The Union Budget 2025 has laid out an ambitious roadmap aimed at propelling India towards its goal of becoming a developed nation by 2047. While the budget introduces several measures to enhance ease of doing business and streamline tax compliance, it is the relief in tax slabs that has garnered the most attention, overshadowing other key announcements.
Over the years, the government has introduced a range of reforms, including faceless assessment, the taxpayers’ charter, expedited tax return processing, and the Vivad Se Vishwas scheme for dispute resolution. Continuing in this direction, the proposed Income Tax Bill seeks to provide greater tax certainty, simplification, and a reduction in litigation.
Tax Relief Takes Centre Stage
The most striking aspect of the budget is the revision in income tax slabs—a long-standing demand from the middle class. The enhancement of tax exemption limits is expected to boost liquidity, thereby encouraging household consumption, savings, and investment. This move is anticipated to uplift overall economic sentiment, particularly among middle-income earners.
Additionally, the rationalisation of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) provisions marks a significant step towards improving business efficiency. Investors in sectors such as ship and aircraft leasing within the International Financial Services Centre (IFSC) have been granted an extension until 2030 to establish operations, providing a long-term horizon for growth.
Other Key Tax Reforms
Further measures introduced in the budget focus on bolstering voluntary tax compliance. These include extending the time limit for filing updated tax returns to four years, supporting startups by extending the sunset date for tax benefits by another five years, and implementing compliance obligations for crypto assets. Additionally, provisions for determining arm’s length pricing have been refined to enhance tax certainty and reduce disputes.
However, some expectations remain unfulfilled. The budget does not address the implementation of the OECD’s Base Erosion and Profit Shifting (BEPS) 2.0 Global Minimum Tax. Likewise, the anticipated extension of the sunset date for new manufacturing companies and the provision for weighted deductions on research and development expenditures were notably absent.
GST Amendments and Industry Impact
The proposed amendments to the Goods and Services Tax (GST) primarily aim to ensure consistency, without introducing major surprises. Notably, a retrospective change clarifies that the term “plant or machinery” now explicitly refers to “plant and machinery.” This aligns with the government’s stance on disallowing input tax credits on the construction of immovable property, though the long-term implications remain uncertain.
A key relief for businesses comes in the form of an exemption for vouchers from GST, as they will no longer be classified as goods or services. Additionally, the budget includes several initiatives aimed at streamlining compliance, supporting local industries, and recalibrating import duties.
A Commitment to Economic Sustainability
Overall, the budget reflects India’s commitment to fostering a balanced and sustainable economic environment. The success of its various initiatives will be crucial in shaping the country’s financial future. While the tax slab relief has captured the headlines, the broader structural reforms will play an equally important role in determining India’s long-term economic trajectory.
