‘Relief in tax slabs has stolen the limelight’

The Union Budget 2025 aims to unlock India’s potential in its journey to become a developed nation by 2047. Over the years, the Government has introduced several reforms for ease of doing business and reducing compliances, such as faceless assessment, taxpayers’ charter, faster processing of returns, and the Vivad se Vishwas scheme to settle disputes. Continuing with these efforts, a new Income Tax Bill is proposed to provide tax certainty, simplification and reduce tax litigation.

Of course, what has stolen the limelight is the relief in the tax slabs which has overshadowed all the other announcements. This was a long pending ask of the middle class and the enhancement of tax exemption limits will promote more liquidity, boosting household consumption, savings, investment, and uplift the overall sentiment of the middle class.

Ease of doing business

Rationalisation of TDS / TCS provisions for ease of doing business is another long pending ask which has been addressed. The extension of the date of set up of operations, till 2030, have been proposed for several sectors in the IFSC - like ship and aircraft leasing - which should give investors a good long term horizon view. Rationalisation of provisions for arms-length price determination should also help in certainty and reducing litigation. Other tax amendments focus on increasing voluntary compliance by extending the time limit to file updated tax returns up to four years, support to the startup ecosystem by extending the sunset date by another five years, introducing compliance obligations for crypto assets, and harmonization of provisions of significant economic presence in India. A few key tax expectations which did not find mention were implementation of the OECD’s BEPS 2.0 - Global Minimum Tax, extension of the sunset date for new manufacturing companies and weighted deduction for R&D spends.

Consistency in GST changes

Most proposed GST amendments align with ensuring consistency without major surprises, including the retrospective change that tightens legal provisions by explicitly changing “plant or machinery” to “plant and machinery”. This is in line with the government’s intent to disallow input tax credit on the construction of immovable property; however, its future impact remains to be seen. The decision to not treat vouchers as goods or services, thereby exempting them from GST, offers welcome relief to industry. Several steps measures have been unveiledintroduced to streamline compliance, support local domestic firms and recalibrate import duties. The Budget is a testament to India’s commitment to foster a balanced and sustainable economic environment. The successful implementation of its various initiatives will<SU>be<SU>crucial.

Budget 2025 is a testament to India’s commitment to fostering a balanced and sustainable economic environment. The successful implementation of the Budget initiatives will be crucial.Budget 2025 aims to unlock India’s potential in its journey to become a developed nation by 2047. Over the years, the government has introduced several reforms for ease of doing business and reducing compliances, such as faceless assessment, taxpayers’ charter, faster processing of returns, and Vivad se Vishwas scheme for dispute settlement. Continuing with these efforts, a new direct tax bill is proposed to provide tax certainty, simplification and reduce tax litigation.

Of course, what has stolen the limelight is the relief in the tax slabs which has overshadowed all the other announcements.

This was a long pending ask of the middle class and the enhancement of tax exemption limits will promote more liquidity, boosting household consumption, savings, investment and uplift overall sentiment of the middle class. Rationalisation of TDS/TCS provisions for ease of doing business is another long pending ask which has been addressed. The extension of the date of set up of operations,till 2030, have been proposed for several sectors in IFSC e.g. shipleasing, aircraft leasing which should give investors a good long term horizon view.

Each budget we have seen IFSC, getting the right attention it deserves to make it an attractive Financial services zone for the country. Rationalisation of provisions for arms- length price determination should also help in the certainty and reducing litigation. Other tax amendments focus on increasing voluntary compliance by extending the time limit to file updated tax returns up to four years, support to start-up ecosystem by extending the sunset date by another five years, introducing compliance obligations for crypto assets and harmonisation of provisions of significant economic presence in India.

A few key tax expectations which did not find mention was the implementation of the OECD’s BEPS 2.0 - Global Minimum Tax, extension of sunset date for new manufacturing firmscompanies, weighted deduction for R&D spends.

Most proposed GST amendments align with those approved by the GST Council, ensuring consistency without major surprises including the retrospective change that tightens legal provisions by explicitly changing “plant or machinery” to “plant and machinery”.

This aligns with the government’s intent to disallow input tax credit on the construction of immovable property, however, its future impact remains to be seen. The decision to not treat vouchers as goods or services, thereby exempting them from GST, offers welcome relief to the industry.

A range of measures have been introduced to streamline compliance, support domestic industries, and recalibrate customs duties on imports.

Budget 2025 is a testament to India’s commitment to fostering a balanced and sustainable economic environment. Tthe successful implementation of the Budget initiatives will be crucial.

(The writer is Head of Tax, KPMG in India)