India: Tax measures in budget 2025-2026

Measures related to direct and indirect tax, transfer pricing, and customs duties 

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February 3, 2025

The Finance Minister presented the Union Budget for fiscal year 2025-2026, which includes the following proposed tax measures:

  • Rationalization of withholding tax provisions
  • Extension of the registration period for smaller trusts from five to 10 years
  • Extension of the time limit for filing updated income tax returns from two years to four years
  • Rationalization of the taxation of business trusts
  • Harmonization of the applicability of significant economic presence provisions to nonresidents with those applicable to business connection
  • Introduction of a presumptive taxation scheme for nonresidents providing services or technology to electronic manufacturing facilities
  • Extension of the tonnage tax scheme to inland vessels
  • Introduction of scheme for determination of arm’s length price of international transactions and specified domestic transactions over a block period of three years for similar transactions
  • Extension of the sunset clause for the commencement of operations in International Financial Services Centre (IFSC) units and startups and extension of the benefits for IFSC units to include ship-leasing units, insurance offices, and treasury centers of global companies
  • Goods and services tax (GST) amendments that align with GST Council recommendations
  • Various customs duty proposals including reduction/regularization of rates, setting clear timelines for finalizing provisional assessments, and allowing voluntary rectification of mistakes without penalties

Notably, the budget does not propose changing corporate tax rates and does not address the expected implementation of the Organisation for Economic Cooperation and Development's Pillar Two global minimum tax (GloBE rules) in India. In addition, the budget does not propose introducing any new production linked incentives (PLI) scheme.

Read a February 2025 report prepared by the KPMG member firm in India that provides more details about the tax measures in the budget for 2025-2026.

The KPMG member firm in India has also prepared a series of blogs covering various aspects of the budget:

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