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    NewsBills
    Inclusion of retail schemes and Exchange Traded Funds (ETFs) in the existing relocation regime of fu...
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    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.
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    Extension of date of making investment by Sovereign Wealth Funds, Pension Funds & others and rationa...
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    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.
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    Scheme of presumptive taxation extended for non-resident providing services for electronics manufact...
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    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.
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    Extension of benefits of tonnage tax scheme to inland vessels
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    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.
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    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.
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    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.
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    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.
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    Rationalisation of persons specified under sub-section (3) of section 13 for trusts or institutions
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    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.
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    Rationalisation in taxation of Business trusts
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    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.
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    Harmonisation of Significant Economic Presence applicability with Business Connection
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    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.
    NewsBills
    Bringing clarity in income on redemption of Unit Linked Insurance Policy
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    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.
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    Amendment of Definition of ‘Capital Asset’
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    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.
    NewsBills
    Extension of timeline for tax benefits to start-ups
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    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.
    NewsBills
    Rationalisation of taxation of capital gains on transfer of capital assets by non-residents
    Show AI Summary
    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.
    NewsBills
    Rationalization of tax deducted at source (TDS) rates
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    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.
    NewsBills
    TDS rate reduction for section 194LBC
    Show AI Summary
    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.
    NewsBills
    TDS threshold rationalization TDS provisions have various thresholds of amount of payment or amount ...
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    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.
    NewsBills
    Section 193 – Interest on securities
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    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.
    NewsBills
    Section 194 – Dividends
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    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.
    NewsBills
    Section 194A – Interest other than interest on securities
    Show AI Summary
    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.

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      Companies - Tax Rates For the assessment year 2025-26

      1 February, 2025

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      Union Budget 2025-26 (Full) + Finance Bill, 2025

      E. Companies

      In the case of companies, the rates of income-tax have been specified in Paragraph E of Part I of the First Schedule to the Bill and remain unchanged vis-à-vis those for the AY 2024-25. In case of domestic company, the rate of income-tax shall be 25% of the total income, if the total turnover or gross receipts of the previous year 2022-23 does not exceed four hundred crore rupees and in all other cases the rate of income-tax shall be 30% of the total income.

      2. In the case of companies other than domestic companies, the rate of income-tax shall be 35%, on the total income other than income chargeable at special rates.

      (1) Surcharge on income-tax

      The rates of surcharge on the amount of income-tax for the purposes of the Union are the same as that specified for the AY 2024-25. The surcharge shall not apply on income-tax computed on income of specified fund (referred to in clause (c) of the Explanation to clause (4D) of section 10) that is chargeable under clause (a) of sub-section (1) of section 115AD of the Act. Further, for person whose income is chargeable to tax under sub-section (1A) of section 115BAC of the Act, the surcharge at the rate of 37% on the income or aggregate of income of such person (excluding the income by way of dividend or income under the provisions of sections 111A, 112 and 112A of the Act) exceeding five crore rupees is not applicable. In such cases the surcharge is restricted to 25%.

      (2) Marginal Relief—

      Marginal relief has also been provided in all cases where surcharge is proposed to be imposed.

      (3) Education Cess—

      For assessment year 2025-26, “Health and Education Cess” is to be levied at the rate of 4% on the amount of income-tax so computed, inclusive of surcharge wherever applicable, in all cases. No marginal relief shall be available in respect of such cess.

      (3) Education Cess—

      For assessment year 2025-26, “Health and Education Cess” is to be levied at the rate of 4% on the amount of income-tax so computed, inclusive of surcharge wherever applicable, in all cases. No marginal relief shall be available in respect of such cess.

      Full Text:

      Union Budget 2025-26 (Full) + Finance Bill, 2025

      Topics

      ActsIncome Tax
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