In her record eighth budget speech, Honorary Finance Minister Nirmala Sitharaman ushered in vision and bold steps towards a stronger, more inclusive India. At its core is the middle class, the driver of our economy, the dreamers and actors who fuel our nation’s progress. Tax reform and simplified structures are moving the needle to equity and simplicity, enabling businesses to thrive and strengthen socio-economic welfare, which will help create a more dynamic and competitive economy. By adopting two prescribed approaches (enhance consumption and accelerate investment), the government has added more firepower to the engine of economic growth.
Enhance disposable income and stimulate consumption
Admittedly, one of the outstanding features of the 2025 budget is that under the new tax regime, the “zero” income tax limit has increased by Rs 1.2 lakh and the rationalization of the income tax floor rate, while the income tax loss was 1 lakh. In addition to the growth driven by spiral consumption through additional disposable income, this also seems to drive the government’s agenda toward a new regime.
Promote investment, easy business and fill technology
The budget has had a wide impact in industries and industries such as banking, manufacturing, retail, pharmaceuticals, finance, artificial intelligence, EV, automotive, GCC, etc. India’s manufacturing has added vitality in its focus on electronics, toys and footwear sectors. At the right time to raise China, and a strategy in increasing tariff arrests on the Trump 2.0 regime.
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To strengthen India’s strategic action as a global hub for electronic systems design and manufacturing, FM has proposed a new presumptive tax plan for non-residents. Under the scheme, non-residents who provide services/technology in India can consider 25% of the total received/receivable from India as 25% of taxable income.
From an investment-promoting perspective, the extension of the sunset dates for multiple tax benefits at the International Financial Services Centre (IFSC) (IFSC) to 2030, and investments in the Sovereign Wealth Fund (SWF) and Pension Fund (PF) are a welcome step. These will benefit from the transfer/leasing of aircraft and ships by non-residents and the transfer of certain capital assets and the transfer of certain capital assets and the exemption of transfer of interest/dividends from designated investment instruments. Rationalizing the definition of “dividend” in the IFSC China Library Center to exclude certain advancements or loans between group entities will also smooth out group funds.
Rationalization and compliance
Removal of TCS on purchase transactions which were grappling with the parallel level of TDS on such transactions, withdrawal of application of higher TDS/ TCS rate for non-tax return filer cases, decriminalisation of delay of TCS deposit up to the date of filing the return, rationalisation in rates and application of higher thresholds, removal of TCS on certain overseas remittances, and so on, demonstrates a commitment to ease of compliance and certainty. Furthermore, the option to conduct a TP assessment within three years in the same factual model and the expansion of the safe harbor would pave the way for more certainty in reducing litigation and international tax issues.
Direction to go
Sitharaman also mentioned the digitization of the process, including the impact on the appeal order. Although this is a welcome announcement, it depends largely on effective implementation. The enacted faceless assessment and appeal plan remains in chaos of suspense and loopholes. On the scene after the scene, the department was very slow in filing an appeal, affecting the order and due refunds, prompting many taxpayers to seek court intervention. Perhaps legislative intervention is needed here to carefully equip and enhance systems and machinery to provide a seamless experience for compliant taxpayers.
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Finally, numerous discussions about the new income tax bill are finally approaching. The Finance Minister announced that it will be proposed next week that the new bill should meet the needs of 21st century India and will be clear and direct in text that contains half of the content, such as this tax law. Hopefully this highly anticipated bill will show that the dawn of a more modern, investment-friendly India has taken its leap towards faith on its journey toward Viksit Bharat.
Naveen Aggarwal is a tax partner at KPMG India.
