Budget 2025: A new dawn for the middle class and a prosperous future

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In her record eighth budget presentation, the Honourable Finance Minister Nirmala Sitharaman ushered a vision and bold steps towards a stronger and more inclusive India. At its heart lies the middle class, the driving force of our economy, the dreamers and doers who fuel our nation's progress. Tax reforms and streamlining structures are pushing the needle towards fairness and simplicity, enabling businesses to thrive and reinforcing socio-economic welfare, which will help create a more vibrant and competitive economy. By taking a two-pronged approach—boosting consumption and accelerating investment—the government has added more firepower to the engines of economic growth.

Undeniably, one of the standout features of the 2025 budget is the enhancement of the 'Zero' income tax limit to Rs12 lakhs and rationalisation of the income tax slab rates under the new tax regime while ensuing a revenue loss of Rs1 lakh crore. Besides spiralling consumption-driven growth through the additional disposable income, this also seems to push the government's agenda to push to the new regime.

This budget also has a pervasive impact across industries and sectors such as banking, IT, manufacturing, retail, pharmaceuticals, finance, artificial intelligence, EV, automobile sector, GCCs and so on. The Make in India pillar finds added vigour with the focus on the electronics, toys and footwear sectors. It comes at an opportune time to bolster the China Plus One strategy amidst the increased tariff apprehension of the Trump 2.0 regime.

In a strategic move to strengthen India's position as the global hub for electronics system design and manufacturing, the FM has proposed introducing a new presumptive tax scheme for non-residents. Under this scheme, non-residents providing services/ technology for setting up electronic manufacturing facilities in India can deem 25 percent of the aggregate amount received/receivable from India as their taxable income.

From the perspective of promoting investment, an extension of the sunset date to 31 March 2030 for several tax concessions in the International Financial Services Center (IFSC) and investments by Sovereign Wealth Funds (SWF) and Pension Funds (PF) is a welcome step. These will benefit exemptions on capital gains and royalties earned by non-residents on the transfer/lease of aircraft and vessels and the transfer of certain capital assets and interest/dividend from the specified investment vehicles. Rationalising the definition of 'dividend' for treasury centres in IFSC to exclude certain advances or loans between group entities will also smoothen group funding.

Removal of TCS on purchase transactions which were grappling with the parallel levy of TDS on such transactions, withdrawal of applicability of higher TDS/ TCS rate for non-tax return filer cases, decriminalisation of delay of TCS deposit up to the date of filing the return, rationalisation in rates and applicability of higher thresholds, removal of TCS on certain overseas remittances, and so on, demonstrates a commitment to ease of compliance and certainty. Additionally, the option for block TP assessment for a three-year period for matters within the same fact pattern and expansion of safe harbour will hopefully pave the way for reduced litigation and more certainty in international taxation matters.

Sitharaman also alluded to the digitisation of processes, including giving effects to appellate orders. While this is a welcome announcement, much will depend on effective implementation. The enacted faceless assessment and appeal schemes are still mired with exorbitant pendency and loopholes. On the post-appeal scene, the department is excruciatingly slow in delivering appeal affect orders and due refunds, driving many taxpayers to seek court interventions. Perhaps a legislative intervention is needed here to earnestly equip and enhance the systems and the machinery to deliver a seamless experience to compliant taxpayers.

And finally, the much talked about new Income Tax Bill is finally around the corner. Announced to be tabled next week, the Finance Minister indicated that the new Bill should address the needs of 21st-century India and will be clear and direct in text, containing half the content as that of the present tax law. Hopefully, this much anticipated Bill will signal the dawn of a more modern, investment-friendly India taking the leap of faith in its journey towards Viksit Bharat.