Co-operative society tax rates and surcharge structure clarified for FY, with marginal relief and optional concessional tax regime available.
Rates of income-tax for co-operative societies remain unchanged from the prior fiscal year. A tiered surcharge regime applies with marginal relief to smooth threshold effects. Resident co-operative societies that satisfy specified conditions may elect a concessional tax option under the Finance Bill, which attracts a reduced surcharge on the alternative tax.

Firm income-tax rate unchanged; surcharge applies on incomes above the specified threshold, with a cap limiting surcharge impact.
The rate of income-tax for firms remains unchanged from the prior year as set in Paragraph C of Part III of the First Schedule. A surcharge applies on a firm's income-tax where total income exceeds a specified threshold, but the total of income-tax and surcharge on income above the threshold is capped so it cannot exceed the tax on the threshold amount by more than the excess income.

Surcharge on local authorities' income capped above the statutory threshold while base tax rates remain unchanged.
The income-tax rate for local authorities set in Paragraph D of Part III of the First Schedule is unchanged for FY 2025-26; a surcharge applies where total income exceeds one crore rupees, but the aggregate tax and surcharge on income above that threshold is limited so it cannot exceed the tax on one crore rupees by more than the excess income amount.

Corporate tax rate structure revised with differential domestic and foreign company rates, surcharge bands, marginal relief, and a health cess.
Corporate tax rates for FY 2025-26 set differentiated base rates for domestic and non domestic companies, allow domestic companies to opt into a concessional section 115BAA regime, and apply tiered surcharge rates with marginal relief; an additional Health and Education Cess is levied on tax inclusive of surcharge and is not eligible for marginal relief.

Rebate under section 87A expanded for new tax regime, raising eligibility and capping deduction to tax payable.
The proviso to section 87A grants a limited rebate and marginal relief to resident individuals whose income is chargeable under the new tax regime, excluding incomes taxed at special rates. From assessment year 2026-27 the Finance Bill proposes to increase the income limits and the maximum rebate under the proviso, and to add a proviso limit that the deduction cannot exceed the tax payable under the new tax-regime rates.

Incentives to International Financial Services Centre: proposed tax and regulatory amendments to further promote IFSC operations in non rupee currencies
IFSC is a jurisdiction providing financial services to non-residents and permitted residents in currencies other than the Indian Rupee; prior tax concessions have been granted to IFSC units to develop financial infrastructure, and the Union Budget 2025-26 proposes further amendments to provide additional incentives for operations from IFSC units, building on existing concessions to enhance its attractiveness for international financial services.

IFSC tax concession sunset extension extends commencement and relocation deadlines to March 2030, effective April 2025.
The Finance Bill proposes extending sunset dates for tax concessions tied to IFSC units and relocation of funds to IFSC, moving the deadline for commencement and relocation-related benefits to 31 March 2030; these amendments take effect from 1 April 2025.

Life insurance exemption extended to IFSC-issued policies without premium cap, improving parity for non-residents and clarifying scope.
Exemption for amounts received under life insurance policies, including bonuses, will expressly apply to policies issued by IFSC insurance offices; the proposed amendment removes the existing premium-cap condition for IFSC-issued policies to provide parity for non-resident policyholders, while leaving other exemption conditions intact, effective 1 April 2025.

Exemption to capital gains and dividend expanded to ship leasing units in IFSC, aligning tax treatment with aircraft leasing.
The measure extends existing IFSC exemptions applying to aircraft leasing so that non residents or IFSC units engaged in ship leasing are exempt from capital gains tax on transfers of equity shares of domestic companies that are IFSC ship leasing units, and dividends paid by an IFSC ship leasing company to another IFSC ship leasing unit are likewise exempt. The amendment aligns ship leasing with aircraft leasing treatment and specifies an effective commencement under the Finance Bill.

Dividend definition clarified for IFSC treasury centres-group entity loans to finance units excluded from dividend rules subject to conditions.
The proposal narrows the scope of dividend for IFSC corporate treasury centres by excluding advances or loans between group entities where one is a Finance company or Finance unit in IFSC acting as a global or regional corporate treasury centre, provided the parent or principal entity is listed on an overseas stock exchange (with Board specified exceptions). Conditions defining group entity, principal entity and parent entity will be prescribed, and the amendment is to take effect from the stated effective date.

Business connection exemption for IFSC fund managers streamlined with timing relief and relaxed conditions for qualifying managers.
Amendments to Section 9A rationalise the resident participation condition by testing aggregate participation on 1 April and 1 October of the previous year, with a four month period to cure deficiencies. Clause (c) will otherwise remain unmodified for all eligible funds and managers. Additionally, clauses (a)-(m) may be relaxed for eligible funds whose IFSC based eligible fund managers commenced operations on or before the specified commencement date under sub section (8A). The amendments take effect from 1 April 2025.

Exemption for non-resident derivative income expanded to include FPIs in IFSC units, subject to prescribed conditions.
The amendment broadens clause (4E) of section 10 to exempt from a non-resident's total income income from transfer of non-deliverable forward contracts, offshore derivative instruments, over-the-counter derivatives, and distribution of income on offshore derivative instruments when entered into with Foreign Portfolio Investors that are IFSC units, subject to prescribed conditions and applicable from the notified effective assessment year onward.

Tax-neutral relocation: inclusion of retail schemes and ETFs in IFSC resultant fund definition enables tax-neutral transfers for investors.
The amendment adds retail schemes and Exchange Traded Funds (ETFs) established and regulated in the IFSC to the definition of resultant fund, so that transfers by investors of shares, units or interests in an original fund in exchange for interests in such IFSC funds are not treated as transfers for capital gains purposes, preserving the tax-neutral nature of relocations into IFSC funds.

Long-term capital gains exemption for sovereign wealth and pension funds extended; investment deadline moved to 2030, effective April.
Clause (23FE) of section 10 is amended to exclude long-term capital gains arising from investments in India from the total income of specified persons, even if such gains are deemed short-term under section 50AA, and to extend the qualifying investment date from 31st March, 2025 to 31st March, 2030; the amendments take effect from 1st April, 2025.

Presumptive taxation for non-resident service providers to electronics manufacturing facilities creates a deemed profit basis, reducing effective tax.
A presumptive taxation regime under proposed section 44BBD deems a fixed proportion of aggregate amounts received/receivable or paid/payable to non-residents for providing services or technology to resident companies establishing or operating electronics manufacturing or connected facilities under a Central Government notified scheme as profits and gains, simplifying tax treatment and lowering the effective tax on gross receipts, subject to prescribed conditions and rules.

Tonnage tax extension to inland vessels allows eligible inland ships to opt into the tonnage tax regime from AY 2026 27.
Inland vessels registered under the Inland Vessels Act, 2021 are made eligible as qualified ships for the tonnage tax regime by aligning the income tax definition of inland vessels with that Act and by introducing corresponding amendments to extend tonnage tax benefits to inland vessels. The amendments are effective from 1 April 2026 and apply to the assessment year 2026 27 and subsequent assessment years.

Charitable trust tax exemption requires registration and compliance with application, approval and cancellation procedures under the law.
Income of a trust or institution is exempt only if it meets statutory conditions and maintains registration; one provision governs the application procedure to obtain registration to claim exemption, another governs approval and cancellation of registration, and a separate provision disqualifies exemption where specified conditions are not satisfied.

Specified violation classification: incomplete registration applications excluded from grounds for cancellation under section 12AB, limiting tax exposure.
The Finance Bill amends the Explanation to sub section (4) of section 12AB to provide that situations in which the application for registration of a trust or institution is not complete shall not be treated as a specified violation for purposes of cancellation of registration, thereby excluding mere incompleteness of the registration application from grounds that could trigger cancellation and consequent taxability under Chapter XII EB.

Registration period for smaller trusts extended to reduce compliance where income and application criteria are met.
The period of registration for trusts or institutions that apply under the specified application categories of section 12A(1)(ac) will be extended from five years to ten years where the total income, before applying sections 11 and 12, does not exceed the stated income threshold in each of the two preceding years; the change aims to reduce compliance for smaller trusts and will take effect from 1 April 2025.

Substantial contribution threshold revised, narrowing specified persons and excluding relatives and related concerns from applicability.
The amendment recalibrates the substantial contribution test by raising annual and aggregate contribution thresholds so that only larger contributors qualify as specified persons, and excludes relatives and concerns in which such contributors have substantial interest from the specified persons list; the changes apply prospectively from the Finance Bill's commencement date.