The Union Budget 2025 presented by the Finance Minister focuses on reforms aimed at attaining the Viksit Bharat 2047 vision with tax reforms and key economic policies working in tandem. On the tax reforms front, the Budget aims to build on the development story which has drawn global attention and continue implementing reforms for augmenting taxpayer convenience on the lines of the past decade (faceless assessment, taxpayers charter, faster returns, Vivad se Vishwas scheme):
- Transfer Pricing relaxations: Introduction of Multi Year Arm’s length price (ALP) determination wherein Transfer Pricing assessments would be carried out in in a 3-year block period and ALP determined for a transaction will be applicable for next 2 consecutive years on similar transactions. Further, the scope of the Safe Harbour Rules is also sought to be expanded to mitigate litigation and provide certainty in International transactions.
- Scheme Of Presumptive Taxation Extended For Non-residents providing services For Electronics Manufacturing Facility to ensure certainty and promote Electronics System Design and Manufacturing facilities in India: A presumptive taxation regime(deeming 25 % of aggregate amount received as taxable profits) for non-residents engaged in business of providing services or technology, to a resident company establishing or operating electronics manufacturing facility or a connected facility for manufacturing or producing electronic goods, article or thing in India.
- Parity in rates of long-term capital gain on transfer of securities by non-resident: Amendment to enhance the tax rate for non-residents being Foreign Institutional investors, on their income by way of long-term capital gains on transfer of securities to align it with the applicable rate for residents.
- Gift City incentives: The Budget proposed various IFSC related tax Incentives including extension of sunset dates related to IFSC units for exemptions, deductions and relocation in various sections to March 31, 2030.
- Extension of date of making investment by Sovereign Wealth Funds, Pension Funds and others up to March 31, 2030, and continuity of exemption for even deemed short-term gains.
- Rationalisation of TDS provisions: Omission of TCS on sale of goods under Section 206C(1H) of ITA and removal of higher TDS/TCS rate in case of non-filers of returns of income.
Further, in line with the Finance Ministers’ statement, a new Income-tax Bill, 2025 (2025 Bill) was introduced in the Lok Sabha on February 13, 2025, which aims to overhaul the existing Income-tax Act, 1961, by incorporating international best practices and simplifying the tax code after taking into consideration suggestions from various stakeholders. Key aspects of the 2025 Bill include:
- The Bill once approved with become Income Tax Act, 2025 and will be applicable from April 1, 2026.
- The concept of “Tax year” has replaced the terms “previous year” and “assessment year”.
- The language has been simplified, with shorter sentences and the replacement of complex terms like “notwithstanding” with “irrespective.”
- The Bill includes 57 tables and 46 formulas to aid understanding of various provisions and reduces fragmentation of provisions.
- A Taxpayers Charter outlining the rights and obligations of taxpayers is sought to be made part of the Bill.
The 2025 Bill aims to provide a more streamlined and user-friendly tax code, making it easier for taxpayers to comply with their obligations and understand their rights.