The Finance Minister presented the Union Budget 2025-2026, announcing significant tax proposals impacting sovereign wealth funds (SWFs), pension funds (PFs), and other financial sectors.
These tax proposals include:
- Tax rate changes: The long-term capital gains (LTCG) tax rate on certain securities, including listed bonds and debentures, will increase from 10% to 12.5%, aligning with rates for equity shares and mutual funds. This change would be effective from assessment year (AY) 2026-2027.
- SWFs and PFs exemptions: The sunset clause for tax exemptions on income from specified infrastructure investments is extended to March 31, 2030. Additionally, exemptions now include LTCG from unlisted debt securities, effective April 1, 2025.
- Start-ups and alternative investment funds (AIFs): The definition of capital assets is clarified for SEBI-registered Category I and II AIFs. Tax benefits for start-ups would be extended to those incorporated before April 1, 2030, effective April 1, 2025.
- International Financial Services Centre (IFSC): The scope of exempt income for non-residents is expanded, and the definition of resultant funds now includes retail schemes and ETFs. The relocation period for funds is extended to March 31, 2030.
- Transfer pricing and compliance: A new block transfer pricing assessment option is introduced, and the time limit for filing updated tax returns is extended from 24 to 48 months.
Read a February 2025 report prepared by the KPMG member firm in India