BUDGET 2025-26 DETAILED ANALYSIS By CA Mohan Patel

1. MACROECONOMIC HIGHLIGHTS

• Fiscal deficit target: 4.4% of GDP (down from 4.8% in the previous year).
• Focus areas:
  • Agriculture – Support for farmers & rural economy.
  • MSMEs – Increased classification limits for wider coverage.
  • Investments – Tax incentives for tech, manufacturing, and startups.
  • Exports – Easier tax regimes for international business.

2. DIRECT TAX PROVISIONS
3. Income Tax Slabs (New Regime)

• The new regime increases the exemption limit to ₹12 lakh, benefiting the middle class.
• Revised Slabs (compared to previous rates):

• No change in old regime tax slabs.
• Rebate under Sec. 87A increased to ₹60,000, effectively making income up to ₹12 lakh tax-free.

1. Corporate Tax

• No changes in corporate tax rates.
• Existing rates:
  • 25% for domestic companies with turnover ≤ ₹400 crore.
  • 30% for all other domestic companies.
  • 22% for companies opting under Section 115BAA.
  • 15% for new manufacturing companies under Section 115BAB.

1. Taxation of Charitable Trusts & Institutions

• Registration validity increased from 5 years to 10 years for smaller trusts (income ≤ ₹5 crore).
• Higher threshold for substantial contributors:
  • Previously ₹50,000 → Now ₹10 lakh.

1. Taxation of Investment Trusts (REITs, InvITs, AIFs)

• Securities held by investment funds are treated as capital assets, ensuring capital gains taxation instead of business income.
• Long-term capital gains tax (LTCG) at 12.5% for business trusts (previously taxed at MMR).

1. Carry Forward of Losses on Amalgamation

• Time limit for the set-off of losses now begins from the year of loss (not from the merger year).
• Effective for mergers with an appointed date of April 1, 2025, or later.

1. Non-Resident Taxation

• LTCG for non-residents now uniformly taxed at 12.5%.
• Presumptive taxation introduced:
  • 25% of receipts from tech services for electronics & semiconductor industries will be deemed as taxable business income.

1. International Financial Services Centre (IFSC) Benefits

• Tax exemption on life insurance payouts from IFSC insurers, regardless of premium amount.
• Ship leasing companies in IFSC are exempt from dividend tax.
• Corporate Treasury borrowing from IFSC entities is no longer treated as a deemed dividend.

1. Block Assessment & Virtual Digital Assets (Crypto, NFTs)

• Virtual digital assets (VDAs) now explicitly included in block assessment.
• New annual compliance for crypto traders and investors.

1. Taxation of ULIPs

• ULIP proceeds now taxed as capital gains (12.5% / 20%), if not exempt under Section 10(10D).

1. Transfer Pricing Rationalization

• New Block Approach:
  • Arm’s Length Price (ALP) determination valid for three years if opted for.
  • Reduces litigation & enhances certainty for businesses.

3. TDS & TCS CHANGES
4. Higher Thresholds for TDS

• TDS exemption limits increased for various transactions:

1. TCS on Foreign Remittance & LRS

• Education & Medical remittance exemption increased from ₹7 lakh to ₹10 lakh.
• TCS on other remittances (LRS) & tour packages remains at 20% but applies beyond ₹10 lakh.

1. Other TDS/TCS Changes

• TCS on sale of goods (0.1%) removed from April 1, 2025.
• No prosecution for late TCS payment if settled before the quarterly return deadline.

4. GOODS & SERVICES TAX (GST) CHANGES
5. Amendments in Definitions

• ISD can now distribute ITC on Reverse Charge Mechanism (RCM) transactions.

1. ITC Restrictions on Real Estate Industry

• Supreme Court ruling (Safari Retreats case) overturned → No ITC on construction expenses.

1. Pre-Deposit for GST Appeals Increased

• Appellate Authority: 10% of penalty amount (was 25% for detention cases).
• Appellate Tribunal: Additional 10% penalty pre-deposit.

1. GST Compliance Simplifications

• Track & Trace Mechanism for High-Risk Goods Introduced.
• Penalty for non-compliance: ₹1 lakh or 10% of tax liability (whichever is higher).

5. SECTOR-SPECIFIC INCENTIVES
6. Agriculture & MSME Support

• Makhana Board setup in Bihar.
• MSME investment threshold increased by 2.5x.
• Turnover limit doubled for MSME classification → Wider access to credit & tax benefits.
• Revised MSME Classification – Union Budget 2025

1. Electronics & Technology

• New tax certainty for non-resident technology providers investing in semiconductor & display manufacturing.
• ₹10,000 crore Deep Tech Fund for AI, Blockchain, Robotics, and Clean Energy.

1. Startup & Investment Benefits

• Startup Tax Exemption extended to April 1, 2030.
• IFSC fund manager compliance relaxed.

6. SUMMARY & IMPACT ANALYSIS

FINAL THOUGHTS

• “Trust First, Scrutinize Later” approach aims to create a taxpayer-friendly environment.
• Direct tax changes benefit salaried taxpayers, while GST amendments impact real estate & trade.
• MSME & IFSC incentives position India as a global economic hub.

**** BizFacts (For informational purposes only. Not legal or financial advice.)****