Proposed Amendments in Finance Bill, 2025
The Indian government has proposed several key changes in the Finance Bill, 2025, which include the abolition of certain levies, adjustments in pension regulations, and clarifications on the taxation of electronics manufacturers.
Scrapping of Equalisation Levy
- The 6% equalisation levy on online advertising services provided by non-resident entities, benefiting companies like Google, Meta, and X, is proposed to be scrapped.
- This move is part of 59 amendments introduced in the Lok Sabha by the Minister of State for Finance, Pankaj Chaudhary.
- The proposal coincides with bilateral trade discussions between New Delhi and Washington and aims to mitigate potential trade retaliations, particularly from the US.
- However, the corresponding income-tax exemption under Section 10(50) will be removed, bringing such revenues under regular taxation.
Pension Reforms
- Amendments aim to validate the Central Civil Services (Pension) Rules.
- The government reaffirms its authority to determine pension structures post a Supreme Court ruling.
- Pensions will continue to be determined by retirement dates, ensuring new pay commission benefits are applied only prospectively.
Electronics Manufacturing Taxation
- Changes to Section 44BBD of the Income Tax Act allow foreign electronics manufacturers to avail presumptive tax benefits.
- A proviso ensures Sections 44DA and 115A do not apply to non-residents in the electronics sector, avoiding legal disputes.
Income Tax Reforms
- Section 143(1) empowers the tax department to reconcile ITR filings with previous returns, improving accuracy.
- Amendments in Sections 113, 132, and 158 replace "Total Income" with "Total Undisclosed Income" in search and seizure taxation, focusing on undisclosed income only.
Offshore Fund Regulations
- Adjustments to Section 9A remove the condition on indirect ownership for offshore funds.
- The government regains the power to change these rules through notifications.
Key Highlights
- Pension Classification: Government authority to classify pensioners by retirement date is reaffirmed.
- Electronics Taxation: Section 44BBD excludes Sections 44DA and 115A, simplifying the tax regime.
- Search & Seizure: Clarification that only undisclosed income is targeted.
- ITR Processing: Amendments to improve reconciliation of ITRs with past filings.