KPMG in India conducted an online survey to understand industry views and expectations from the simplification exercise
Income-tax Bill, 2025
The Bill seeks to simplify the legislation by consolidating similar provisions, eliminating obsolete sections, and presenting some information in a tabular format
India Union Budget 2025-26 highlights
In today’s Union Budget 2025, the finance minister outlined a series of key proposals aimed at shaping India’s economic future. From tax reforms to investment in infrastructure, digitalisation, and social welfare, the budget highlights several transformative initiatives designed to stimulate growth, enhance inclusivity, and drive sustainability.
The finance minister announced that a new Income-tax bill would be introduced in the next week, with close to half of the present law, in terms of both chapters and words. The finance minister also mentioned that the bill will be simple to understand for taxpayers and tax administration, leading to tax certainty and reduced litigation.
On the personal tax front, tax slabs and rebates have been amended under the default (new tax) regime. As a result, there would be no income tax payable up to the income of INR 12 lakh (other than income taxable at special rate such as capital gains).
The domestic taxation proposals include an extension of the sunset clause for incorporation of an eligible start-up to claim tax holiday and inclusion of the inland vessels in the existing tonnage tax regime. The threshold limits for applying the TDS provisions are proposed to be increased to ensure that low-value transactions are not subjected to TDS compliance.
A new presumptive tax regime is introduced for non-residents providing technology or services to support the setting up of electronics manufacturing facilities in India. The activities confined to the purchase of goods from India are now excluded from the purview of significant economic presence (SEP) provisions bringing it in line with the business connection provisions.
The corporate tax rates remain unchanged. However, the budget does not address the expected implementation of the Organisation for Economic Co-operation and Development's (OECD) global minimum tax (GloBE rules) in India.
The government's recent proposals aim to boost the financial and insurance sectors in India by attracting more international capital and enhancing investment opportunities. By raising the Foreign Direct Investment (FDI) limit in insurance to 100 per cent, the government seeks to increase insurance penetration and bring in more global players, subject to certain conditions. This move is expected to enhance the competitiveness and efficiency of the insurance sector.
The International Financial Services Centre (IFSC) is gaining global traction as a prime destination for financial activities. Key policy changes include expanding the scope of aircraft leasing to include ship leasing, extending sunset dates for various IFSC units, and rationalising the definition of 'dividend' for treasury centers. Additionally, a simplified regime for fund managers based in IFSC and exemptions for non-residents from offshore derivatives instruments issued by Foreign Portfolio Investors (FPIs) located in IFSC are being introduced. The inclusion of retail schemes and Exchange-Traded Funds (ETFs) in the tax-neutral relocation regime further enhances the attractiveness of IFSC.
Recognising the long-term nature of infrastructure investments, the finance minister has proposed extending the deadline for investments in specified infrastructure sectors by five years, until March 31, 2030. This extension aims to provide stability and a clear timeframe for global investors, particularly Sovereign Wealth Funds (SWFs) and Pension Funds (PFs), to contribute significantly to India's infrastructure development. These measures collectively aim to strengthen India's financial landscape and foster sustainable economic growth.
The proposals for rationalisation of various TDS and TCS provisions are aimed to provide enhanced cash flow for various individuals – including even senior citizens. More emphasis has been laid on ‘trust first, scrutinise later’ by increasing the time limit for filing updated tax returns. In an effort towards simplified tax legislation, new tax bill is proposed to be introduced in the coming week.
The transfer pricing audits, or assessment have been rationalised in line with international leading practices. With effect from assessment year (AY) 2026-27, the taxpayers will have an option to choose whether they wish to apply the outcome of transfer pricing assessment order of current year under assessment (i.e. the ongoing proceedings) to the following two years. To exercise this option, the taxpayers will be required to make an application in a manner which will be clarified in the rules, and the Transfer Pricing Officer (TPO) will have to convey his acceptance within a month. Once it is validated by the TPO, the same outcome of arm’s length price will apply to all three years for the chosen or similar transactions. This appears to be a step in the right direction, as it will curtail the time, efforts, and resources that are invested in repetitive assessments of similar transactions year after year.
The government has also proposed to expand the application of safe harbour rules, details of which will be released later by way of a notification.
The Union Budget 2025-2026 continues to focus on the ‘Make in India, Make for the World’ initiative, with specific assistance to industries such as toys, leather, food processing, electric vehicles, and electronics through customs tariff rationalisation.
Further, some more significant changes in customs include establishing clear timelines for finalising provisional assessments and permitting voluntary rectification of errors without penalties.
On the GST front, as expected, all the GST law amendments as recommended by the GST council have been introduced in the budget.
India Union Budget 2025-26 highlights
The publication highlights the salient features of the Finance Bill, 2025 with respect to tax and indirect tax proposals.
KPMG in India leaders on Union Budget 2025-26
- Yezdi Nagporewalla
- Sunil Badala
- Himanshu Parekh
- Parizad Sirwalla
- Gaurav Mehndiratta
- Kalpesh Maroo
- Abhishek Jain
- Anish De
- Neeraj Bansal
- Nikhil Sethi
- Namrata Rana
- Atul Gupta
- Manish Aggarwal
- Nilachal Mishra
- Vishnu Pillai
- Manoj Kumar Vijai
- Karan Marwah
- Vivek Agarwal
- Mohit Bhasin
- Vikas Gaba
- Kailash Mittal
- Dr. Puneet Mansukhani
- Supreet Sachdev
- Cdr. Gautam Nanda
- S Sathish
- Prasanth Shanthakumaran
- Chintan Patel
- Anvesha Thakker
- Amit Bhargava
- Girish Nair
- Naveen Aggarwal
- Anshul Aggarwal
- Prashant Kapoor
- Vikram Srinivas
- Vinay Narkar
- Hitesh Sachdeva
- Nirmal Nagda
- Kalpesh Desai
- Gautham Lokande
- Somdeb Sengupta
The Union Budget 2025 is a visionary and inclusive blueprint for India's economic ascent, setting the stage for Viksit Bharat, ready to lead in the global arena. The government's commitment to reducing the fiscal deficit to 4.4% while laying down robust economic foundations for growth of the economy is truly commendable. The emphasis on skilling initiatives, particularly through the establishment of 50,000 Atal Tinkering Labs and the Centre of Excellence in AI, will empower our youth with the skills needed to excel in a digital economy.
Moreover, the inclusive measures aimed at supporting the startup ecosystem, women entrepreneurship and rural prosperity, underscore a balanced and equitable approach to development. Strategic initiatives to boost trade and exports, such as the Export Promotion Mission, and BharatTradeNet, the digital public infrastructure for seamless trade documentation and financing, complemented by the Unified Logistics Platform, will significantly enhance the competitiveness of Indian businesses on the international stage.
The proposed introduction of the new Income Tax Bill, which will considerably simplify the existing Income Tax Act, is a much awaited and a landmark move towards simplified tax regime, further fostering a conducive environment for growth and innovation. Also, personal income tax reforms like significantly enhancing the income-tax exemption limit will provide a much needed boost to the middle class and an impetus to economy through additional disposable income available to consumers, additionally, rationalisation of TDS/TCS regime will ease the compliance burden of taxpayers.
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