- New Income Tax Act, 2025 is slated to take effect from April 2026.
- Simplified rules and redesigned forms are to be notified, aimed at easier compliance for ordinary taxpayers.
- Ease of living measures
- Interest awarded by the Motor Accident Claims Tribunal to a natural person is proposed to be exempt from income tax; TDS on this is to be removed.
- TCS rationalisation (headline rates)
- Overseas tour program package: TCS reduced to 2% (from a current 2–20% band).
- LRS remittances for education and medical: TCS reduced to 2% (from 5%).
- TDS and return-filing simplification
- Simplified TDS for manpower supply to help labour-intensive businesses.
- Small taxpayers to get a rule-based automated process for lower/nil deduction certificates (instead of assessor-facing applications).
- Single-window filing with depositories for Form 15G/15H for TDS on dividends/interest.
- Return revision window extended from 31 Dec to 31 Mar with nominal fees; filing timelines to be staggered.
- Property transactions involving NRIs: TAN requirement to be replaced with resident buyer’s PAN-based challan.
- One-time 6-month foreign asset disclosure scheme for small taxpayers to disclose overseas income/assets.
- Penalty/prosecution rationalisation
- Assessment and penalty proceedings to be integrated through a common order.
- Taxpayers allowed to update returns even after reassessment begins, with an additional 10% tax rateover the applicable rate.
- Penalty for misreporting also eligible for immunity with payment of additional income tax.
- Prosecution framework to be rationalised; decriminalisation proposed for:
- non-production of books/documents, and
- TDS payment requirement where payment is made in kind.
- Non-disclosure of non-immovable foreign assets with aggregate value < ₹20 lakh to get immunity from prosecution, retrospectively from 1.10.2024.
- Cooperatives: targeted tax support
- Extend existing deductions for primary cooperatives supplying milk, oilseeds, fruits, vegetables to also cover those supplying cattle feed and cotton seed.
- Under the new regime, allow deduction for inter-cooperative dividend income to the extent it is further distributed to members.
- A notified national cooperative federation gets a 3-year dividend income exemption for investments in companies up to 31.1.2026, provided dividends are further distributed to member cooperatives.
- IT services: tightening definitions, expanding safe harbour, speeding certainty
- Software dev services, IT enabled services, KPO, and contract R&D relating to software dev to be clubbed into one category: Information Technology Services with a common safe harbour margin of 15.5%.
- Safe harbour threshold increased from ₹300 crore to ₹2,000 crore for IT services.
- Safe harbour approvals to move to an automated, rule-driven process; continuity for 5 years at a stretch.
- Unilateral APA process for IT services to be fast-tracked with an endeavour to conclude within 2 years(extendable by 6 months on request).
- Modified returns facility for APA entrants to be extended to associated entities.
- Attracting global business: specific incentives with long horizons
- Tax holiday till 2047 for foreign companies providing global cloud services using data centre services from India.
- Safe harbour of 15% on cost if the India data centre provider is a related entity.
- Safe harbour for non-residents for component warehousing in bonded warehouse at 2% of invoice value(resultant tax noted as ~0.7%).
- 5-year income-tax exemption for non-residents providing capital goods/equipment/tooling to toll manufacturers in a bonded zone.
- Exemption to global (non-India sourced) income of a non-resident expert for a 5-year stay under notified schemes.
- MAT exemption to all non-residents paying presumptive tax.
- Tax administration + market-related tax changes
- Joint committee of Ministry of Corporate Affairs and CBDT to align ICDS requirements into IndAS; separate ICDS-based accounting to be removed from tax year 2027–28.
- Buyback taxation: for all shareholder types, to be taxed as capital gains; promoters face additional buyback tax (effective 22% corporate promoters, 30% non-corporate promoters).
- STT increases:
- Futures: 0.05% (from 0.02%).
- Options premium and exercise: 0.15% (from 0.1% and 0.125% respectively).
- MAT redesign:
- Set-off of brought forward MAT credit allowed only in the new regime; set-off capped at 1/4th of new-regime tax liability.
- MAT proposed as final tax; no further credit accumulation from 1 April 2026.
- Final tax rate reduced to 14% (from 15%); accumulated credits up to 31 March 2026 remain usable as above.
- TCS on specific goods:
- Alcoholic liquor, scrap, minerals rationalised to 2%; tendu leaves reduced from 5% to 2%.
- Indirect taxes + customs: simpler tariffs, faster clearance, and “trust rails”
- Tariff simplification: sector-wise moves
- Marine/leather/textiles:
- Duty-free import limit for specified seafood processing inputs for export increased from 1% to 3% of FOB value.
- Duty-free imports of specified inputs extended for exports of leather/synthetic footwear.
- Energy transition:
- BCD exemption on capital goods for lithium-ion cell manufacturing extended.
- BCD exemption on sodium antimonate for solar glass.
- Nuclear power: extend BCD exemption on imports for nuclear power projects till 2035.
- Critical minerals: exempt BCD on imported capital goods needed for processing critical minerals.
- Biogas blended CNG: exclude biogas value when computing Central Excise on biogas-blended CNG.
- Civil & defence aviation:
- Exempt BCD on parts/components for civilian/training aircraft.
- Exempt BCD on raw materials for aircraft parts used in MRO for defence sector units.
- Electronics: exempt BCD on specified parts for microwave ovens.
- SEZ: one-time measure to allow eligible manufacturing units to sell to DTA at concessional duty (quantity capped as a proportion of exports).
- Marine/leather/textiles:
- Ease of living at the border
- Tariff rate on all dutiable goods imported for personal use reduced from 20% to 10%.
- BCD on 17 drugs/medicines exempted.
- Duty-free personal import of drugs/medicines and food for 7 more rare diseases.
- Baggage clearance rules to be revised to enhance duty-free allowances in line with current travel realities.
- Process simplification + trust-based systems
- Minimal intervention customs processes for smoother, faster movement.
- Tier-2 and Tier-3 AEO duty deferral extended from 15 days to 30 days (also for eligible manufacturer-importers).
- Advance ruling validity extended from 3 years to 5 years.
- Government agencies encouraged to leverage AEO accreditation for preferential cargo treatment.
- Trusted importer bill of entry + goods arrival to auto-notify customs for clearance formalities (for goods not needing compliance).
- Warehousing to shift to an operator-centric model with self-declarations, e-tracking, and risk-based audit.
- Single digital window + new systems
- By FY-end, cargo clearance approvals across agencies to be processed through a single interconnected digital window.
- By April 2026, processes for food, drugs, plant, animal, and wildlife products (noted as ~70% of interdicted cargo) to be operationalised on this system.
- For goods without compliance requirements: clearance immediately after online registration.
- Customs Integrated System (CIS) planned over 2 years as a single integrated platform.
- Non-intrusive scanning with advanced imaging + AI risk assessment to expand with the aim of scanning every container across major ports.
- New export opportunities
- Fish caught by Indian vessels in EEZ/high seas to be duty-free; landing at a foreign port treated as export of goods.
- Remove the ₹10 lakh per consignment value cap on courier exports to support small businesses, artisans, and start-ups using e-commerce.
- Dispute settlement
- Honest taxpayers willing to settle disputes can close cases by paying an additional amount in lieu of penalty.
- Tariff simplification: sector-wise moves
