As the government prepares for the upcoming Union Budget 2026-27 presentation on February 1, the Finance Ministry reviewed the major Budget announcements and the progress achieved. The Finance Act 2025 brought about extensive changes to the Personal Income Tax structure through the New Tax Regime (NTR), resulting in increased disposable income for taxpayers. Effective from FY 2025-26 (AY 2026-27), these changes aim to modernize India’s decades-old direct tax system.
The Income Tax Bill, 2025, signifies a crucial move towards overhauling India’s direct tax framework, focusing on enhancing investor confidence, providing relief to taxpayers, and improving administrative efficiency. Notable reforms include adjustments in corporate tax rates, offering a 22% rate for companies not availing specified deductions, and a 15% rate for new manufacturing firms. Additionally, individual taxpayers benefit from more lenient tax slabs, lower rates, and enhanced rebates, with those earning up to Rs 12 lakh exempted from tax obligations under these revised provisions.
The Finance Act 2025 also extends benefits under Section 10 (23FE), allowing Sovereign Wealth Funds (SWFs) and Pension Funds to engage in qualifying infrastructure investments until March 31, 2030, while enjoying tax exemptions on dividends, interest, and Long-Term Capital Gains (LTCG). Furthermore, amendments related to the International Financial Services Centre (IFSC) have been fully implemented through the Finance Act, 2025, effective from April 1, 2025. The government’s commitment to ensuring ‘certainty of taxation’ for Alternative Investment Funds (AIF) has been fulfilled by clarifying the income classification from securities.
