for new manufacturing companies to avail the 15 percent tax rate under section 115BAA which expired on 31 March 2024. Clarification on Significant Economic Presence is welcome but the concept itself ought to have been comprehensively relooked at, in my view. Proposed amendments to Transfer Pricing are positive and in the right direction. Overall, this is a good budget from a Direct Tax point of view.”

"The finance minister Budget was preceded by Economic Survey and there were expectations on this budget on the following areas:

• Ease of doing business
• Attracting Companies to invest more into Manufacturing and Investment
• Rationalising Personal Taxation.
• Promised reforms on Direct Tax
• Facilitating the ease of Corporate Restructuring
• Introduction of revised safe harbor norms

The Honourable Finance Minister in her budget proposals has answered some and has promised to answer some.

Certainly, the budget proposal to rationalise the personal taxation up to Rs 12 lakhs is a welcome measure. The FM has chosen to give much awaited through rebate instead of direct exemption, but certainly a welcome measure as this would leave significant surplus with the middle-class income earners.

Similarly, the continues measure on rationalising TDS/TCS is a welcome measure. Also, the proposed amendments on carry forward of business loss in case of amalgamation for a period of 8 years from the year of incurring losses provides clarity. Also, the promised setting up of mechanism to fast track amalgamations will also help the Corporates who are the path of restructuring.

The proposal to do TP audit for 3 years together is also a welcome measure.  Further setting up pf special regime for fund managers based in Gift City on the amount of capital from Indian residents also a good measure.

The commitment to release new Direct Tax Code next week for public comments and setting up of consultative committee on Ease of Doing Business (EODB) in India is also welcome step. While these steps are positive aspects but the absence of any announcement on disposal of appeals by CIT(A) and ease of tax administration will have an impact on promised tax certainty.

Overall the reduction in tax rates for middle classes and the assurance on making EODB an easier one are the cheer points. The Government has taken a big bet that the spending by middle class and making EODB easier will make Private Companies to invest more and continuous focus on other sectors will lead to demand generation and lead to growth of economy on a sustainable basis."

This article has been co-authored by Jimmy Bhatt, Khaitan & Co.

3 main pillars of Budget 2025: Capex, Consumption and Clarity

Capex (Investment)

• Sovereign Wealth Funds: 5 year extension of tax exemption on income of Sovereign wealth funds and Pension funds from investments upto 31 March 2030 should significantly spur investment interest into India. It is heartening to see that the extension is for a significantly more period than what one is generally used to seeing in the tax law. The clarity on coverage of deemed short-term capital gains on unlisted debt instruments for such exemption, is also a welcome move.

Having said that, an icing on the cake would have been the anticipated extension/renewal of the concessional 15% corporate tax rate regime for manufacturing companies.

• Gift City Units and start-ups: Similarly, a 5-year extension of tax holiday of Gifty City units as well as registered start-ups should significantly spur domestic and foreign investments into India. Further proposal to also exempt relocation of retain schemes and exchange traded funds into Gift City, should increase Gift City’s attractiveness.
• Electronics Manufacturing sector: Introduction of presumptive income for non-resident service providers to electronics manufacturing sector should provide a timely fillip to establishing a robust electronic manufacturing base in India. The further promise of a safe harbour regime relating to non-resident’s income from storage of components for electronic manufacturers would be interesting to see.

Consumption

Reduction in slab rates under the new regime – effectively exempting taxable income upto 12 lakhs and even otherwise reducing the personal income-tax burden across all classes, should give a boost to the currently struggling domestic consumption situation.

Certainty / Simplification

AIF income: Clarity on capital gains characterisation for AIF’s income from sale of securities should allay risks of mischaracterisation.

Transfer pricing: Allowing applicability of transfer pricing  based arm’s length price of a year to two subsequent years, should provide greater certainty and flexibility to MNCs on their cross-border transactions.

Updated return: Extension of time limit for filing updated return too, would put more onus on taxpayers to ensure self-compliance – being in line with the Finance Minister’s motto of “trust first, scrutinize later”.

TDS/TCS: TCS on sale of goods was indeed an onerous obligation, especially in the absence of any specific relief for non-residents. Its deletion should ease avoidable compliance burden. Rationalisation of thresholds for TDS across the board too, should put more liquidity in the hands of small businesses.

Impact of the budget on FS sector

"From a financial sector perspective, clearly the focus of this year’s budget is on the GIFT city and investment management along with some initiatives to ease business and facilitate transactions in equity asset class.

Last several years have witnessed new enabling regulations introduced by the GIFT city regulator (IFSCA) immediately followed by tax exemptions introduced by the ministry of finance to ensure parity with other international financial service centers.

While the tax holiday for business profits for units in IFSC is open ended, certain types of income and transactions have an exemption expiring this year. These tax exemptions are extended till March 31, 2030 on income such as capital gains tax on sell and withholding tax on lease rentals of aircraft and ships, dividend, interest for foreign shareholder etc.

Safe harbour regime for offshore funds managed from India has been rationalized further to ensure that more fund managers avail of the regime without exposing offshore funds to any additional tax in India. 

Investors in AIF I and II are taxed directly on income earned by the Fund as capital gains, dividend or interest. The CBDT has earlier issued clarification on treatment of income sale of securities as capital gains. This is now proposed to be codified to treat securities held by CAT I & II AIFs classified as a capital asset. This means that all gains emanating from the sale of securities will be treated as “Capital gains” & not “Business Income”. This brings AIFs at par with FPIs.

Provisions relating to Tax Collection at Source (TCS) are changed to exclude shares and hence will not attract TCS henceforth.

"India’s Union Budget 2025, demonstrates the government’s commitment to foster economic growth by fiscal and tax policy reforms. Giving the slowing economy, there was a need to spur urban consumption which is proposed to be achieved by imposing 'Nil tax” on individuals earning up to ₹12 lakh annually. To aid enhanced compliance, the government plans to replace the existing six-decade old income tax law with a simpler version. This new law aims to reduce complexity and volume, operating on the principle of "trust first, scrutinise later”. A sincere attempt also is being made to do away with and/or simplify redundant non fiscal compliances.  TDS provisions simplifications is on expected lines and will again significantly ease compliance.  For the first time in the history of Indian tax assessments, block assessment for three years hs been introduced at the option of taxpayer for transfer pricing related issues.

In addition to tax reforms, the budget includes measures to support the agriculture sector, travel and tourism industry and the gig economy. The government will launch a nationwide program to promote high-yielding crops and increase subsidized credit limits for farmers. Gig workers will be formally registered and provided with identity cards and access to welfare initiatives. Some other significant steps include promotion of manufacturing of sustainable energy products as also development of India as a toy making hub of the world. Focus on education - broadband connectivity for secondary schools in rural areas and recognition of AI as a game changer and skill development in this area should help in employability of our youth.  The budget focuses on developing the top 50 tourist sites in the country in partnership with states, aiming to generate employment and showcase India’s cultural heritage."

"The budget sets a positive tone towards becoming a developed nation with the theme of 'Sabka Vikas' by focusing on four key areas: Agriculture, MSMEs, Investment, and Exports.

It has provided long due relief to the middle class, maintaining stable policy, and streamlining regulations. Among key highlights include tax relief under the new regime with no tax up to INR 12 lakhs for certain incomes which will boost disposable income and potentially stimulate consumption levels. Further, rationalization of TDS/TCS compliances is proposed which will ease TDS/TCS compliances through revised threshold limits followed by the simplification of custom tariff system lowering the cost of imports and also boosting the competitiveness of domestic manufacturing.

As expected, several incentives have been given again to promote investment and employment in the International Financial Services Centre (IFSC) that includes extending the sunset dates for several tax concessions pertaining to IFSC and providing exemption on life insurance policies from IFSC insurance offices. Additionally, the budget proposes a new Fund of Funds for startups, with expanded scope and a fresh contribution of 10,000 crore. In order to strengthen 'Make in India's initiative national manufacturing mission is proposed to be set up. Also for shipping industry, the budget proposes the facilitation of Shipbuilding Clusters to increase the range, categories, and capacity of ships.

Ease of doing business is encouraged through measures like decriminalization of various laws and that is intended to reduce unnecessary litigation and foster a more conducive environment for businesses to function.

Additionally, it has not introduced any new burdensome change such as increased capital gains tax thereby reassuring investors.

It has also done it's fair part in boosting specific sectors through support for MSMEs, agricultural activity, and the insurance industry by increasing FDI limit therein.

However, the long-term success of these measures will depend on effective implementation and their impact on actual consumption patterns and investment activity. Last but not the least, one needs to carefully analyse what the new Income Tax Bill will bring to the table and how that will impact these changes."

"Themed on sustaining economic growth and marching towards Viksit Bharat 2047, the Budget 2024 tax proposals have acknowledged the measures emphasized in the Economic Survey 2024-25 and seem to live upto the expectations of the Indian taxpayer community. The sweeping personal tax relation and announcement of a simplified income-tax code is a welcome move. The Govt. has started walk the talk of tax-friendly environment and ease of doing business, a sustainable reform measure to attract capital investment, promote job creation, promoting manufacturing hub, improve cross-border trade, enhanced role in global supply chain, strengthen competitiveness to reach a sustained annual growth and remain resilient amidst the global headwinds and trade protectionism.

"The Indian Finance Minister presented the Budget 2025 against a backdrop of key economic challenges, including rising unemployment, slowing consumption growth, and the potential impact of new US tariffs.

Finance Minister listed four engines of development in the Union Budget 2025-25. These are Agriculture, MSMEs, investments, and exports. She added that the Budget aims to initiate transformative reforms across 6 domains: Taxation, power sector, urban development, mining, financial sector, and regulatory reforms.

The budget very clearly focuses on giving impetus to the Make in India brand. Boost to MSME, making India global hub for toys, focus on environment friendly tech, encouraging internal ecosystem for production of solar panels, launch of national manufacturing mission for MSME etc. all aimed towards making India a manufacturing destination.

Further, with a view to bringing more enterprises under the ambit of the MSME sector, Finance Minister announced new classification criteria for MSMEs. The investment limit for MSME classification will be made 2.5 times while turnover limits for MSME classification will be doubled.  

Another noteworthy announcement is formation of a High-Level Committee for Regulatory Reforms to review of all non-financial sector regulations, certifications, licenses, and permissions. This will foster Ease of Doing Business in India and will not only attract FDI but also encourage local private investment.  Also, FDI limit for insurance sector to be raised from 75% to 100%.

The Minister also announced that the New Tax Bill will be introduced in the coming week, to take forward the “trust first, scrutinise later” concept and highlighting its simplicity and aim to provide greater tax certainty for taxpayers. Notably, the New Bill will be significantly shorter, reducing its size by half. This is a welcome step that could simplify tax compliance and potentially reduce litigation.

Personal taxation:

As expected, the budget included significant announcements on personal taxation. A notable highlight was the exemption from income tax for individuals earning up to INR 12 lakh, a much-needed measure to boost consumption. Additionally, the tax burden on second self-occupied properties was reduced, further enhancing savings for individual taxpayers. Also, the increase in limits of TCS on LRS from 7 Lakh to 10 lakhs and removal of TCS on LRS made out of loan obtained from financial institution for pursuing education would also provide some relief.

Thresholds for TDS are also proposal to be hiked in many cases thereby putting improving cash flow in hands of tax payer.

Corporate taxation:

• Transfer Pricing: Introduction of the block assessment concept for transfer pricing cases. The finance bill proposes to carry out block transfer pricing assessments and the arm length price determined for year 1 shall apply to subsequent two years in respect of the same transaction. This is at the option of the taxpayer
• TDS Rationalization: Increased limits for TDS deductions and .
• Removal of TCS: Removal of TCS on the sale of goods.
• Extended Filing Window: Extended time limit for filing updated tax returns.
• Loss Carry forward: Accumulated loss of predecessor entity can now be carried forward for maximum period of 8 assessment years from the year such loss was first computed. This would prevent evergreening of losses of predecessor entity

The budget also extended the presumptive taxation scheme to non-resident service providers in the electronics manufacturing sector, with a deemed profit of 25%, resulting in an effective tax rate below 10%.

The International Financial Services Centre (IFSC) received several incentives, including an extended sunset date, exemptions on life insurance premiums, and tax exemptions on capital gains and dividends for ship leasing units. The definition of "dividend" for treasury centers in the IFSC was also rationalized, and the relocation regime for funds was expanded to include retail schemes and ETFs.

While the budget introduced several positive changes, some key areas were not addressed. These include:

• Guidance on Pillar 2: No Guidance on the applicability of the OECD's Pillar 2 global minimum tax in India.
• Manufacturing Incentives: Extending the timeline for setting up new manufacturing facilities to avail of lower tax rates.
• Litigation Reduction: Specific schemes or options for faster dispute resolution for reducing pendency of tax litigation in India.
• Foreign Company Ease of Doing Business: Measures to simplify compliance for foreign companies operating in India.

The budget announcements will be closely analyzed by businesses and investors in the coming weeks. However, all eyes would now be on New Tax Bill and whether it would achieve its stated purpose."

BUDGET 2025: Reform, Perform and Transform

Trust-Based Taxation, Faster Business Growth, and Big Relief for the Middle Class

"The Union Budget 2025 introduces significant reforms aimed at fostering trust, simplifying compliance, and boosting economic growth aligned with guiding principle of Sabka Saath, Sabka Vikas, Sabka Vishwas, Sabka Prayas, this Budget embodies the ‘reform, perform and transform’ model ensuring inclusive development and economic empowerment.

1. Trust First, Scrutiny Later –

The government has reaffirmed its commitment to a taxpayer-friendly approach by prioritizing trust in honest taxpayers while ensuring scrutiny is conducted only when necessary. This will reduce unnecessary litigation and improve the ease of doing business.

2. Fast-Track for Mergers & Demergers –

A game-changing reform has been introduced to expedite mergers and demergers, enabling businesses to restructure more efficiently. This will reduce legal and administrative costs, promote faster completion of transactions, and encourage innovation and expansion.

3. Direct Tax Proposals –

Budget 2025 brings key direct tax measures that simplify tax laws, enhance transparency, and promote voluntary compliance.

4. Big Relief for the Middle Class –

In a much-awaited move, the government has provided significant relief to middle-class taxpayers. This includes higher exemption limits, increased deductions, and measures to reduce the overall tax burden, ensuring more disposable income and improved financial well-being.

5. New Income Tax Act Bill to be Presented –

The government is set to introduce a new Income Tax Act Bill in Parliament next week, marking a historic reform in the country’s taxation system. This bill aims to replace the outdated Income Tax Act, streamlining tax provisions, reducing complexity, and enhancing ease of compliance. The new framework will focus on simplification, predictability, and fairness, ensuring a more transparent and efficient tax system that aligns with modern economic needs.

6. Push for New Tax Regime, But at the Cost of Savings? –

The increase in tax slab limits under the new tax regime clearly signals the government’s intent to encourage taxpayers to shift to this structure. While it offers lower tax rates and simplifies compliance, it removes traditional deductions available under the old regime, such as investments in PPF, ELSS, NPS, and insurance policies. This shift, while beneficial for those seeking higher disposable income, may discourage long-term savings and financial discipline, which were previously incentivized through tax-saving schemes.

These initiatives reflect the government’s vison of tax regime that is fair, efficient, and growth-oriented driving reformation, performance and transformation to build a prosperous and self-reliant India"

"Hon’ble Finance Minister presented the Union Budget 2025 in the backdrop of revamping the existing Income Tax Act in line with what was stated in the earlier Budget of making the provisions simpler, concise, lucid, easy to read and understand. However the new Income Tax Bill is scheduled to be introduced in a week’s time. That apart, some direct tax proposals have been made in the Finance Bill 2025. 

Popular and wide expectation of the middle-class tax payer has been met with a proposal to make an individual’s income to be tax free up to INR 12 lakhs after availing rebate under sec. 87A under the new regime. Tax slabs and rates have been modified accordingly.

A salaried taxpayer would enjoy tax free income up to INR 12,75,000 on considering the standard deduction benefit also. Thereby the entire thrust of the govt to promote the new regime is very evident.

The time limit for filing an updated return under sec. 139(8A) by any person has been extended from 24 months to 48 months from the end of the relavant assessment year. FAQ 27(Q.7) clarifies that a taxpayer cannot file more than one updated return, whereas the said tax payer is eligible to file the same even after filing a revised return.  

In respect of tax benefits to Start-ups in form of sec. 80IAC, the condition to incorporate the Start-up entity before 1st day of April 2025 has been extended up to 1st April 2030. In other words, a 5-year extension has been provided to start up industry to avail the tax benefit. However, the expectation of the industry to increase the turnover from 100 crores to a higher limit has not been considered.

Removal of sec 206AB for higher TDS/TCS in case of non-filers of return of income is a welcome proposition for deductors/collectors of tax, as it would be impractical for them to ascertain the tax filing status of the deductees. However, higher rates of TDS/TCS in the event of Invalid PAN or no-PAN cases shall continue to apply.

In respect of Transfer pricing provisions, it is proposed to carry out TP assessment in a block of 3 years. An assessee shall be required to exercise an option under proposed new sub sec. (3B) of sec. 92CA in the form and manner prescribed before the TPO in a situation where similar transactions and circumstances exist in respect of subsequent 2 years so as to apply the same ALP determination made in the first year.  We need to analyse how this provision is going to operate in the light of an announcement that safe harbour rules are being revamped.

In respect of LRS payments the threshold of TCS has been increased from INR7 lakhs to INR10 lakhs. It is a welcome proposal of NIL rate in respect of amounts remitted out of a loan obtained from any financial institution as defined in clause(b) of sub section 3 of 80E for the purpose of pursuing any education.

The direct tax proposals moved in Finance Bill 2025 pending new Income Tax Bill are by and large in the right direction addressing the concerns and hardship of the taxpayers. It is time for us to eagerly look forward for the new Income Tax Bill."

Budget 2025: An Imago est in Adhuc

This article has been co-authored by Harsh Shukla and Siddharth Agrawal, BMR Legal.

"The Budget 2025 marks a significant step towards the Government’s commitment to increasing ease of doing business, removing regulatory bottlenecks and providing a cohesive investment climate.  

The Union Budget contains pathbreaking tax-related announcements, including significant personal tax relief to middle-class and salaried employees. This tax relief is expected to increase disposable income, boost consumer spending and stimulate economic activity. With a continued focus on reducing tax litigation and promoting tax certainty. To this effect, Customs tariff structure is proposed to be simplified, and timelines have been fixed to finalise provisional assessments. The Budget has also proposed a voluntary disclosure scheme under Customs giving a chance to the taxpayer to rectify any incorrect import.

To augur certainty in investment climate and compliment the spirit of “First Develop India”, the Finance Minister proposes to revamp the Bilateral Investment Treaty (BIT) to make it investor friendly and palatable to major trade partners. The Incentives provided to non-residents for boosting electronic manufacturing in India will encourage global players to set shop in India.  As with past few budgets thrust has been put on incentivising IFSC regime. The cut-off to avail the tax exemptions for ship-leasing units, insurance and treasury centres has been extended to 31.03.2030. In similar breath the tax exemptions for Start-ups has also been extended to the same date.

Aligning with best global TP practices, the Budget proposes to introduce block period concept for determination of Arm’s length price.  The safe harbour rules are also proposed to be expanded for providing tax certainty for non-residents. Increase of thresholds with a view to simplify TDS/TCS provisions is also helpful. Further, in the most significant announcement, the Finance Minister laid the ground for the introduction of the New Income Tax Bill, which will carry forward the same spirit of “Nyaya”, a promise to be simple to understand and implement."

"Union Budget 2025, presented today by the Hon’ble FM, is largely in line with the general expectations of various stakeholder during the run up to Budget.  It is in line with the suggestions in the Economic Survey, broadly focusing on reducing the burden of regulations, focusing on ease of doing business and relief to middle class on personal income-tax.  While we need to wait for a week to see how new Income-tax Bill will continue the spirit of the Budget proposals. Changes proposed to TDS / TCS is another area is a much awaited relief and is likely to reduce the compliance burden. Proposal to apply block assessment concept to transfer pricing matters is likely to reduce the time and effort of taxpayers as well as tax administration.  Further, expansion safe harbor rules also like to reduce the compliance burden.  Proposal relating to carry forward of losses in case of mergers will have a restricted effect on the ability to set off those losses."

"The Finance-Minister ("FM") today presented the Union Budget 2025-26 with the theme "Sabka Vikas" stimulating balanced growth of all regions. The budget highlighted that Agriculture, MSME, Investment, and Exports are the engines in the journey to Viksit Bharat. The FM outlined the broad principles of Viksit Bharat to encompass the following:

a)    Zero-poverty
b)    Good quality school education
c)    Access to high-quality, affordable, and comprehensive healthcare
d)    Skilled labour with meaningful employment
e)    Seventy per cent women in economic activities and
f)    Farmers making our country the 'food basket of the world

Tax proposals in the Union Budget FY 2025-26 were guided by the following objectives:

a)    Personal Income tax reforms with a focus on middle class
b)    TDS/TCS rationalization
c)    Encouraging voluntary compliance along with reducing compliance burden
d)    Ease of doing business and incentivizing employment and investment

The following key direct tax announcements were made by the FM during her speech:

1.    The new Income Tax Bill will be introduced next week which will aim to be simple, clear for taxpayers

2.    Key reliefs announced for the middle class:

• NIL tax slab for personal taxes increased to INR 12 lakhs (new regime). This limit will be 12.75 lakh Rs for salaried class.
• Slabs and rates being changed across levels under new regime
• Removal of TCS on remittance for educational purposes, where remittance is out of loan taken from financial institution
• Threshold limit for TDS on interest for senior citizens is being doubled from the present Rs 50,000 to Rs 1 lakh.
• Threshold limit of Rs 2.40 lakh for TDS on rent is being increased to Rs 6 lakh.
• Annual Value of self-occupied property for two properties can be NIL without any conditions

3.    Extension of time limit for filing updated ITR from existing 2 yrs to 4 yrs

4.    Amendments to carry forward of losses in case of amalgamations announced - Accumulated loss of predecessor entity can now be carried forward for maximum period of 8 assessment years from the year such loss was first computed. Amendment to apply to any amalgamation or business re-organisation which is effected on or after April 1, 2025.

5.    Proposals in International Taxation (including TP):

• Introduces a scheme for determining the arm's length price of international transaction for a block period of three years.
• Expansion of safe harbor rules scope to non-residents who store components for supply to specified electronics manufacturing units.
• Presumptive taxation regime is envisaged for non-residents who provide services to a resident company that is establishing or operating an electronics manufacturing facility.

6.    Both TDS and TCS applied on any transaction on sale of goods - proposes to omit TCS

7.    Proposes to reduce compliance burden on small charitable trust and institutions

8.    Extension for start-ups - extend the incorporation by 5 yrs - incorporated before 2030

9.    Specific benefits to IFSC ship units

10.    Extends the benefits of current tonnage tax scheme to certain inland ships

11.    Category I and II AIFs undertaking investments in infrastructure and other such sectors to be provided certainty w.r.t. taxes on the gains from securities.

12.    Key updates for MSME's:

• Revision in classification criteria for MSMEs - The investment and turnover limits for classification of all MSMEs to be enhanced to 2.5 and 2 times respectively.
• Credit Cards for Micro Enterprises - Customized Credit Cards with ? 5 lakh limit for micro enterprises registered on Udyam portal
• Fund of Funds for Startups - A new Fund of Funds, with expanded scope and a fresh contribution of ? 10,000 crore to be set up
• Scheme for First-time Entrepreneurs - A new scheme for 5 lakh women, Scheduled Castes and Scheduled Tribes first-time entrepreneurs to provide term-loans upto ? 2 crore in the next 5 years announced.
• Measures for the Toy Sector - A scheme to create high-quality, unique, innovative, and sustainable toys, making India a global hub for toys
• Support for Food Processing - A National Institute of Food Technology, Entrepreneurship and Management to be set up in Bihar.
• Manufacturing Mission - Furthering "Make in India" - A National Manufacturing Mission covering small, medium and large industries for furthering "Make in India" announced.

Other key Updates:

1.    FY-25 estimated to end with fiscal deficit of 4.8%, target to bring it down to 4.4% in fy-26

2.    Capex expenditure of ?11.21 lakh crore (3.1% of gdp) earmarked in fy2025-26.

3.    Centre of excellence in artificial intelligence for education, with a total outlay of ? 500 crore

4.    Gig workers to get identity cards, registration on e-shram portal &  healthcare under pm jan arogya yojana

5.    ?20,000 crore allocated for private sector driven research development and innovation initiatives

6.    FDI limit enhanced for insurance from 74 to 100 per cent"

"The Union Budget 2025, presented by the Hon'ble Finance Minister, introduces several significant amendments to direct taxes. These changes are designed to offer relief to various taxpayer segments and foster economic growth. Below is a summary of the key amendments:

1. Income Tax Relief for the Middle Class

Income tax has been effectively eliminated for individuals earning up to Rs. 12 lakhs. Additionally, several other tax relief measures have been introduced for the middle class.

2. Introduction of Block Transfer Pricing Assessment

A new block transfer pricing assessment system has been introduced for taxpayers with related party transactions whether domestic or international. This initiative aims to provide tax certainty and reduce litigation for multinational enterprises struggling with year in year TP audits and litigation. Taxpayers can opt to roll forward their transfer pricing assessments for up to two years. The detailed provisions will be notified through rules at a later date.

3. Incentives for International Financial Services Centres (IFSC)

The sunset date for availing tax incentives in IFSCs has been extended to March 31, 2030. In addition, benefits previously available only for aircraft leasing from IFSCs will now apply to ship leasing as well. The budget also addresses various issues concerning treasury centres operating from IFSCs, alongside other amendments aimed at making IFSCs more attractive.

4. Safe Harbour for Non-Resident Companies in Electronics Manufacturing

A safe harbour has been introduced for computing income of non-resident companies engaged in electronics manufacturing services in India. Under this provision, 25% of the amount received for such services will be deemed taxable income. Since this would address the issue of what income could be taxed in India, it avoids allegations of a permanent establishment in India.

5. Non-Resident Taxpayers and Significant Economic Presence

The budget clarifies that procurement activities by non-resident taxpayers in India for exports will not be considered a "significant economic presence" in India. This provides much-needed clarity on tax obligations for non-resident taxpayers.

6. Parity in Long-Term Capital Gains Tax

To create a level playing field, the budget proposes equalizing the tax treatment of long-term capital gains for non-resident Foreign Institutional Investors (FIIs). This change is expected to attract more foreign investment into India.

7. Rationalization of TDS Rates and Thresholds

The budget proposes rationalizing tax deduction at source (TDS) rates and thresholds. The higher TDS rate for individuals not filing their return of income is set to be eliminated, providing compliance relief for taxpayers.

8. Policy on Losses for Amalgamated Entities

The budget introduces a policy change regarding the treatment of business losses for companies undergoing amalgamation or reorganization. Going forward, business losses of predecessor entities can be carried forward only for eight years from the year in which the loss was first computed. This plugs the benefit of ever greening of losses on account of amalgamations or other business reorganisations that was available earlier. 

9. Extension of Time Limits for Filing Updated Returns

In line with the government’s “trust first, scrutinize later” approach, the time limit for taxpayers to file updated returns has been extended from two years to four years. This provides taxpayers with additional time to correct any mistakes in their returns.

Conclusion:

The amendments in the Finance Bill 2025 demonstrate the government’s commitment to providing tax relief, promoting investment, and enhancing the ease of doing business in India. With these key measures, the budget aims to create a more favorable tax environment for both domestic and international taxpayers.

With reforms like the new tax bill, Vivad she Vishwas, expanded safe harbour scope, block transfer pricing assessments, the message seems to be very clear: trust is the new currency for tax certainty. All eyes are now on the upcoming week, as the much-anticipated new tax bill is set to become a reality."

"The present budget aims to address the concerns of the middle-class individuals by radically amending tax rates and rebate provisions so as to effectively make income upto 12 lakhs tax free. While this will not cover income like capital gains that are taxable at special rates, the rate rationalisation is laudable and will certainly benefit large category of taxpayers by benefitting them with a higher disposable income and a positive impact on consumer spending"

"Budget 2025 is centrally focused on driving demand in the economy, rationalising and simplifying tax legislation and more importantly, continuing the momentum for infrastructure investments. Insofar as foreign taxpayers, extension of tax exemptions for sovereign wealth funds will encourage these investors to commit long term development capital with fair degree of tax certainty. The government will unveil a new income tax legislation next week and it’s promised to be a crisper and a clearer legislation intended to significantly improve the ease of doing business. Rationalisation of customs duty structure and reduction in number of tariffs to single digit is a hugely progressive tax policy and will go even further in alleviating cost of compliance. Regulatory cholesterol is set to be eased out too with proposed review of all non-financial regulations. Overall, it’s a comprehensive overhaul budget and will set the course for high economic growth trajectory for years to come."

“The 2025 Budget maintained its emphasis on the “Make in India, Make for the World” initiative, with various schemes including enhancing infrastructure, tariff rationalization, etc. for industries specifically, toys, leather, food processing, emerging and sustainable sectors like electric vehicles and electronics, etc.  On the indirect tax front, most proposed GST amendments are aligned to those approved by the GST Council with no big surprises. The key proposals include a retrospective change to tighten legal provisions by explicitly changing “plant or machinery” to “plant and machinery,” which aligns with the government’s intent to not allow input tax credit on construction of immovable property.  However, given that retrospective amendments in some cases have been deemed unconstitutional, it will be interesting to see how this fares. The proposal to not treat vouchers as goods or services and hence not liable to GST is a welcome relief for industry.  Proposed enabling provisions in the law for Invoice Management System suggests this optional compliance becoming mandatory soon.  Business should focus on preparing their systems and processes in advance, ensuring thorough testing to prevent potential disruptions during implementation. Proposal requiring a pre-deposit before the Tribunal, even in cases involving only penalties, could impose additional financial burden on businesses. On the customs duty front, proposal for setting clear timelines for finalizing provisional assessments and allowing voluntary rectification of mistakes without penalties are significant steps to enhance tax certainty and boost ease of doing business."

"The budget appears largely populist, with a clear focus on increasing disposable income to a little extent for the middle class to stimulate consumption. However, the reduction in government spending on infrastructure is disappointing, as it would adversely affect the MSME sector and job creation. With FDI decreasing years after year and private sector keener to invest outside India,  due to no serious structural reforms and only assertions and promises which are no longer believed, we may not be able to see any great growth in India. The numbers flouted are not transparently arrived at. Most feel that the GDP as well as the inflation numbers are not realistic considering the state of affairs on the ground. 

The introduction of the revised Income Tax Act is a welcome step. Yet, its effectiveness will depend on the bureaucracy’s commitment to genuine simplification. We know what the Good & Simple Tax, has become. The drafting should include the specialist and not just a tick box approach of exposing to public- which is generally a sham. The result  in GST framework, which has become unnecessarily complex due to missed reform opportunities and greed for more revenue has let all pristine principles promised and otherwise to be abandoned.

While customs rationalization measures aim to reduce tariff rates, the budget lacks clarity on how India plans to counter potential US tariff threats, with no specific action points highlighted in the budget speech. That said, the formation of an inter-departmental coordination committee for export growth is a positive move. Unless we see a massive increase in exports which may not happen with band aid sort of approach, India would find its future not as brength as portrayed.

On the GST front, the budget offers no major surprises. The continued trend of retrospective amendments, particularly in light of Supreme Court rulings on Input Tax Credit (ITC), contradicts the government’s earlier commitments to tax certainty. This approach leads to tax cascading, undermining the GST’s core objective of simplification.

The delayed establishment of tax tribunals by 7 YEARS is another critical concern, leading to denial of timely justice. It is unfair to burden taxpayers with tax, interest, and penalties arising from delays beyond their control.

Additionally, the industry awaits decisive government action on GST rate rationalization and the inclusion of petrol, diesel, and real estate under its ambit. This on of the areas where the credibility of the Govt. has been repeatedly lost to not keeping its promise at least 5 times. The prolonged delay in addressing these issues undermines the goals of reduction in mean rate, uniformity and ease of compliance, making it challenging for businesses to navigate the taxation landscape effectively. One of the main reasons for FDI not being attracted."

“It’s a generous and progressive budget. It has supplemented the vision of Hon’ble Prime Minister of Viksit Bharat. The Union Budget has responded to the issue of slow growth rate by putting more disposal income in the hands of tax payers, ie. more money in the consumption, which will boost the production cycle.

In terms of the tax proposals, the increase in slab rates and exemption to income tax till Rs. 1.2 million, has steal the show. In addition to the personal taxes, the ethos being taking corrective and rationalisation path. The clarification regarding characterisation of ULIP and AIF gains as capital gains, provides much needed clarity and will reduce litigation. At the same time, the increase in threshold of TDS provisions adjusts the inflation impact over the years over the said thresholds.

The removal of basic customs duties on key materials for battery manufacturing is a strategic move to boost domestic EV production, foster a sustainable ecosystem, and drive India's transition to a greener economy.

In terms of foreign investors, the scrapping of TCS provision on sale of securities will mitigate the levy of TCS on purchase of securities from Indian residents and accordingly will reduce their transaction cost. The introduction of rationalisation of transfer pricing provisions for carrying out multi-year arm’s length price, will pave the way to reduce transfer pricing related tax disputes.

Overall, this year budgetary tax proposals are generous and aim towards rationalisation of tax administration. Now all eyes on the new tax code with the expectation to address the legacy issues and further improve the tax administrative structur”

“The 2025 Budget takes a distinctly populist approach, with the government foregoing ₹1 lakh crore in tax revenue due to revisions in the new tax regime. The decision to exempt taxpayers earning up to ₹12 lakh from taxation is a significant step, expected to stimulate consumption and drive economic activity.

A key highlight is the Finance Minister’s announcement of a new Income Tax Bill, signaling a long-overdue modernization of India’s tax framework. If executed well, this could bring much-needed simplification, global alignment, and improved compliance mechanisms for both individuals and businesses. Extending the time limit for updated returns to four years provides a significant compliance relief, while rationalization of TDS and TCS rates, along with tax certainty for Category I and II AIFs.

The introduction of fast-track merger norms is a pragmatic response to prolonged NCLT pendencies, while the revival of the asset monetization agenda up to 2030 is a welcome development. Raising the MSME classification threshold will have far-reaching implications, particularly in ensuring timely payments. Additionally, the decriminalization of over 100 provisions and a streamlined customs duty structure enhance regulatory clarity and ease of doing business.

With a fiscal deficit now at 4.4%, the government has aimed to strike a balance between growth-driven policies and fiscal prudence.”

Budget 2025-Towards Simplification and Rationalization

"The Hon’ble Finance Minister (FM) tabled the Finance Bill for the year 2025-26 today. In her budget speech reforms in ‘taxation’ was on the top of the six domains identified by the Government which require transformative reforms. This is very encouraging that tax reforms have been placed on the top of the list. Following such intent, the Hon’ble FM has also stated that the new tax bill would be tabled in the next week. Given the fact that a new tax bill is on the anvil, the changes proposed to the Act are therefore towards simplification and rationalization.

The amendments proposed on the personal tax front are commendable. The Hon’ble FM is betting that the loss of revenue on account of increase in the slab rates would be off-set by the increase in consumption as more money is put in the hands of the people. This is a step in the right direction. On simplification, the proposed changes to the TDS/TCS regime are welcome as the industry is saddled with compliance burden. Any relief on this account would be accepted with open arms. Likewise, the proposed changes to the transfer pricing regime, amendment to section 9 vis-à-vis significant economic presence gives the right message. The introduction of a presumptive scheme for non-residents will provide clarity and is a well thought out provision to give boost to the electronics industry. The increase of the time period for granting tax concessions to start-ups by 5 years also provides a great deal of certainty. 

The proposal to extend the filing of updated returns is a very good step. It encourages voluntary compliance, though the ask was also to increase the time for filing the revised return beyond which the updated return provision would kick-in. On the flip side, the amendment which will not go down well with the taxpayers is the curtailment of evergreening of losses in case of amalgamation. To sum-up, kudos to the FM for this Budget!"

"Finally, new simplified Income Tax law is in sight ! Interesting times ahead to learn how the new concise tax law addresses the interpretation issues being faced over the years or it opens a pandora’s box.

Pre-Budget debate had very much heated up on topic of existential crisis for middle class, which in a way got also highlighted in Economic Survey tabled yesterday in the form of a striking disparity between rising corporate profits and lagging wages. Consequential issues concerning stagnating demand and consequential slowing of economic development cycle were the key concerns. The Booster dose of never before 70 per cent jump in tax exemption bracket for middle class that was more than what was wished for and the overall tax rate rationalization benefiting all individual taxpayers, are aimed at reviving the consumption cycle and push industrial activity.

Over the years, the Government had persistently increased the capital expenditure to promote economic growth; but this year, infusing liquidity in the hands of middle class was a top priority in view of consumption crisis knocking on the door. However, despite this massive INR 1 trillion package to bail out middle class, it is noteworthy that the government is still on fiscal consolidation path, as it targets to reduce the fiscal deficit to 4.4% in FY 2025-26. 

While there has been a rationalization of TDS and TCS provisions with increase in thresholds and elimination of some onerous compliances, there was a scope for more simplification, which we would now need to look for in the upcoming new simplified tax law. Higher recoveries through updated returns and higher additional tax rates prescribed for newly introduced timelines as regards filing of updated returns for upto 4 years should boost sentiments of compliant taxpayers given that Government’s efforts to collect taxes from erring taxpayers are yielding results. The amendment relating to penalty orders appears to be simple; but the same should help to reduce some litigation, till the matter is not decided by ITAT. The motto “trust first, scrutinize later”, if brought in practice, should go a long way in enhancing self-compliance. 

On transfer pricing front, an important step has been taken to bring in global best practices in carrying out TP assessments for a block period. It will be interesting to evaluate the conditions under which the taxpayers will choose this option to ease their compliance burden. However, further clarifications are needed to understand how it will work in practice and achieve the intended results. 

Regarding the expansion of Safe Harbour Rules, the budget speech confirmed the Government's commitment to simplifying processes and ensuring tax certainty. However, specific details are yet to be announced. 

Beyond the welcoming direct tax proposals, the Hon’ble Finance Minister continued its trend of rationalization of customs tariff to reduce the customs duty structuring of import of capital goods and raw materials whereas increasing the customs duty structure of import of finished goods in order to boost the Make in India and its steps towards being a manufacturing hub.

In other welcoming proposals under Customs Regulations, the time limit for finalization of provisionally assessed Bills of Entry is introduced subject to certain exclusions to bring clarity for industry and improving efficiency of customs authorities in disposing the cases.  Further, another amendment is proposed to revise the documents on post clearance basis by virtue of which the importer / exporter can discharge the applicable customs duty if short paid or not paid on voluntary basis and on the other hand also can claim the refund of customs duty paid in excess.

Under the GST Regulations, the changes in the CGST Act, 2017 proposed by the GST Council during its 55th meeting are introduced in the Finance Bill, 2025 including the retrospective amendment to Section 17(5)(d) of the CGST Act, 2017 to overcome the landmark ruling of Hon’ble Supreme Court in case of Safari Retreat.  Further, a new Section 148A is proposed to be introduced to tracking and tracing of high value goods which will be notified separately by the Government on time to time basis.

On overall basis, these are welcome budget proposals for the industry from Indirect Tax perspective wherein much awaited clarity and certainty is brought by the Government and continued its prudence towards boosting the Make in India.

Focus on other pillars of the economy such as, MSMEs, agriculture, investments, and exports, should help propel the economic growth cycle.

If concessional tax rate regime for new manufacturing units would have been reintroduced, it would have probably ticked another big item on everybody’s wish list.

Nevertheless, the overall measures aim to foster a diversified and resilient economy."

"This budget seems to demonstrate that government is very serious to enhance the ease of doing business in India. Decriminalisation of 100 odd legal provisions, safe harbours and presumptive taxation for foreign companies providing services and storing goods in India for electronics manufacturing, block assessments for transfer pricing and enabling business restructuring through more efficient fast track mergers are some of the key highlights in this regard.

Ease of Doing Business

Ease of doing business 2.0 was a strong theme in yesterday’s economic survey.  The economic survey harped on the need for deregulation and FM has actioned this by announcing setting up of a high level Committee for regulatory reform in non-financial sector.  This is to identify bottlenecks and harassment (especially in matters of inspection and compliances). It is a welcome move and with a one year timeline for this initiative, I hope we will see tangible results very soon.

Transfer Pricing

Bringing in the concept of block assessment for transfer pricing can help reduce transfer pricing disputes and at par with global best practices.  Industry has been demanded this for a long time now. Safe harbour provisions for non- residents supplying goods seems to be motivated to enable more toll-manufacturing in the electronics space.  This can boost domestic manufacturing."

INITIAL REACTION TO INDIRECT TAX PROPOSALS IN BUDGET 2025

"The Union Budget 2025-26 has been presented in the backdrop of global economic slowdown, political instability in various regions, adoption of conservative international trade policies, low per-capita GDP decrease in industrial output, falling rupee and artificial intelligence posing opportunity as well as risk. The budget consciously allocates money towards 6 domains to achieve the object of a Vikasit Bharat. From the perspective of income-tax, the government has again proposed introduction of Direct Tax Code. There are significant developments in the new tax regime, including revision of tax slabs and extent of rebate available. From deal making perspective, amendment has been proposed to restrict carrying forward of losses under Section 72A of Income-tax Act, 1961 to a total period of 8 years in hands of amalgamating and amalgamated company. Further, TCS on sale of goods has been omitted.

From GST perspective, the Union Budget has primarily reiterated and reinforced the recommendations of the 55th GST Council Meeting. The provisions inter alia provide for disallowance of input tax credit (‘ITC’) attributable to construction of immovable property, pre-deposit of 10 per cent. for appeal against an order raising demand of only penalty, unique identification marking in respect of notified goods. The amendment in ITC provisions vitiate the impact of Supreme Court judgment in Safari Retreats Private Limited, 2024 INSC 756. Its introduction with retrospective effect however seems to be a pain point for the industry.

In the field of customs, we are seeing major customs tariff changes and equally substantial statutory overhauls. Most notably, a time limit of 2 years (extendable by 1 year with approval of the Commissioner) has been proposed for finalisation of provisional assessments. This amendment will effectively help companies mitigate the financial implication of prodigious interest liability arising upon finalisation of assessments after years of litigation. While the objective is laudable, the discretion to not adhere to the timeline where similar matters are pending before Courts or where CBIC so directs by way of an order seems to whittle down its effect. It will also be interesting to study the impact of this provision on SVB assessments.

Another notable proposal being the introduction of provision for revision of bills of entry and shipping bills post clearance of goods. This provision overrides the existing provision for amendment of customs documents which covers pre-clearance as well post-clearance scenario. The provision surreptitiously introduces a time limit for amendment of bill of entry without discussing with stakeholders. The corresponding proposal for amendment in refund provisions seems to suggest that revision of bill of entry must be allowed within 1 year from the payment of customs duty, so as to allow consequent refund upon revision. This effectively implies that taxpayer will have even less than one year to apply for revision of bill of entry in case it wishes to seek a consequent refund. Interestingly, the proposed amendment does not override the appeal provisions. In case of refund arising from orders, the limitation period commences from the date of such order, and not the date of payment of duty. It seems that a taxpayer will have the option to prefer appeal or revision which in turn will have an impact of limitation period for filing refund claim.

There is however a silver lining to this issue in situations where a taxpayer wishes to subsequently deposit customs duty. The extant provision of Section 149 of Customs Act, 1962 was widely condemned as ineffective, as customs officers refused to amend the bill of entry on the ground that goods once cleared could not be verified. Taxpayers were strong-armed into paying excess duty through TR-6 challans, which posed difficulty in availing ITC of integrated tax portion. The provision effectively seems to cement the option to revise the bill of entry and avail ITC of the differential integrated tax liability.

Lastly, the Settlement Commission has been completely substituted by the Interim Board for Settlement, rendering the former defunct with effect from April 1, 2025.

Overall, there are significant developments, with significant misses. The industry was craving for amnesty scheme under customs law and erstwhile indirect taxes. This would have significantly reduced the burden of pending tax litigation. The establishment of GST Tribunal still seems a far-fetched dream even after so many years of GST implementation. It is disheartening that there was demur with respect to the same."

"Budget 2025 promises transformative reforms across key domains including tax to unleash India’s growth potential. Much awaited rationalisation of tax rates and widening of tax slabs means everyone will see a reduction in their annual tax bill. Additional Sweetener for senior citizens by increasing threshold for TDS deduction on interest income. No conditions for tax exemption for 2 self-occupied house properties. Also the announcement of soon to be tabled simplified tax code easy to understand for taxpayers and tax administrators is very welcome”

"Identifying taxation as a key area for transformative reforms over the next five years, the Hon'ble Finance Minister (FM) commenced Part B of her Budget speech with a verse from Thirukkural – “vaanokki vaalum ulakellaam mannavan koalnokki vaalung kuti” translating to: "Just as living beings thrive expecting rains, citizens thrive expecting good governance." With governance as the foundation, the FM presented her tax proposals.

As seen in recent years, the Finance Bill offered no major surprises regarding GST and Customs. Many GST proposals addressed pending matters previously recommended by the GST Council. Notable amendments include:

1. Track and Trace mechanism – Section 148A has been inserted to formalise a ‘Track and Trace’ mechanism which was recommended by 55th GST Council Meeting. The mechanism which seems to be taken from the EU and Turkey may aim to curb tax evasion on goods like Cigarettes, Pan Masala, and other goods prone to tax evasion. One would have to wait for the Notification to understand the Goods or specified taxpayers getting covered in the said system.
2. Pre-deposit on penalty only notices: Till date, pre-deposit was only required to be paid on disputed tax amount in other than Section 129 cases. However, post this amendment, if a taxpayer has to litigate only penalty notices, a pre-deposit will be required to be paid. Essentially what the Government has done is it has brought the pre-deposit provisions in line with the previous regime (S. 35F of Central Excise Act). Having said so, one needs to understand that under Central Excise the pre-deposit was only 10% for appeals upto Tribunal. However, under GST, the same has been increased to 20% (10% at the time of first appeal and another 10% at the time of appeal before Tribunal).
3. Legal backing to the IMS has been provided in the Finance Bill, 2025 to make the procedure water-tight. The same has already been implemented basis the advisories issued by GSTN. However, once the law is amended, the taxpayers may expect notices coming in if the procedure is not followed.
4. Transactions in vouchers – As discussed in the last Council meeting, S. 12 and 13 have been modified to exclude transaction vouchers as a supply. This is another inspiration taken from the EU VAT Directives 2019 wherein the EU had clarified that vouchers should only be taxed once i.e., when they are redeemed against any specific good or service. Settling a long-standing debate, this is a relief to the retail sector where Vouchers are commonly used.
5. Retrospective amendment to S.17(5)(d) to nullify the Safari retreats judgment pronounced by Hon’ble Supreme Court has been on the cards. Therefore, taxpayers who might have availed credit post the judgment would have to reverse the same. Interest implications may arise, if the credit was utilised.
6. To put to rest the ambiguity of whether a FTWZ and SEZ shall be considered as a Customs Bonded Warehouse given in Entry 8 of Schedule III, an amendment has been proposed making transactions occurring within FTWZs prior to clearance to the DTA shall be neither a supply of goods, nor a supply of service. The same has been amended with effect from 1 July 2017. Interestingly, the Bill also proposes that if any tax has been collected, the same will not be refunded on such transactions, closing all doors for refund applications.
7. From a Customs perspective, an important amendment that has come in is the prescription of time limit to conclude provisional assessment by the Customs officer as two years, extendable by another one year. This is a huge relief for the assesses where the provisional assessment has been ongoing for long time periods. However, it needs to be seen on how will the old cases be resolved. Other than this, there has been rate rationalisation on multiple goods including healthcare, lithium batteries, shipping sector etc.

While largely predictable, these reforms reflect a continued effort toward fostering a transparent, robust, and globally aligned tax framework, laying the groundwork for sustained growth and improved governance."

"All eyes now on the new tax bill proposed to be introduced next week. Let's hope that the concept of "Trust first and Scrutiny Later" is reflected in the fine prints. This announcement is followed by a series of amendments aiming towards ease of doing business and promotion of investments.

The Finance Bill 2025 proposes various amendments like presumptive taxation for non-resident service providers to specific sectors, harmonisation of transfer pricing provisions and safe harbour rules, clarifications related to significant economic presence, rationalisation of various TDS and TCS provisions, enhanced personal tax limits, enhanced time limit to file updated return, etc. 

It also introduces a step towards a streamlined customs tariff structure for industrial goods by removing seven tariff rates, applying only one cess or surcharge, and adjusting the cess to maintain effective duty incidence on most items while lowering cess on certain items.

All these measures will provide certainty to taxpayers and reduce tax litigation to a great extent. Enhanced slab rates in personal taxation will inject a booster dose by way of higher spending and consumption."

Union Budget 2025

"The Union Budget 2025 brings key reforms in GST and Customs, focusing on simplified compliance, dispute reduction, and ease of doing business to enhance tax efficiency and transparency.

GST Reforms:

The Finance Bill, 2025, introduces amendments to the CGST Act aimed at streamlining GST laws and improving compliance. Key changes include the expansion of the Input Service Distributor (ISD) mechanism for inter-State reverse charge supplies and rationalization of Input Tax Credit (ITC) provisions, ensuring greater clarity for businesses. New penalties under Sections 122B and 148A reinforce Track and Trace mechanisms, pushing for digitization and improved supply chain monitoring. However, stricter ITC eligibility criteria and retrospective amendments raise concerns about increased disputes and financial liabilities for businesses.

Retrospective Amendments – A Concern for Businesses:

The retrospective reversal of judicial decisions, such as the Safari Retreats Pvt. Ltd. Supreme Court ruling on ITC for immovable property, undermines legal certainty and business confidence. This shift impacts not just real estate, but also insurance, e-commerce, and online gaming, discouraging investment and increasing tax unpredictability. A prospective approach would help restore trust and stability in the tax system.

Track and Trace with Unique Identification Mark (UIM):

The introduction of UIM and Track and Trace Mechanism strengthens supply chain transparency and tax compliance. Similar to global best practices, these measures target counterfeit goods, tax evasion, and illicit trade. While beneficial for pharmaceuticals, tobacco, and electronics, businesses—especially SMEs—may face initial implementation challenges in upgrading IT systems and adopting tracking technology.

Customs Reforms:

The Budget continues duty rationalization to support domestic manufacturing and exports, eliminating seven more tariff rates, leaving only eight slabs, including a zero rate. Minor duty reductions on selected goods aim to minimize impact on revenue, while limiting cess and surcharge to one per product and exempting social welfare surcharge on 82 tariff lines seeks to ease import costs.

Conclusion: A Middle-Class Friendly Budget

The Budget supports the middle class by simplifying tax compliance, reducing price burdens through lower customs duties, and boosting employment via domestic manufacturing incentives. However, retrospective tax changes create uncertainty, potentially affecting long-term business confidence. Overall, the Budget attempts to balance economic growth with middle-class welfare, ensuring stability and affordability in the tax framework"

Providing Clarity in a single direction

Finance Bill 2025

"The Finance Bill 2025 provisions pertaining to Goods and Services Tax will be remembered for bringing in greater clarity in the provisions of the Act but in a single direction i.e. revenue biased. Having said that, the attempt of the Government in avoiding continuing disputes is laudable. The trend of making retrospective amendments to overcome Supreme Court decisions unfortunately continues.

The amendments which are proposed to bring greater clarity include:

• Amending definition of input credit distributor and manner of distribution of input tax credit in respect of inter-state supplies on which tax has to be paid on reverse charge basis
• Inserting explanation to provide for definition of terms ‘Local Fund’ and ‘Municipal Fund’ used in the definition of ‘local authority’
• Explicitly providing for requirement of reversal of input tax credit in respect of a credit note, if availed by a registered recipient for the purpose of reduction of tax liability of supplier in respect of the said credit note
• A welcome amendment in Schedule III of the CGST Act in respect of supply of goods warehoused in SEZ or in FTWZ to any person before clearance for exports or to DTA specifying that it shall neither be treated as supply of goods or supply of services

The amendments which seek to reverse beneficial judicial rulings include:

• A widely expected retrospective amendment to substitute the words ‘plant or machinery’ with the words 'plant and machinery’ in Section 17(5)(d) of the CGST Act that provides restrictions on input tax credit.
• Providing for 10 percent mandatory pre-deposit of penalty amount for appeals before Appellate Authority and Appellate Tribunal in cases involving only demand of penalty without any demand for tax.

A new system for enabling affixation of unique identification marking and for electronic storage and access of information contained therein is being introduced for specified commodities.

To sum up this budget is an honest attempt to bring in more clarity and greater simplicity in the much-maligned provisions of the Goods and Services law."

1. I would rate this budget highly for delivering on most major requests for boosting economic activities.
2. The most sought-after demand was to reduce tax burden on the middle class and the FM has proposed to deliver even more than expected on this front, by bringing down tax payable by individuals, HUFs, AOPs etc to nil for income upto Rs 12 lakh p.a. Since the slab rates have been rejigged, this also has the positive cascading effect on reducing tax outgo upto the annual income of Rs 24 lakh. This is very welcome as it puts more money in the hands of people for spending and / or investing. We hope to see more consumption as well as investments, bringing positive effect on the total economic activities.
3. Increasing thresholds for triggering TDS should significantly reduce compliance burden on small businesses and professions.
4. Rationalising TDS rates is also a very positive step.
5. Deletion of TCS under section 206C(1H), i.e. by seller of goods above Rs 50 lakh is a huge welcome step. As there was no definition of ‘goods’ for this purpose, even sale of shares by NRs would have resulted in attracting this compliance provision, leading to avoidable compliance burden on them.
6. Increasing the limit of TCS on remittance under LRS from Rs 7 lakh to 10 lakh is very welcome. All the same, reducing this TCS rate to much lower rate would have gone a long way in easing the strain on cash flow faced by individuals.
7. Since new Income Tax Code Bill will be presented next week, and hopefully it will be passed as law in 2026 after stakeholder comments, we hope that the capital gains tax regime will be much more simplified and the immense litigation arising on account of claim for CGT exemption through re-investment will be avoided as also whether the gains are capital gains or business/ revenue income.
8. Several tax concessions to make IFSC more attractive to operate from should enable to develop this sector.
9. Extensions of timelines for setting up Start ups as well as businesses and units in IFSC to 31 March 2030 to qualify for tax concessions speaks volumes for the administration to provide a reasonably long term certainty .

A few misses :

1. One major ask from the Start Up industry was to rationalise taxation on Employee Stock Options. This rationalisation to postpone taxation in the hands of employees would have gone a long way in use of ESOPs to attract much needed talent in this industry.
2. While several policy measures to help the MSMEs, being the backbone of the economy, are proposed, reducing number of TDS and TCS compliances would have gone a long way to provide more ease of doing business to them.
3. Clarifying on application of anti-abuse provision of section 56(2)(x) for indirect transfer of Indian asset in the hands of foreign shareholders in case of foreign mergers would have given impetus to SPAC transactions to give access to foreign capital markets to worthy Indian companies.

"Budget 2025 introduces a set of direct tax amendments aimed at simplifying compliance, enhancing voluntary adherence, and supporting growth. The government’s commitment to table a new, simplified Income Tax Act further underlines its vision for a certain, cleaner and clearer tax legislation and governance. Reworked personal income tax slabs, senior citizens’ benefits, and a rationalised TDS system showcase a clear focus on easing taxpayers' burdens.

Extended timelines for updated returns and higher eligibility towards Self Occupied Properties reflect efforts toward improving transparency and reducing bureaucratic load. Targeted incentives for sectors like manufacturing, startups, and the International Financial Services Centre (IFSC) aim at stimulating investment. However, I was expecting major announcements and sops towards the IFSC units.

International taxation reforms, including expanded safe harbour rules, promise greater coherence for cross-border enterprises. These measures combine to create an ecosystem of simplified tax compliance alongside concrete steps to foster growth and boost India’s standing as an attractive investment destination giving highest growth rate in major economies.

Ultimately, basis the commitment shown despite the current global geopolitical scenario, India could push beyond ‘Make in India’ to 'Design and Make in India' and pave the way for a true ‘Viksit Bharat,’ where homegrown innovations echo well beyond its borders."

"The Union Budget 2025-26 has set the stage for India's economic program by providing a dynamic and transformative direction through a blend of reforms and inclusive development. The six priority areas - taxation, power, urban development, mining, financial services, and regulatory reforms - deliberately reflect the vision of the Government to make India more competitive in the global arena.
 
The most significant highlight of this budget is Zero income tax to the middle-class taxpayers having income upto ₹12 lakh (excluding special rate income). This will allow increased consumption and economic activity.  

The FM has also announced to introduce new Income Tax Bill next week which will take forward the concept of ‘Trust First Scrutinise Later’.  FM has also announced that the tax reforms would be simplified, transparent, and aligned with international standards.

The extensions of time limit for filing of updated return; rationalization of TDS and TCS rates; rationalisation of transfer pricing provisions, additional incentives to IFSC, extension of time limit for start-ups and tax certainty measures for Category I and II AIFs are measures taken in the right direction that will ease compliance and attract investments.

A strong and renewed emphasis on technology in sustainability. The establishment of a Centre of Excellence for AI in Education with an allocation of ₹500 crore underlines India's commitment to harnessing AI for innovation and skill-building, thus positioning itself at the cutting edge of a digital revolution.

In the startup ecosystem, the announcement of a deep tech fund of funds and the expansion of SIDBI’s Fund of Funds for Startups with an additional ₹10,000 crore will fuel the next generation of innovations. These proposals intends to provide critical capital to startups and SMEs for growth and scale.

Fast-tracking merger norms, asset monetization until 2030will contribute to making India’s business landscape more efficient and investor-friendly. Decriminalizing over 100 provisions and simplifying customs duties will ease regulatory burdens and improve the ease of doing business.

The strategic focus on agriculture, MSMEs, exports, and infrastructure reflects the government’s commitment to fostering inclusive growth while ensuring India’s global competitiveness.

The budget proposals outlines the Government’s focus on building a future-ready economy -embracing AI, driving energy transition, and supporting innovation through startups."

Finance Minister announced the provision of block assessment covering three financial years in transfer pricing matters.  This provision will allow taxpayers to approach the transfer pricing officer to examine and determine the arm’s length price for similar transactions for a consecutive period of three years together. The introduction of this legislation suggests relief from year-on-year litigation, however, the rules may through light on the unanswered questions including the approach of the transfer pricing officer to resolve the matters, scope of appeal with the taxpayers, fate of new transactions along with the process for corporate tax assessment matters in the second or third year under the block. Government has introduced these provisions in line with the bigger objective of ease of doing business and enhance tax certainty, so it is expected that the rules will clear any ambiguity otherwise the block assessment provision may see few takers and may face the same fate as Safe Harbor Provisions.

Union Budget 2025: Aims at augmenting India’s growth potential and global competitiveness   

"The Union Budget proposals announced today come at the backdrop of India’s sustained growth and inclusive development. A comprehensive roadmap for the pursuit of its vision covers four powerful engines viz., agriculture, MSME, Investment and Exports. The Budget aims to initiate transformative reforms across six domains viz., taxation, power sector, urban development, mining, financial sector and regulatory reforms. During next five years, these are expected to augment India’s growth potential and global competitiveness.   

A key highlight of the Budget is its emphasis on job creation and skill development to harness the potential of India's youth. Another key highlight to set-up a high-level committee for regulatory reforms to strengthen trust-based economic governance and take transformational measures to enhance ‘ease of doing business’ is indeed a welcome measure.

On the direct tax side, the FM announced that a new income-tax bill shall soon be tabled in the parliament – said bill is expected to have tenets of simplicity for both taxpayers and administration, leading to tax certainty and reduction in litigation. The biggest bonanza for the individuals, HUFs and others is announcement of INR 12 Lakhs to be the tax-free income – a measure which has long been pending. In order to further incentive operations from IFSC, few key relaxations and exemptions have been proposed. Proposal to insert Section 44BBD to provide a presumptive taxation regime for non-residents engaged in business of providing services of technology for setting-up an electronic manufacturing facility is an encouraging one. Harmonization of ‘significant economic presence’ with business connection under Section 9 would lead to better trust building with the non-resident business community. Proposal to omit TCS on sale of goods and extension of incorporation period for start-ups are indeed industry friendly measures.              

The customs duty rates on specified goods have been carefully recalibrated in line with the needs of the economy ostensibly to boost domestic manufacture. Relief from BCD on importation of lifesaving drugs/medicines is a welcome proposal. Proposal of fixing time-limit of 2 years, extendable by 1 more year for finalization of the provisional assessment should provide certainty. A new provision to enable importers or exporters, post clearance of goods, to voluntary declare material facts and pay duty with interest but without penalty, has been proposed. Certain trade facilitation measures in the form of relaxations in IGCR conditions are proposed.

From a GST standpoint, the Budget has followed up on the 55th GST Council meeting and proposed to amend Section 17(5)(d) to substitute the words “plant or machinery” with the words “plant and machinery” wef July 1, 2017 – effectively, negating the judgment of the Hon’ble Apex Court in Safari Retreat. Also, proposed amendment in Section 34 to explicitly provide for requirement of reversal of ITC qua credit notes, if availed, by the registered recipient, for reduction of tax liability of the supplier is an important one – however, implementation thereof especially in case of disgruntled parties would pose a huge challenge. Few other noteworthy changes relate to time of supply in case of vouchers, mandatory pre-deposits in case of penalty alone, and additions in Schedule III etc.       

Collectively, proposed changes enhance the ease of doing business, reduce litigations, and support a robust tax framework."

"The benefit of claiming two house properties as self-occupied is now proposed to be made available without any restrictive conditions attached. The conditions earlier required that either the owner actually occupies or that he is prevented from so occupying on account of his employment or profession being elsewhere. The proposal is likely to provide much needed relief to taxpayers who have not been able to let out their house properties due to any reason whatsoever, and who were earlier liable to pay taxes despite not generating any income thereon"

“The amendment in relation to Category I and II AIF’s proposes to define the investments by such AIF as Capital Asset. This would mean that any income earned on transfer of investment by such AIF would be capital gains and the taxation would apply accordingly. There is an ongoing debate as to the income earned by the AIF from temporary investments in liquid mutual fund is capital gains or business income. Proposed amendment will put such ambiguities to rest and such income will now be characterised as capital gain.

AIF’s on the ground are hoping that with this amendment, the tax administrators and authorities put to rest past open litigation."

"The remittances under the LRS were severely impacted by the onset of TCS provisions which got introduced in October 2020. Despite a relief granted for remittances upto Rs. 7 lakhs, the issue got further exacerbated in October 2023 when the rate was increased from 5% to 20% in respect of remittances made for purposes other than education/medical treatment. The present budget intends to increase the threshold for collection of TCS from the existing Rs. 7 lakhs to Rs. 10 lakhs. Further, the budget also proposes to keep remittances for the purposes of education which is funded out of a loan obtained from specified financial institutions, outside the ambit of TCS (presently such remittances are subject to a TCS of 1.5% in excess of Rs. 7 lakhs)."

Rate Rationalisation

The current budget is in line with the theme of rationalisation of tariff Structures, promote domestic manufacturing, provide a flip to exports of goods from India and ‘ease of doing business’.

Assessee Friendly Approach – East of doing business

The Government also aims at reducing litigations with a new facility allowing the assessee to disclose facts and discharge additional duty, if any as a measure to simplify the procedure for making additional duty.  This is, of course with a rider:  there are no investigation and audit is initiated. This amendment will encourage importers to make voluntary disclosures, bring down the litigation costs and also help assessees availing specific schemes like AEO wherein the eligibility is dependent on Show Cause Notices alleging fraud.  It is hoped that this facility also enables the assessee to get refund, if the additional disclosure results in such refund.

The time limit for use of imported inputs is being increased from 6 months to 1 year under the Import of Goods at Concessional Rate of Duty rules, 2017.

Time limit of 2 years with further extended to 1 year has been prescribed for finalisation of provisional assessments. These amendments will provide more certainty to the trade.  It is hoped that this applies to past cases also.

Industry Specific quotes

To provide benefit to common man grappling with life threatening diseases, complete exemptions to 36 life saving drugs and partial exemption to 6 life saving drugs have been provided.

In line with ‘make in India’ policy specific exemptions have been provided to electronic goods such as full exemption to parts of open cell which were subject to 2.5% BCD, capital goods exemptions have been provided to boost domestic manufacture of lithium-ion battery and manufacture of ships in India (Including ship breaking services).

“The Finance Minister has announced in her Budget speech that the new Income-tax Bill will be introduced next week. The new income tax bill will be clear and direct in text with close to half of the present law, in terms of both chapters and words. It will be simple to understand for taxpayers and tax administration, leading to tax certainty and reduced litigation.

The Finance Bill 2025 proposes to introduce a presumptive taxation regime for non-residents who will be providing support in setting up of such electronics manufacturing facilities by deploying the technology and providing support services in India. 

This presumptive taxation regime shall be available for non-residents engaged in the business of providing services or technology, to a resident company which are establishing or operating electronics manufacturing facility or a connected facility for manufacturing or producing electronic goods, article or thing in India, under a scheme notified by the Central Government in the Ministry of Electronics and Information Technology and satisfies such conditions as prescribed in the rules. 

"Union Budget 2025 carried forward the vision of driving the nation toward a Viksit Bharat and Aatmanirbhar Bharat. The Budget follows a comprehensive approach to empower various sectors through budgetary supports, structural reforms, stabilising the Indian economy against global market volatility. Tax reforms have been recognized amongst the six domains listed for transformative reforms which includes announcement for upcoming new Income tax bill, reducing non-tariff challenges to promote exports and critical changes in Goods and Services Tax (GST) to streamline compliances.

This Budget has introduced necessary legislative changes for implementing the Invoice Management System (IMS). IMS brings us one step closer to the original vision of e-matching the recipient’s input tax credit (ITC) with the supplier’s tax liability. Though, this may add compliance burden to the taxpayers to avail ITC. At the same, it is also likely to minimize litigations on reconciliation issues under GST. Further, reduction of tax liability due to credit note is allowed only when corresponding GST credit reversal by the recipients. This would require real time coordination with recipients to accept credit note in IMS.

The Track and Trace Mechanism introduced under Section 148A of the GST laws, is a new age mechanism to avoid tax leakages by affixing a unique identification marking on specified goods, to ensure appropriate tracking and consequent tax payments at each stage of the supply chain. This is likely to be used for products like cigarette and tobacco, which are prone to tax evasion. This is in line the international best practices which has successfully been adopted by European Union, countries in Latin America, Africa (like Kenya) to curb tax evasion in the tobacco sector.

The Budget has also proposed a retrospective amendment to Section 17(5), nullifying the impact of the Hon’ble Supreme Court’s decision in the Safari Retreat case last year, which allowed GST credit on construction activities for leasing and warehousing businesses based on the functionality test. However, the relief enjoyed by taxpayers following the Supreme Court’s decision was short-lived, as it has been overturned by this amendment. This retrospective amendment may have a negative impact on the real estate leasing business and also goes against the Government’s stated objective of a predictable and stable tax regime. Despite repeated taxpayer appeals, this change reinforces policymakers’ strict stance on denying GST credit for construction activities.

Stakeholders wished for a customs amnesty scheme, similar to such schemes in other tax legislations, to settle prolonged litigation. While the Budget turned down this expectation, it introduced a facility for voluntary revision of entry post clearance to declare material facts and pay duties with interest but without penalties or claim refund (excluding cases where audit/investigation is ongoing).

Another key customs amendment includes introducing a sunset clause for provisional assessments, limiting them to 2 years (extendable by 1 year). This will provide certainty regarding the financial liability on account of customs duties for the trade.

Custom tariff adjustments include removing 7 tariff rates and thus, only 8 tariff rates to remain including zero-duty. Eliminating 7 tariff rates would reduce the classification disputes as currently prevalent, however, the simultaneous efforts are expected to align such reforms with the exemption notifications.

The Budget has also exempted Social Welfare Surcharge (10%) on 82 tariff line items. Another sigh of relief from this Budget is that Cess and surcharge will not be applicable simultaneously on any goods.

Reduction in various sectoral tariff rates has been also announced. Sectors benefitting from such exemptions include critical minerals, textiles, electronic goods, lithium-ion batteries, shipping, and telecommunications.

In conclusion, the Union Budget 2025 aims to boost domestic manufacturing, promoting ease of doing business, encouraging voluntary compliance, and streamlining procedures."

"Ease of Doig M&A - The Finance Minister announced the speedy approval of company mergers. Currently, a simple and intra-state merger takes not less than 6-8 months.  The FM also announced that the scope for fast-track mergers will be widened, and the process will be more straightforward. A fast-track merger is currently allowed between a holding and 100% WOS with positive net worth & smaller companies.   These measures will help in the "Ease of Doing M&A".

Evergreening of losses -   The Finance Bill 2025 proposes an amendment to section 72A of the Income Tax Act against the evergreening of the tax losses post-amalgamation.  The law now provides that loss carry forward shall not exceed an overall period of 8 years.  Thus, a parity is now introduced with the provision of a period for carrying forward losses in amalgamation with demerger. The proposed amendment applies to "amalgamation or business reorganisation, as the case may be, is effected on or after the 1st April 2025". The proposed amendment to section 72AA applicable to banks refers to the term "brought in force".  Thus, whether the section would apply where the appointed date is before 1 April 2025 would be a matter of interpretation."

"Modi Government 3.0 is not shying away from structural reforms. The new income tax code is on the anvil and promises a simple, clear and a predictable tax regime. Relief to the middle class taxpayer ties in with the boost required IN consumption to sustain India's economic growth. On the other hand, extension in the sunset date for the tax holidays to sovereign wealth funds that are important sources of capital for infrastructure , and start-ups should keep the supply side momentum going. Rationalization of TDS regime to increase cash flows, picking up nits in the taxation of funds, expanding the scope of transfer pricing safe harbours to lend tax certainty are all testament to the Government's commitment to a tax regime that facilitates economic growth."

"The Budget proposals pertaining to transfer pricing assessment covering block of 3 years seems to be simply a mechanism allowing ‘rolling forward’ of the determination of arm’s length mechanism of Year 1 to Year 2 & 3 subject to certain conditions. This should not be construed as ‘block assessment’ whereby in true sense the assessment is conducted evaluating peculiar scenarios eg. assessing the cumulative impact of transactions during a block of 3 years factoring the cyclical impact of market conditions over 3 years. Nonetheless, it is to be noted that given the high pitched positions adopted by tax authorities for international transactions pertaining to IT / ITeS (where there is a tendency of having similar international transactions year on year), it is unclear as to how such budget proposals pertaining to ‘rolling forward’ of the determination of arm’s length mechanism of Year 1 to Year 2 & 3 even meet its stated objective of ‘reducing taxpayer’s burden’."

"Sunset provisions in GIFT City – The sunset for tax exemptions in GIFT City has been extended to March 31, 2030 giving a big boost to investments in GIFT City. This provides an additional opportunity to investors and fund managers sitting on the fence and considering setting up a presence in the GIFT City.

The budget has clarified that in respect of any loan transactions where one of the party is a treasury centre in GIFT City, the deemed dividend provisions will not be attracted. This helps to remove uncertainty on taxation as dividends in case of loans given by group companies to treasury centres in GIFT City.

In order to boost fund management activity in GIFT City, most of the conditions under section 9A will be considered to be removed where the fund management entity is setup in GIFT City before 31 March 2030. This will incentivise fund managers to relocate their fund management activity either from overseas or mainland India. Non-banks in GIFT City issuing ODIs or P notes will get a boost because the tax exemption available to the P Note holders has been extended to P Notes issued by non-banks or FPIs based in Gift City

The deadline for tax neutrality on relocation of offshore funds to GIFT City has been extended till March 31, 2030. Also, the same benefits on relocation have been extended to retail schemes and ETFs considering that retail schemes and ETFs in GIFT City now enjoy tax benefits similar to Cat 3 AIFs."

"As a result of the proposals, direct tax revenue of INR 1 lakh crore will be foregone.  A good portion of this should be used by taxpayers for consumption/spending (apart from investments).  Further, recognising nearly one crore gig-workers by arranging their identity cards and registration on the e-Shram portal will also bring them under the tax-net.

However, for GST, the growth in budget estimates for 2025-26 is same as that in revised estimates for 2024-25 at 10.9%.

Under customs, number of new tariff entries have been added as well as substituted/deleted to align tariff entries with World Customs Organization classification and better identification of goods.

Levy of not more than one cess or surcharge in customs, will simplify computation of duties; even though the effective duty incidence is to be broadly maintained.  Reduction in the number of tariff rates is also equally welcome.  Providing time limit to finalize provisional assessments under customs and to allow importers to voluntarily declare material facts, after clearance of goods, to pay duty with interest and without penalty is a good step.

Provisions in GST law for the time of supply of goods / services, where payment is made using vouchers are proposed to be omitted.  These provisions were never intended to specify the time of supply of vouchers itself.  Omission of this well-established principle (which was picked from European Union / UK VAT laws) is not a welcome step. The purpose and intent of this provision was required to be clarified, rather than omitting the same.

Apex Court’s decision in Safari Retreats Pvt. Ltd., under GST law, is being overcome with substitution of the words ‘plant or machinery’ with the words ‘plant and machinery’ with effect from July 1, 2017.

Implementation of track and trace mechanism for ensuring effective monitoring and control of supply of specified commodities is proposed under GST law.  It would apply to goods, to be specified, and persons or class of persons, to be specified, who are in possession or deal with such goods.  For this, ‘unique identification marking’ is to mean a mark that is unique, secure and non-removable."

"The long overdue relief for middle class taxpayers has been the highlight of this budget. The magnitude of relief given to individuals is commendable and is clearly a tangible benefit. This change would mean additional funds in the hands of individuals which will fuel consumption, which has been a topic of focus. While a new Income tax bill has been stated to be introduced next week (and the promise is that it will be half the size of the present tax act), there have been a lot of rationalization or simplification related changes proposed in the budget. 

While there will be an overall reduction in tax in the hands of High Net Worth Individuals (“HNWIs”) as well, the option to file an updated return (off-course with steep additional costs) for an extended period of additional two years (extended from two years to four years) could help taxpayers to potentially regularize their tax filings wherever taxpayers may have missed reporting incomes / assets in the original tax filings (including offshore incomes to avoid the rigours of the Black Money Act). Widening the definition of virtual digital assets (cryptos, etc) (“VDA”) as well as addition of undisclosed VDAs in undisclosed income provisions for search provisions is also being keenly observed by the HNWIs (as that would mean additional tax outflow in case of discovery in search proceedings). Introduction of specific reporting requirements for reporting VDA transactions is also being keenly tracked and it would be interesting to follow these developments. Relaxation of conditions for claiming 2 residential premises as self-occupied is also a very welcome move from a HNWIs taxation and would reduce potential litigation on interpretation of the conditions earlier prescribed. 

There is increased global focus on localization of manufacturing and benefits / lower taxes being rolled out to entities to localize manufacturing facilities, there were heightened expectation that India too would re-introduce the erstwhile beneficial rate of 15% that had been extended to entities commencing manufacturing in India. This seems to have been missed, and one hopes that the same will be addressed in the new Income tax bill to be introduced next week. Another expectation from an ease of doing business perspective was that remained to be addressed was issues / steps to be taken to address / de-clog the pendency of cases before the Commissioner of Income Tax (Appeals)."

Union Budget February 2025

"The Hon’ble Finance Minister of India, Smt. Nirmala Sitharaman presented her eighth consecutive budget  in the parliament today. In terms of headline numbers for year ending 2026, the fiscal deficit to GDP ratio has been targeted at 4.4% and capital expenditure outlay is at INR 11.2 lac crore.

It was announced that the government will be introducing a new Income Tax bill next week to take forward the “trust first, scrutinise later” concept,  as the new bill is expected to be clear, simple to understand and provide clarity.

In an effort to boost consumption and stimulate adoption of the New Tax Regime, tax rates and slabs have been modified to provide that no income tax would be leviable upto an income of Rs 12 lacs after availing rebates. For salaried taxpayers, no tax would be leviable upto an income (before claim of standard deduction) of Rs. 12.75 lacs. For AY 2024-25, approximately 8.75 crore persons have filed their tax returns, out of which,  those assessees who were paying tax in the new tax regime will benefit going forward from the changes in rates and slabs.

Various compliance reliefs were provided for in the budget ranging from rationalising the Tax Deducted at Source (TDS) & Tax Collected at Source (TCS) rates and monetary thresholds. Time limit to file updated tax returns has been increased from two to four years. There has been an extension of timeline for tax benefits to start-ups by five years, i.e., the benefit will be available to eligible start-ups incorporated before 1st day of April, 2030, as against the earlier limit of 1st day of April, 2025. Henceforth, Tonnage tax shall be applied on domestic vessels as well which will provide boost to the domestic shipping industry.

In order to provide relief in the much litigated area of transfer pricing (TP), as per best international practices, a new scheme of TP for a block of three years has been introduced, wherein, the arm’s length price (ALP) determined in relation to an international transaction or a specified domestic transaction for any previous year shall apply to the similar transaction for the two consecutive previous years immediately following such previous year. This shall reduce multiple proceedings for determining ALP for similar transactions. This scheme is not mandatory and is applicable at the option of taxpayers. In addition, scope of the Safe Harbor Scheme is stated to be expanded.

In a notable development, for the purpose of Crypto-Asset Reporting Framework (CARF) that provides for automatic exchange of tax-relevant information (AEOI) on Crypto-Assets, a Reporting Framework for crypto exchanges (Reporting Entities) has been introduced. Rules and forms will be prescribed in due course to enable furnishing of prescribed information by the Reporting Entities.

On digital taxation front, with Amount A under Pillar One as proposed by the OECD not getting implemented anytime soon, no new measure has been introduced in the budget, more so, when equalisation levy of 2% on e-commerce was withdrawn in the July ’24 interim budget, and only equalisation levy on online advertisement services of 6% remains.

The much talked about introduction of Global Anti-Base Erosion (GloBE) Rules under Pillar Two finds no mention in the Finance Bill 2025. The reason being that Pillar One and Pillar Two were to be introduced as a package and since multilateral convention on Amount A is not yet open for signature, hence, India’s policy to not implement GloBE rules is justified. In any case, anticipated revenue accruing to India from GloBE Rules is not encouraging enough to put any heightened compliance burden on multinational enterprises."

***

"Budget is intending to consolidate and interlink existing assets, address specific gaps, and make capex outcomes-oriented. This is also because the system’s capacity to absorb additional mega-projects is being tested, as managerial, administrative, and technical constraints are leading to delays and cost overruns

On Nuclear Power

Nuclear power, which is clean and essential for base load, is key to India’s energy transition from fossil fuel. Very crucial reforms to immediately focus on small modular rectors and amend law to expand investment from private sector and the liability cap, will go a long way to achieve target of 100 GW by 2047."

"The Budget 2025 looks promising especially with the New Income tax bill proposed to be presented in a week and the amendments to the tax slabs primarily aimed to benefit the working class in India.  The Hon’ble Finance Minister leaves no qualms when she mentioned that new tax bill is based on the same spirit of Nyay in its drafting making it clear, direct and concise about half in size of the existing legislation. Finance Minister acknowledged the admirable energy and ability of middle class in nation building and recognizing their contribution towards nation building, proposed substantial increase in tax exemption threshold for individuals opting for new tax regime.  Pursuant to this change individuals who are resident in India can claim rebate and effectively not required to pay taxes if their total income is upto INR12 lakhs. This is applicable if they do not have any other income that are subject to special rates (for example capital gains).  TCS threshold on overseas remittances for education / medical treatment has been increased from INR7 lakhs to INR10 lakhs.  If this amount is remitted out of education loan taken from specified financial institutions, there will not be any TCS. 

Taxable limit on passive income of interest received by senior citizens is also increased from INR 50,000 to 100,000 supporting the sunset years. As a measure of good governance and based on the principle, “Trust First, Scrutinise Later”, with ongoing administrative reforms, it is proposed to increase the time limit for filing updated tax return from two years to four years. 

While on one hand the budget proposals in the form of direct tax and indirect tax reforms would cost INR1 lakh crore to the government, it provides an optimistic outlook towards Viksit Bharat 2047 with Democracy, Demography and Demand as its foundation."

On MSME

Inflation has been a persistent problem, and the government has recognized the pressing need to address food inflation, which has been a significant contributor to rising overall inflation. Among the key drivers of this inflation are pulses and vegetables, which have seen consistent price increases in recent times. Prices of pulses have been a concern and targeted initiatives such the National Mission on Pulses is a crucial step aimed at boosting the production of pulses, ensuring better supply, and stabilizing prices. Additionally, a comprehensive program for the production of vegetables and fruits has been put in place, focusing on improving yields, enhancing supply chains, and reducing price volatility.

the National Mission for High-Yielding Seeds is the continued effort from past budget will go a long way to improving agricultural productivity and resilience

Focus on employment was expected, and the announcements are all about ensuring a broad-based and inclusive growth with a focus on agriculture, MSMEs, and women. Footwear; leather; toys (Made in India), Food processing will push this sector to create employment. Providing security to gig workers is also a great measure to give recognition and ensuring a better earnings for this segment.

On FDI

Significant strides have been made to harness the potential of India’s demographic dividend through strategic investments in skilling and education. The announcements to launch 5 National Centres of Excellence for skilling, establishment of 50,000 Atal Tinkering Labs in schools, and launching the Centre of Excellence in AI for education are measures to strengthen India’s growing position in innovation.  Together, these measures reflect a holistic approach to transforming India’s education system, ensuring that students are not only prepared for the future but are also capable of driving innovation and economic growth.

On Exports

Amid global trade uncertainties and slowing merchandise exports, this Union Budget introduces the crucial Export Promotion Mission to help India achieve its ambitious $1 trillion export target by 2030. A key element of this initiative is the establishment of Bharat Trade Net, a digital public infrastructure designed to streamline trade facilitation and financing. The government is empowering MSMEs by supporting them in overcoming non-tariff barriers. Simplifying cargo screening and customs clearance processes will ensure a more seamless export experience.

On Skilling

India needs investment and one of the factors to help bring investment is ease of doing business. The economic survey tabled yesterday did highlight the importance of deregulation in a phased-wise manner, and the budget did acknowledge the same today. Govt will develop modern, people friendly, trust-based regulatory framework, Jan Vishwas 2.0 bill to decriminalise over 100 provisions in existing laws. Investment friendly index of States to be launched in 2025.

Insurance FDI hiked was also 74% to 100%, which will also ensure more resources for investment in the insurance sector. This sector plays an important role in deepening financial inclusion, expanding coverage, and enhancing risk protection for individuals and businesses

The government revised FY25 revised capex at rs 10.18 lakh cr, down from 11.11 L cr.  This year, the FM is pushing the states to take the onus of building infrastructure. Union Finance Minister Nirmala Sitharaman announced an outlay of ₹1.5 lakh crore for 50-year interest free loans to states for capex and infrastructure. Again, there has been emphasis on partnership with the private sector. Each infrastructure-related ministry is to come up with a 3-year plan to be implemented in PPP mode.

Overall

India needs investment and one of the factors to help bring investment is ease of doing business. The economic survey tabled yesterday did highlight the importance of deregulation in a phased-wise manner, and the budget did acknowledge the same today. Govt will develop modern, people friendly, trust-based regulatory framework, Jan Vishwas 2.0 bill to decriminalise over 100 provisions in existing laws. Investment friendly index of States to be launched in 2025.

Insurance FDI hiked was also 74% to 100%, which will also ensure more resources for investment in the insurance sector. This sector plays an important role in deepening financial inclusion, expanding coverage, and enhancing risk protection for individuals and businesses

The government revised FY25 revised capex at rs 10.18 lakh cr, down from 11.11 L cr.  This year, the FM is pushing the states to take the onus of building infrastructure. Union Finance Minister Nirmala Sitharaman announced an outlay of ₹1.5 lakh crore for 50-year interest free loans to states for capex and infrastructure. Again, there has been emphasis on partnership with the private sector. Each infrastructure-related ministry is to come up with a 3-year plan to be implemented in PPP mode.

Amid global trade uncertainties and slowing merchandise exports, this Union Budget introduces the crucial Export Promotion Mission to help India achieve its ambitious $1 trillion export target by 2030. A key element of this initiative is the establishment of Bharat Trade Net, a digital public infrastructure designed to streamline trade facilitation and financing. The government is empowering MSMEs by supporting them in overcoming non-tariff barriers. Simplifying cargo screening and customs clearance processes will ensure a more seamless export experience.

"Our three biggest takeaways from Budget 2025 are in terms of the impetus provided to India’s consumption story, the boost provided to Global Capability Centres (GCCs) in emerging Tier-2 cities and reinforcing of the “Made in India” brand. 

The revised Income Tax slabs would increase the disposable income in the hands of Individual Taxpayers in the range of INR 80,000 to INR 110,000. These revised slabs are only in respect of Individual Taxpayers electing for the New Tax Regime and there are no changes to the slab rates under the Old Tax Regime. This is in line with the theme of previous Union Budgets wherein adoption of Old Tax Regime is being discouraged and which may eventually see a sunset date in future budgets.

Another key announcement from a Direct Tax perspective was in terms of introduction of New Income-tax Bill, 2025. The Hon’ble FM announced she would be introducing the same next week. In line with the indications provided in Union Budget 2024, the revamped Income-tax law is expected to be concise, clear, easy to comprehend and most importantly in alignment with global standards.

Rationalization of TDS / TCS provisions is also a very welcome move which was widely expected and is expected to reduce the compliance burden of various Taxpayers.

With regard to certain procedural amendments, provisions for reporting of transactions in Virtual Digital Asset (‘VDA’) have been introduced. Further, TDS has also been introduced @ 1 per cent of transaction value on payment for transfer of VDAs and VDAs have also been included in the definition of ‘undisclosed income’. These measures would provide increased visibility to the Income-tax Department in respect of such transactions and VDA traders can expect increase in the scrutiny from the Department.

Lastly, additional incentives have been provided to units in IFSC viz. (a) extension of sunset date for commencements of operations of IFSC units for several tax concessions, (b) exemption to non-resident investors arising on account of transfer of non-deliverable forward contracts or offshore derivative instruments or over the-counter derivatives, or distribution of income on offshore derivative instruments, entered into with Foreign Portfolio Investors registered in IFSC; (c) introduction of simplified regime for Fund Managers based in IFSC.

Overall, the Budget 2025 is a very welcome one – the best part about the same is there are no unwelcome negatives. Though, the key aspect to look out for would be the content of New Income-tax Bill, 2025."

"After introducing taxation framework for Virtual Digital Assets (“VDA”) in Finance budget of 2022 followed by TDS regulations for the VDA transactions, there were few circulars released by the Government to provide clarity/guidelines on this matter. Now again in this Union Budget of 2025, the Government has expanded definition of VDA to also include any crypto asset that relies on cryptographically secured distributed ledger or similar technology. The Government has now mandatd reporting requirements by certain reporting entities in the form of statement of all the crypto transactions. While specific rules regarding timelines, formats etc will be prescribed in due course, such reporting requirement will surely contribute  to improved transparency and bolster compliance."

“Hon’ble Finance Minister has framed her budgetary proposals focusing towards the needs of fast growing Indian economy and the Government initiatives’ towards accelerating growth, inclusive development, encouraging investments and enhancing spending power of middle class. The Budget focusses on providing development measures on Garib, Youth, Annadata and Nari.

 Several measures were announced to increase the disposable income in the hands of middle class by reducing taxes and rationalising TDS. This will promote more spending power in the hands of middle class.  Salaried Individuals earning upto Rs. 12.75 lacs will not have to pay any tax. The limit for TCS on foreign remittances under Liberalised Remittance Scheme and overseas tour program package has also been extended from Rs. 7 lacs to Rs. 10 Lacs. Further the limit of TDS on interest earned by senior citizens has been increased from Rs. 50,000 to Rs. 1 Lakh. Further, there is no TDS to be deducted in case of annual rental of house property upto Rs. 6 Lacs as compared to Rs. 2.4 lacs previously.

To encourage voluntary compliances, the time limit for furnishing Updated returns is also extended from 2 years to 4 years.

To promote employment and Investment in India, presumptive taxation regime has been introduced for non residents providing services in respect of electronics manufacturing. The period for incorporation of start ups has also been extended by 5 years to allow benefits to start ups incorporated before April 1, 2030.

The Budget also tried to improve global sentiments towards investments. The Finance Minister has proposed to introduce scheme for determining arms length price of international transaction for a block period of three years.  To reduce litigation and providing certainty, the scope of safe harbour rules has also been expanded. Carrying out the spirit of ‘Nyay’ the Government proposes to issue new income tax bill which will be simple to understand for taxpayers, simplifying tax administration, aiming at reducing litigation and providing certainty. Budget 2025 moves towards providing well required stimulus to Indian Economy by encouraging Investment, Employment & rationalisation of taxes.”

"Rationalisation of TDS provisions is a welcome step. Government has increased the thresholds for non deduction across various TDS provisions broadly ranging from INR 5,000 to 50,000.

The major change is in respect of TDS on rent where the threshold has been increased massively from existing INR 2.40 lacs to 6 lacs.

That apart, omission of higher TDS/TCS rates which was applicable for non-filers is indeed a necessary change.

Though, there was a need to rationalise these TDS provisions and it was expected that a singular (or max three rates) should be in place, yet the provisions currently rationalised does provide some easing out on the compliance and administrative burden."

"Laid on the pedestal of garnering reforms to provide impetus to Garib (Poor), Mahilayen (Women), Yuva (Youth) and Annadata (Farmer) and building on the same focus areas from the July 2024 budget, overall, the FM's speech has jibed well with this central theme with policy initiatives under each of these core areas. For young entrepreneurs, contrary to the one year extension each year, the announcement of a 5-year extension pushing the deadline for incorporation of start-ups all the way to April 1, 2030 to claim the tax holiday, would give them a sufficient runway to develop their groundbreaking ideas while the tax benefit remains safeguarded. Continual efforts towards streamlining of TDS rates and thresholds as part of the metamorphosis towards the new income-tax bill has certainly benefited the taxpayer community by easing compliance burden. Abolishment of TCS provisions is yet another impressive stride towards this deft initiative of TDS rationalisation which will eliminate confusion on operational aspects of overlapping provisions such as TDS and TCS on purchase/ sale of goods.

Recognising compliances as a key area of endurance, the FM has made proposals to support India's steadfast commitment towards "ease of doing business". Keeping charitable institutions as one of the beneficiary, an extension in the registration validity from 5 to 10 years is proposed for smaller charitable trusts and institutions with an annual income of less than INR 5 crore over the preceding two fiscal years. Reinforcing the tax department's commitment to a "Trust First, Scrutinize Later" approach, the Finance Minister has proposed extending the deadline for filing updated returns from two years to a four-year window. In the M&A arena, the FM announced plans to widening the scope of fast-track mergers and simplifying the entire process to accelerate deal completions. On the tax front, to close the loophole of perpetual loss carry-forward through successive amalgamations and ensure regulatory alignment, the Finance Bill proposes to prospectively provide that accumulated losses from predecessor entities can be carried forward for a maximum of 8 assessment years from the year the loss was computed by original predecessor entity.

"The Finance bill 2025 has introduced the concept of block TP assessments, whereby a taxpayer shall have an option to apply the outcome of a transfer pricing assessment for a financial year to successive two financial years. Where the taxpayer exercises such an option the principles of ALP determination for a financial years can be applied to two successive financial years. In effect, the ALP determined in addition to such transaction for a year can be valid for similar transactions for the next 2 years.

The amendment aims to reduce transfer pricing disputes and multiplicity of transfer pricing proceedings for determining ALP. The amendment emphasizes the CBDT’s intent in fostering an investment-friendly environment while ensuring tax equity for multi nationals.

"A key highlight of this budget is its recognition of the middle class as a crucial driver of economic growth. The increase in income tax exemption limits, along with the introduction of a new Income Tax Bill based on the principle of "Trust First, Scrutinize Later," reflects a commitment to transparency and fairness. Additionally, there is a strong focus on supporting startups, aiming to foster innovation and entrepreneurship."

"The Union Budget 2024-25 outlines measures to drive economic growth by strengthening key development engines. MSME classification criteria will be expanded with higher investment and turnover limits, while a new Fund of Funds will support startups. Sector-specific initiatives in footwear, leather, and toys aim to boost employment and productivity. The increased FDI for insurance sector from 74% to 100%, encourage greater inbound investment.

Speedy approval of company mergers will be aimed along with simplifying fast-track mergers. To enhance ease of doing business, a High-Level Committee for Regulatory Reforms will review non-financial sector regulations, and an Investment Friendliness Index of States will be introduced. Additionally, the Financial Stability and Development Council (FSDC) will assess existing financial regulations, and Jan Vishwas Bill 2.0 will decriminalize over 100 legal provisions.

"The proposed change in customs regulations to finalize provisional assessments within a definitive time period of two years is a bold step aimed at improving efficiency and transparency in the customs process. In some exceptional cases, this two year period can be extended for 1 more year by Commissioner of Customs if there is a sufficient reason for such extension, 

Under the new rule, if a provisional assessment is not finalized within this timeframe, it will be suspended. This move intends to prevent delays and ensure timely resolution of assessments, thereby minimizing uncertainty for businesses. There is a huge backlog of Bill of entries which are provisionally assessed waiting for finalization across all customs ports.  

Apart from this, FM announced a new provision in customs law for post clearance revision of self-assessment at the time of customs clearance to voluntarily revise material facts after clearance of goods. This voluntary post clearance revision of  self-assessment at the time of customs clearance is a very welcome scheme as it gives flexibility to importers to either pay the short paid customs duty and to claim an exemption which is not claimed at the customs clearance"

"Despite geopolitical headwinds suggesting lower global economic growth over the medium term, India continues to march towards becoming 'Viksit Bharat'. Budget 2025 plans to commence transformative reforms across six domains [(1)Taxation;(2)Power Sector; (3)        Urban Development; (4)Mining; (5)Financial Sector; and (6)Regulatory Reforms.] over the next five years.

In order to encourage sustained foreign investment and in the spirit of ‘first develop India’, the Budget has proposed to revamp the current model BIT to make it more investor-friendly. An Investment Friendliness Index of States is also proposed to be launched to further the spirit of competitive cooperative federalism. To strengthen trust-based economic governance and take transformational measures to enhance ‘ease of doing business’, a High-Level Committee for Regulatory Reforms will be set up for a review of all non-financial sector regulations, certifications, licenses, and permissions.

On the indirect taxes front, Budget 2025 has proposed to fix a time-limit of two years, extendable by a year, for finalising the provisional assessment. This is a welcome move and should lead to certainty and savings of cost as opposed to the present regime where there is no limit to finalize Provisional Assessments.

On the direct taxes front, a new income-tax bill has been proposed in line with the vision of Viksit Bharat for taxation reforms to achieve good governance for the nation and economy. The proposals are broadly classified into (i) Personal Income Tax reforms with special focus on middle class by change in slabs and rates (ii) Rationalization of TDS/TCS by reducing rates and increasing thresholds (iii)Encouraging voluntary compliance by taxpayers who had omitted to report their correct income (iv) Reducing compliance burden with respect to trusts and also with respect to self-occupied properties (v) In line with global best practices to streamline the process of transfer pricing and to provide an alternative to yearly examination, Budget 2025 has proposed a scheme for determining arm's length price of international transaction for a block period of three years and (vi) Reforms for promotion of investments such as tax certainty for electronics manufacturing Schemes, Tonnage Tax Scheme for Inland Vessels, extension for incorporation of Start-Ups, extension of benefits of IFSC to ship-leasing units, insurance offices and treasury centres of global companies, certainty of taxation to AIFs Cat I and Cat II on the gains from securities.

Overall, this Budget is a holistic budget covering all fractions of the economy and nation."