The Indian government's budget for 2025-2026 introduces significant changes in taxation and trade policies, with a strong emphasis on supporting Micro, Small, and Medium Enterprises (MSMEs). This blog post explores these key areas, highlighting the reforms, incentives, and measures aimed at creating a more efficient, business-friendly, and globally competitive environment.
Tax Reforms
Direct Tax Reforms
- New Income Tax Bill: A new income tax bill will be introduced, designed to simplify the tax process for both taxpayers and tax administration, thereby reducing litigation.
- Income Tax Threshold: The new tax regime will ensure no income tax is payable for incomes up to ₹12 lakh (excluding special rate income), with marginal relief for those with slightly higher incomes.
- Rationalization of TDS and TCS: Tax deductions at source (TDS) and tax collected at source (TCS) will be rationalized by reducing rates and increasing threshold amounts.
- Extended Time Limit for Returns: The time limit for filing updated returns will be extended from two to four years.
- Charitable Trusts: The compliance burden for small charitable trusts will be eased by increasing their registration period from 5 to 10 years.
- Self-Occupied Properties: Taxpayers can now claim the annual value of two self-occupied properties as nil without any conditions.
Indirect Tax Reforms
- Customs Tariff Structure: The customs tariff structure will be rationalized by removing seven tariff rates, leaving only eight, including 'zero'.
- Cess and Surcharge: There will be a levy of no more than one cess or surcharge, with the Social Welfare Surcharge exempted on 82 tariff lines.
-
Relief on Import of Drugs and Medicines:
- 36 life-saving drugs and medicines will be fully exempted from Basic Customs Duty (BCD).
- 6 life-saving medicines will have a concessional customs duty of 5%.
-
Support for Domestic Manufacturing:
- Full BCD exemption on cobalt powder, lithium-ion battery scrap, lead, zinc, and 12 other critical minerals.
- More types of shuttle-less looms will be fully exempted from BCD.
- BCD on Interactive Flat Panel Displays (IFPD) will increase from 10% to 20%, while BCD on Open Cells and other components will be reduced to 5%.
- Exemption of BCD on raw materials for ship manufacturing will continue for another 10 years.
- BCD on Carrier Grade Ethernet switches will be reduced from 20% to 10%.
- Provisional Assessments: The time limit for finalizing provisional assessments under the Customs Act will be set at two years, with a possible one-year extension.
- Voluntary Declarations: Importers and exporters will be able to voluntarily declare material facts and pay duty with interest but without penalty.
Trade Facilitation
Export Promotion
- Export Promotion Mission: An Export Promotion Mission will be established, driven jointly by the Ministries of Commerce, MSME, and Finance, to facilitate easy access to export credit and support MSMEs.
- Extended Time for Handicraft Exports: The time period for exporting handicrafts is extended from six months to one year, with a further extension of three months possible, and more items added to the list of duty-free inputs.
-
BCD Exemptions:
- BCD on Wet Blue leather will be fully exempted, and export duty on crust leather will be exempted to facilitate exports.
- BCD on Frozen Fish Paste (Surimi) will be reduced from 30% to 5%, and BCD on fish hydrolysate will be reduced from 15% to 5%.
- Extended Time Limit for Repairs: The time limit for exporting foreign-origin goods imported for repairs will be extended to railway goods.
BharatTradeNet (BTN)
A digital public infrastructure for international trade will be established as a unified platform for trade documentation and financing solutions.
Warehousing
The government will facilitate the upgrading of infrastructure and warehousing for air cargo.
Support for MSMEs
MSMEs as the Second Engine of Growth
- Fund of Funds: A new Fund of Funds with a fresh contribution of ₹10,000 crore will be set up for startups.
- Support for First-Time Entrepreneurs: A new scheme will be launched for 5 lakh first-time women, Scheduled Castes, and Scheduled Tribes entrepreneurs, providing term loans up to ₹2 crore.
- Policy Measures for Labor-Intensive Sectors: The government will undertake specific policy and facilitation measures to promote employment and entrepreneurship in labor-intensive sectors.
- Global Toy Hub: A scheme to make India a global hub for toys will focus on
Top comments (0)