Key tax & policy amendments impacting Technology Sector
India's journey into the digital age is a narrative of extraordinary growth and innovation. As a premier hub for technology services and emerging hub for electronics hardware manufacturing, India continues to play a vital role in the international arena. In this backdrop, the Union Budget 2025 offers a blueprint for the future, laying down a strategic roadmap that promises to amplify India's technological capabilities and foster an environment ripe for exponential growth in this sector.
The Union Budget 2025 introduces pivotal measures for this sector, including increased funding for the India AI mission, establishment of an AI Centre of Excellence for Education, and the creation of a Deep Tech Fund to spur start-up innovation. It also outlines a national framework to establish GCCs in tier 2 cities, leveraging India's extensive talent pool. Concurrently, the budget facelifts the indirect tax structure to support the 'Make in India' initiative, adjusting customs duties to incentivise economic value addition in the country.
This Union Budget and the upcoming Income Tax Bill is a strategic catalyst, set to elevate this sector into a new era of global leadership and innovation-driven growth.
How does the budget impact Technology sector?
Key amendments
Direct Tax
- New income tax bill
- A new direct tax bill to be introduced aiming to make the law more concise, lucid, and clear.
- This is expected to be announced next week.
- Rationalization of TDS/ TCS
- Seller of goods was required to collect tax @ 0.1% of the sale consideration exceeding INR50 lakhs subject to certain conditions. This stands withdrawn from 1 April 2025.
- The requirement for higher deduction/collection of tax from non-filers of income tax returns stands omitted from 1 April 2025.
- Increase in TDS threshold limits primarily for rent, professional fee, commission, etc, with effect from 1 April 2025.
- Rationalization of TP provisions
- Streamlined TP litigation by introducing a three-year block assessment, aligning with international standards. Taxpayers can opt to apply the same ALP for similar international transactions for three consecutive years.
- Proposal to expand the scope of Safe Harbour Rules to reduce litigation and provide certainty in international taxation.
- Presumptive taxation for NR ESDM service providers
- Introduction of presumptive taxation regime for NR's income from services and technology provision for electronics manufacturing and production in India under a notified scheme and subject to satisfaction of prescribed conditions.
- A sum equal to 25% of the aggregate of the amounts shall be deemed to be the profits and gains of such NR from this business.
- This is applicable from 1 April 2025.
- Proposal to introduce a Safe Harbour for NR storing components for supply to specified electronics manufacturing units.
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