By Rahul Kakkad
Union Finance Minister Nirmala Sitharaman on Saturday presented the Union Budget 2025, the second budget of Modi 3.0. The budget for the fiscal year 2025-2026 has been a topic of much anticipation and speculation in India specifically amongst the urban middle class.
As India’s retail and consumer sector plays a pivotal role in changing country’s landscape, a consumer-friendly budget was expected from the Government which would leave higher disposable income for consumer thereby boosting demand. Accordingly, there was considerable anticipation from Finance Minister, to unveil tax relief initiatives and create a tax friendly atmosphere.
There were also expectation to improve the business environment by making regulations more efficient and lessening the compliance load to enable startups and MSME’s to be in a better position to innovate and expand.
The Budget unveils government’s plan for ‘Viksit Bharat’ placing significant emphasis on poverty, education, high quality health care, women empowerment, skilled labour and farmers.
The Finance Minister had announced introduction of a new simplified version of the Income tax act in the previous budget. The much-anticipated new Income Tax Bill is proposed to be rolled out by next week. This New Bill aims to be user-friendly, ensuring tax certainty and reducing litigation.
From a personal tax perspective, the revamp of slab rates under the new tax regime coupled with tax rebate would lead to higher disposable income by INR 80,000, which is likely to bolster the consumption story in India.
From a corporate tax front, no changes have been proposed in the tax rates. The burden of tax compliances relating to TDS and TCS have been significantly rationalised. Notably, the omission of TCS on sale of specified goods and removal of higher TCS/TDS on non-filers of return of income would significantly provide relief to corporates. Extension of presumptive taxation regime to non-residents providing services for electronics manufacturing facility would boost Make in India and provide employment opportunities to the youth. Extension of period of incorporation to avail the tax benefits available to start-ups has been extended till 1.4.2030.
To support the Make in India initiative and address inverted duty structures, basic customs duty on components for LCD/LED panels is reduced to 5%, while basic custom duty on flat panel displays is increased to 20%. To remove the uncertainty and cost relating to provisional assessments of bills of entry, time limit of 2 years introduced for finalisation of provisional assessments, with further extension by 1 year. New provisions to incentivize voluntary compliance by allowing importers/exporters to declare material facts and pay taxes without penalties are introduced. Basic customs duty on 35 capital goods for EV battery manufacturing and 28 capital goods for mobile phone battery manufacturing are exempted. Additionally, customs duty exemption was extended to two types of shuttle-less looms for agro, medical, and geo textiles.
On a policy front, a national action plan is proposed to be implemented to make India a global hub for toys. Further, a Focus Product Scheme for Footwear and Leather sector to support design capacity and manufacturing is also proposed to be rolled out.
The budget reflects a commitment to ‘Viksit Bharat’ with significant emphasis on poverty alleviation, education, high-quality healthcare, women empowerment, skilled labor, and farmers. It also aims to promote job creation, skill upgradation, MSME development, and government support for innovation and R&D.
The writer is Tax Partner – Consumer Products and Retail, EY India.