Finance Bill 2025 plays a pivotal role in shaping India's financial, economic landscape, including job generation

New Delhi: Come April 2025. With the Narendra Modi-led government’s strong emphasis on boosting domestic manufacturing, tax certainty and economic growth, the Finance Bill 2025 plays a pivotal role in shaping India's financial and economic landscape, including job creation. The finance bill 2025, approved by Parliament on Thursday, however, will not only impact individuals in some way or the other, but also businesses in the corporate sector in the country as well as the state economy for the fiscal year 2025-26.

One of the most significant amendments in the finance bill 2025 is the abolition of the 6 per cent digital tax on online advertisements, also known as the equalisation levy. This change aims to bring more tax clarity and ease compliance for businesses operating in the digital space. “The finance bill aims to provide tax certainty and improve the ease of doing business. The withdrawal of the equalisation levy was part of an ongoing process since 2023,” finance minister Nirmala Sitharaman had said.

Besides, the government has also hiked income tax (I-T) rebate to Rs 12 lakh per annum from Rs 7 lakh earlier in the 2025-26 Budget. For the salaried and middleclass, this rebate will be Rs 12.75 lakh per year after taking into account the standard deduction. The hike in I-T rebate will lead to tax foregone to the tune of Rs 1 lakh crore in FY26. This measure will not only give a sigh of relief to the common man but also boost consumption demand and will help grow the country’s economy.

Amid the US tariff threat which may hit the Indian economy, the government also took a major step to rationalise customs tariffs where the Budget 2025 aims to boost domestic production and enhance export competitiveness by reducing duties on raw materials and inputs, making domestic products more cost-effective. The government has removed seven tariff rates on industrial goods to give fillip to some sectors.

Among all key changes made in the bill, the government has also proposed yet another amendments to Finance Bill, 2025, under which tax officers will determine only undisclosed income for block assessments in search cases, and not total income of the assessee. The amendment, which will be made effective retrospectively from September 1, 2024, aims at the tax rationalisation in the country.

What is the Finance Bill?

Finance Bill refers to the bill that is strongly representative of the country's finances, about what is paid in amount and what is received. It is a receipt signifying the exchange made between two parties', in this case countries' international trade.

What is new in the Finance Bill 2025?

The Finance Bill, 2025 amends the definition of ‘capital asset’ in section 2(14) to include securities held by investment funds referred to in section 115UB, i.e., category I and category II alternative investment funds (AIF) regulated under the SEBI (AIF) Regulations, 2012.

MAJOR IMPACTS

The Finance Bill, 2025 is expected to either directly or indirectly impact the common man, salaried, middleclass and state economy for the fiscal year 2025-26 as well. Some key changes in the finance bill 2025 may also impact investment funds, presumptive taxation, insurance policies, and tax exemptions in the International Financial Services Centre (IFSC).

On Digital Businesses

The removal of the 6 per cent digital tax will reduce compliance burdens and encourage investments in India’s digital economy.

On Taxpayers

The government has proposed measures for tax rationalisation, enhancing ease of doing business and providing tax relief to individuals and corporations.

For States

The increased resource transfer will provide more funds for state-level development projects.

For Industries

The focus on tariff rationalization and removal of duty inversion will reduce input costs and improve manufacturing competitiveness.

On Investment:

On the investment front, the investment fund rules have been relaxed in the new bill. Earlier, Indian residents could not invest more than 5 per cent in an eligible investment fund, directly or indirectly. The amendment removes indirect investment from this limit, reducing compliance burdens and encouraging fund managers to relocate offshore funds. Additionally, the Central government can now modify this condition if required.

For Tech Services

The new change in the bill introduces presumptive taxation for non-residents providing technology or services to an electronics manufacturing facility in India. It deems 25 per cent of total receipts as taxable business income. The amendment clarifies that sections related to permanent establishments and royalty taxation will not apply to this income.

For Life insurance

The finance bill 2025 exempts life insurance proceeds issued by IFSC insurance offices from tax. The amendment corrects a previous reference from IFSC insurance intermediaries to IFSC insurance offices.

Tax exemptions for specified funds

Specified funds, including retail schemes and Exchange Traded Funds (ETFs), must now comply with IFSC regulations to qualify for tax exemptions. This ensures alignment with regulatory standards.

Extended exemptions for non-residents

Non-residents previously received tax exemptions on derivative transactions with Offshore Banking Units. The amendment extends this to transactions with foreign portfolio investors (FPIs) in IFSC. Additionally, exemptions now cover income distribution from over-the-counter or OTC derivatives.

BUDGET BASICS FOR YEAR 2025-26

The Union Budget for 2025-26 outlines a total expenditure of Rs 50.65 lakh crore, reflecting a 7.4 per cent increase compared to the previous fiscal year. However, the budget will support manufacturing units, domestic value addition, promote exports, facilitate trade and also provide relief to the common people. The government said that the increased budget allocations are driven by higher interest payments on market loans, treasury bills, external borrowings and provident funds. Besides, it has increased capital investment in the armed forces and has given greater provisions for employment generation schemes as well

KEY ALLOCATION & GDP TARGET

Capital Expenditure: Rs 11.22 lakh crore (effective Rs 15.48 lakh crore)

Gross Tax Revenue: Rs 42.70 lakh crore

Gross Borrowing: Rs 14.01 lakh crore

Centrally Sponsored Schemes: Rs 5.41 lakh crore (up from Rs 4.15 lakh crore in FY 2024-25)

Central Sector Schemes: Rs 16.29 lakh crore (up from Rs 15.13 lakh crore in the previous year)

Resource Transfer to States: Rs 25.01 lakh crore (an increase of Rs 4.91 lakh crore over 2023-24)

GDP Target: The government has revised its fiscal deficit target to 4.4% of GDP, an improvement from 4.8% in FY 2024-25. The estimated GDP for FY 2025-26 is Rs 3,56,97,923 crore, reflecting a 10.1% increase over the previous year’s estimates.