Taxation of business trusts clarified: long-term capital gains treatment for units preserved alongside maximum marginal rate application. The Finance Bill amends the taxation of business trusts to clarify that a business trust's total income remains taxable at the maximum marginal rate but subject to the long-term capital gains provision applicable to units of a business trust, thereby preserving pass-through taxation of interest, dividend and rental income in the hands of unit holders and explicitly aligning capital gains treatment with the special regime for REITs and InVITs.
Significant economic presence exclusion clarified: purchases in India solely for export do not create business connection and are excluded. Amendment clarifies that transactions confined to the purchase of goods in India for export by a non resident shall not constitute Significant Economic Presence and therefore shall not constitute a Business Connection in India under section 9, aligning Explanation 2A with the exclusion in Explanation 1 and preserving the non taxable character of purchase for export operations.
Capital treatment of ULIP redemptions clarified: ULIPs without insurance exemption taxed as capital gains and treated as capital assets. The proposal treats Unit Linked Insurance Policies for which the insurance-exemption does not apply as capital assets, mandates that profits on their redemption be taxed as capital gains, and includes those ULIPs within the definition of equity oriented funds for preferential capital-gains treatment; the measure responds to an existing premium-based exemption threshold and distinguishes non-ULIP life policy proceeds taxed as income from other sources where exemption is inapplicable.
Capital asset classification: securities held by specified investment funds treated as capital assets, producing capital gains treatment. The Act is amended to treat securities held by investment funds that acquired them in accordance with securities-market regulations as capital asset, so that any income from their transfer will be treated as capital gain; the amendment applies prospectively from the specified commencement and to subsequent assessment years.
Start-up tax deduction extended, expanding eligibility for newly incorporated start-ups to a later cutoff while retaining certification conditions. Amendment extends the temporal eligibility for the startup tax deduction, preserving the mechanism that permits an eligible start up to claim a full deduction of profits for a limited number of assessment years from the year of incorporation, conditional on meeting the turnover ceiling, holding an eligibility certificate from the inter ministerial board, and making the elective claim; the amendment moves the incorporation cutoff forward and takes effect from 1 April 2025.
Taxation of long-term capital gains increased for non-resident securities transfers to align rates with the resident regime. The Finance Bill proposes amending section 115AD so that income-tax on long-term capital gains arising from transfer of securities (other than units under section 115AB) not covered by section 112A, when included in the total income of specified funds or foreign institutional investors, shall be calculated at the harmonised higher rate applicable to other assessees, with effect from the specified assessment year.
Rationalization of TDS rates aims to simplify withholding rules and raise applicability thresholds to improve compliance and business ease. Rationalization of Tax Deduction at Source (TDS) rates is proposed in the Union Budget 2025 26 and Finance Bill, 2025, to simplify multiple TDS rates and raise threshold limits for applicability, with the aim of reducing fragmentation, lowering compliance burdens, and promoting ease of doing business.
TDS rate reduction for securitisation trust payments under section 194LBC lowers withholding and eases compliance. The Finance Bill reduces TDS under section 194LBC on income paid by securitisation trusts to resident investors from the earlier rates of 25% (individuals/HUF) and 30% (others) to a uniform 10%, on the basis that the sector is sufficiently organised and regulated; the amendment takes effect from 1 April 2025 as Clause 63 of the Bill.
TDS threshold rationalization raises and standardizes withholding triggers, reducing routine tax deductions on smaller payments. The proposal titled TDS threshold rationalization raises and standardizes the monetary thresholds that trigger tax deduction at source for multiple categories-interest (including securities), dividends to individuals, mutual fund/unit incomes, various winnings, insurance commission, lottery-related income, brokerage and commission, professional and technical fees, rent, and enhanced compensation-altering per-transaction and annual benchmarks and distinguishing treatment by payer type and payment mode for withholding obligations.
TDS on interest on securities: threshold increased to reduce small-value deductions and limit routine withholding. Section 193 requires deduction of tax on interest on securities at time of credit or payment to a resident. The Finance Bill, 2025 proposes that tax shall be deducted under this section only when the amount or aggregate amount of interest on securities exceeds a specified monetary threshold during a financial year, and consequentially amends the proviso relating to debenture interest; the amendment takes effect from 1 April 2025.
Dividend tax withholding: higher exemption threshold for individual shareholders reduces small-payment TDS obligations from next fiscal year. Section 194 requires the principal officer of an Indian company, or a company with prescribed arrangements for dividend payments (including preference shares), to deduct tax at source from dividend payments to resident shareholders at the rate provided in the section. The Finance Bill raises the aggregate exemption threshold for individual shareholders under the first proviso so that no tax is required to be deducted on small aggregate dividend payments, with the amendment effective from the start of the next fiscal year.
TDS on interest thresholds increased, raising exemption limits for banks, cooperatives and post office deposits next fiscal year. Amendments raise thresholds under Section 194A for deduction of tax at source on interest other than interest on securities, increasing payer-specific limits for banks, cooperative banks, certain cooperative societies and notified post office deposits from forty thousand to fifty thousand and raising the baseline for other payers from five thousand to ten thousand; senior citizen thresholds for the specified payer categories are increased to one hundred thousand and to ten thousand for other payers. The revised thresholds take effect from the first day of the fiscal year beginning April 1, 2025.
Tax deduction on lottery winnings now triggers per single transaction rather than by annual aggregation. The Finance Bill, 2025 amends Section 194B to remove the aggregate-year threshold and instead require tax withholding on each single transaction that exceeds the statutory threshold, changing the trigger for deduction from annual aggregation to per-transaction basis; this amendment takes effect from 1 April 2025 (Clause 54).
Tax deduction on horse race winnings: threshold now applies per single payout, altering withholding obligation at payment. Section 194BB requires a bookmaker or licensed person paying horse-race winnings to deduct tax at source at the rates in force at the time of payment. The Finance Bill 2025 removes the aggregate-year threshold and makes the deduction requirement apply where a single transaction exceeds the threshold, shifting the test from annual aggregation to single-transaction application.
Insurance commission TDS threshold raised, reducing mandatory withholding on smaller commission payments from the Bill's effective financial year. Section 194D requires deduction of income-tax at source on remuneration or reward for soliciting or procuring insurance business paid to a resident where payments in a financial year exceed a prescribed threshold. The Finance Bill, 2025 raises that threshold, reducing the instances where TDS is required, and makes the amendment effective from the commencement of the specified financial year.
TDS on lottery commissions: threshold raised, reducing instances of deduction at source; new rule effective next fiscal year. Amendment to Section 194G raises the monetary threshold that triggers a two percent TDS obligation on commission, remuneration or prize payments to persons engaged in stocking, distributing, purchasing or selling lottery tickets, thereby reducing instances where tax must be deducted at source. The two percent deduction rate remains unchanged, and the amendment takes effect from the commencement of the next fiscal year.
TDS on commission: threshold for deduction raised, narrowing scope of withholding for small payees next fiscal year Persons other than individuals and HUFs paying commission or brokerage to resident payees must deduct tax at source at a two percent rate where annual payments exceed the prescribed threshold; the Finance Bill proposes to raise that threshold, reducing the number of payments subject to deduction while excluding insurance commission treated under a separate provision, effective from the commencement of the relevant fiscal year.
TDS on rent threshold lowered, expanding deduction requirement to monthly rent payments effective next fiscal year. The amendment expands the requirement to deduct tax at source on rent by replacing the prior annual exemption with a monthly (or part-month) threshold for payers other than individuals and HUFs; rent exceeding the specified monthly amount will attract withholding, and the change is effective from the start of the next fiscal year.
TDS on professional and technical fees: higher thresholds reduce mandatory withholding obligations from the next financial year. The Finance Bill increases the threshold for tax deduction at source on payments characterised as fees for professional services, fees for technical services, royalty and other specified sums made by persons other than individuals or HUFs; deductions are required only when aggregate payments in a financial year exceed the revised thresholds, with the amendment effective from the start of the specified financial year.
TDS on mutual fund unit income: threshold for mandatory deduction increased, narrowing instances where withholding is required. Persons paying income in respect of mutual fund units, administrators of specified undertakings, or specified companies must deduct tax at source at the prescribed rate only when the payee's income from such units exceeds the revised threshold; the amendment narrows the circumstances requiring deduction and applies prospectively from the effective date specified in the Finance Bill.
Social Welfare Surcharge exemptions expanded: specified imported goods excluded from SWS levy under amended customs notification. Amendment to Notification No. 11/2018 exempts specified imported goods from levy of the Social Welfare Surcharge (SWS) with effect from 02.02.2025. ... Summary
Social Welfare Surcharge exemptions expanded: specified imported goods excluded from SWS levy under amended customs notification.
Amendment to Notification No. 11/2018 exempts specified imported goods from levy of the Social Welfare Surcharge (SWS) with effect from 02.02.2025. Exempted categories include solar cells and modules, specified motor vehicles (including used vehicles and vehicles for transport of goods or ten or more persons and certain high-CIF value cars), various footwear classifications, furniture and bedding articles, lighting fittings, parts of electronic toys, candles, PVC flex films, smart electricity meters, yachts and pleasure vessels, articles of gold/silver under specified entries, dutiable personal-use imports, passenger baggage articles, and certain laboratory chemicals.
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