India wakes up to Budget 2025, a decisive moment when policy meets potential, laying the road map for economic resilience and strategic reforms. Buoyed with the “sabka vishwas, saath, prayas and vikas” motto, it focuses on four key engines: agriculture, MSMEs, investment, and exports.
The Budget proposes to enhance the ease of doing business index while unlocking opportunities for foreign investment. In sync with the Economic Survey that vouched for strategic deregulation, it espouses financial and non-financial regulatory reforms. To fast-track, the FM has announced a panel to review all non-financial sector regulations, certifications, licences, and permissions. The Financial Stability and Development Council will separately evaluate the impact of current financial regulations.
In its pursuit of innovation, growth, building capacity and skill development, the Budget outlays significant allocations for deep tech start-ups, R&D initiatives, and ensures credit availability for MSMEs. Notable strides have been made to support MSMEs by widening the turnover classification and enhancing credit guarantee coverage for micro and small units.
The Budget also proposes to revamp the 2016 model of bilateral investment treaty (BIT), which didn’t find favour with investors due to its contentious clauses. It also envisions a framework to promote global capability centres in tier-II cities, with focus on leveraging talent and building infra, to invest beyond IT hubs. Given the potential of global value chains (GVCs) and ability to create employment, the Budget proposes an audacious plan to position India as an electronic design and manufacturing hub.
Bridging digitalisation with the Export Promotion Mission, the government has promised to launch Bharat Trade Net as a centralised platform for trade documentation and financing solutions.
Direct tax reforms have focused greatly on the need to simplify and address compliance index including rationalising long-term capital gains tax rates, incentivising investments in international financial services centres, and a five-year extension of the sunset clause for eligible start-ups. The FM has also promised a simple income tax Bill, carrying forward a reformative stance.
The Budget has emphasised on a trust-based tax system, entailing reforms on certainty, litigation reduction, and voluntary compliance, including removing several penal provisions. Tax certainty package extends presumptive taxation for non-resident electronics service providers (with a presumptive profit rate of 25%) and exemption from Significant Economic Presence povisions for purchases from India. These changes shall catalyse GVCs engaged in large-scale electronics and semiconductor manufacturing. The Budget proposal aims to streamline the transfer pricing regime, including expansion of safe-harbour rules.
A host of Customs duty measures to boost domestic manufacturing and ameliorate value addition across key economic sectors has been mooted. Basic Customs Duty exemptions and concessional duties have been extended to life-saving medicine, critical minerals, shipping, and telecom industries. To address protracted litigation, the Budget has proposed to fix a time limit of two years for finalising provisional Customs duty assessment.
Taxation must endeavour to bridge systemic gaps between taxpayers and administration. In the wake of an ever-expansive multilateral order and possible tariff dissonances, the occasion was opportune for the Budget to herald a new dawn. A phased, reformatory approach has enlivened the possibility of a more equitable tax code. Economic synergies hinge on a verdant landscape of trade, investment, and cooperation between prominent member states. The next decade of tax transformations shall posit ebullience through these announcements.
Co-authored with Shankey Agrawal, partner, BMR Legal, and assisted by Nikky Jhamtani, managing associate, & associates Shinjani Agnihotri and Lopamudra Mahapatra