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Finance Minister Nirmala Sitharaman today presented the first full Union Budget of Prime Minister Narendra Modi’s third term, marking her record eighth consecutive budget. This budget focuses on significant reforms and measures aimed at boosting the economy, enhancing ease of doing business, and further supporting taxpayers.
Key Reforms to Simplify Taxation and Enhance Investments
The Indian government has already introduced several taxpayer-friendly reforms over the last decade. These include faceless assessments, a taxpayers’ charter, faster tax returns, and nearly 99% of returns now being on self-assessment. Continuing these efforts, the government has introduced several new initiatives:
- The Foreign Direct Investment (FDI) limit for the insurance sector will rise from 74% to 100%. This enhanced limit will be available for companies investing the entire premium in India.
- A new ‘Grameen Credit Score’ framework will be developed by Public Sector Banks to better serve Self-Help Groups (SHGs) and rural areas.
- A forum for regulatory coordination will be established to support the development of pension products.
- A High-Level Committee will be set up to review non-financial sector regulations, certifications, licenses, and permissions.
- To promote investment, an Investment Friendliness Index will be launched in 2025.
- The Financial Stability and Development Council (FSDC) will introduce a mechanism to assess the impact of existing financial regulations and subsidiary instructions.
Supporting Taxpayers with Reforms and Simplifications
The budget also focuses on providing relief to taxpayers and simplifying taxation processes:
- The government has introduced a time limit for finalizing Provisional Assessments under the Customs Act, 1962. This will provide clarity and reduce uncertainty for traders, with a two-year limit extendable by one more year.
- Taxpayers can now claim the annual value of up to two self-occupied properties without any conditions, easing the burden on homeowners.
- To streamline the transfer pricing process, a new scheme will allow taxpayers to determine the arm’s length price of international transactions for a three-year block period, aligning with global best practices.
- The government has expanded Safe Harbour Rules to reduce litigation and provide certainty in international taxation.
Special Measures for Startups and the Shipping Industry
The government has also introduced specific measures to promote startups and the shipping sector:
- The period for incorporating startups has been extended by five years, allowing startups to avail benefits if incorporated before April 1, 2030.
- To boost inland water transport, the government has proposed extending the existing tonnage tax scheme to inland vessels registered under the Indian Vessels Act, 2021.
- For the International Financial Services Centre (IFSC), benefits have been proposed for ship-leasing units, insurance offices, and treasury centres of global companies. The cut-off date for claiming these benefits has been extended until March 31, 2030.
Finance Minister Sitharaman’s budget continues the government’s push for tax reforms, investment-friendly policies, and support for key industries like insurance, shipping, and startups. These initiatives are designed to make doing business in India easier and more attractive, fostering economic growth and stability in the long term.
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