PART B: INDIA’S BUDGET 2026-27

As India moves steadily toward the vision of becoming a Viksit Bharat (Developed India), the tax system plays a crucial role in supporting growth, investment, and fairness. In Budget 2026–27 Part B, the government introduces a series of tax reforms aimed at making taxation simpler, more transparent, and growth-oriented.

PART B: TAX REFORMS FOR VIKSIT BHARAT

DIRECT TAXES REFORM

NEW INCOME TAX ACT, 2025

Comprehensive Legislative Modernization

Timeline:

• Announcement: July 2024
• Completion: Record time (9 months)
• Effective Date: 1st April 2026

Key Features:

• Comprehensive review of Income Tax Act, 1961 (64-year-old legislation)
• Simplified Forms and Rules notified shortly
• Redesigned compliance mechanisms for ordinary citizens
• Adequate transition time for taxpayer familiarity

Objective: Remove outdated provisions, align with modern economy, ease citizen compliance

EASE OF LIVING INITIATIVES—DIRECT TAXES

1. Motor Accident Claims Tribunal Interest Exemption

Proposal:

• Interest awarded by Motor Accident Claims Tribunal (natural persons) → Exempt from Income Tax
• TDS elimination on such interest payments
• Benefit: Accident victims receive full awarded amount without tax deduction

Impact: Relief for vulnerable populations receiving accident compensation

2. Overseas Tour Program TCS Reduction

Current Rate: 5% and 20% TCS (Tax Collected at Source) Proposed Rate: 2% TCS Condition: No amount stipulation

Benefit: Simplified compliance, lower tax burden on travel service providers and consumers

3. Education & Medical LRS TCS Rationalization

Liberalized Remittance Scheme (LRS)—Education & Medical Purposes

• Current Rate: 5% TCS
• Proposed Rate: 2% TCS

Scope: Overseas education and medical treatment remittances Benefit: Reduced tax friction on essential personal remittances

4. Manpower Services TCS Standardization

Proposal: Explicitly classify manpower services within contractor payment TDS scope

Tax Rate: 1% or 2% TCS (eliminating ambiguity)

Benefit: Clear compliance pathway for labor/staffing service providers and users

5. Small Taxpayer Deduction Certificate Automation

Mechanism: Rule-based automated process (no assessing officer application required)

Features:

• Self-assessment determines lower/nil deduction eligibility
• Instant digital issuance
• Reduces administrative burden

Benefit: Simplified TDS deferral for small taxpayers with consistent compliance history

6. Securities Deposition Form Simplification

Current Challenge: Individual investors holding securities across multiple companies

Proposal: Enable depositories to accept Forms 15G/15H directly and distribute to relevant companies

Benefit: Single form submission for multiple entities; automated distribution; reduced documentation burden

7. Return Revision Timeline Extension

Current Deadline: 31st December Proposed Deadline: 31st March

Additional Requirement: Nominal fee for late revision

Benefit: Extended compliance window; allows tax planning adjustments; reduces missed deadline penalties

8. Tax Return Filing Staggered Timeline

Individual Returns (ITR 1 & 2):

• Filing Deadline: 31st July (unchanged)
• Benefit: Standard compliance period for salaried individuals

Non-Audit Business Cases & Trusts:

• Extended Deadline: 31st August
• Benefit: Additional month for complex business return preparation

Rationale: Staggered filing reduces administrative bottlenecks; accommodates preparation complexity

9. Non-Resident Property Sale TDS Simplification

Current Requirement: Resident buyer must use TAN (Tax Account Number)

Proposed Change: Buyer’s PAN-based challan for TDS deduction and deposit

Benefit: Eliminates TAN requirement; simplified process; broader applicability

10. One-Time 6-Month Foreign Asset Disclosure Scheme

Objective: Address practical compliance issues for:

• Students
• Young professionals
• Tech sector employees
• Relocated NRIs
• Others with overseas assets/income complexity

Category A: Non-Disclosure of Overseas Income/Assets

Undisclosed Amount Limit: Up to ₹1 crore

Tax Obligation:

• 30% of Fair Market Value (FMV) of asset as tax
• 30% of undisclosed income as additional income tax (in lieu of penalty)
• Total effective rate: 60% on disclosed amount

Benefit: Immunity from prosecution; simplified disclosure pathway

Category B: Disclosed Income But Undeclared Asset

Asset Value Limit: Up to ₹5 crore

Requirements:

• Paid due tax on disclosed income
• Could not declare acquired asset

Tax Obligation:

• ₹1 lakh one-time fee
• Immunity from both penalty and prosecution

Benefit: Low-cost compliance regularization; legal certainty

Scheme Duration

• 6-month window (specific dates TBD)
• One-time opportunity for eligible taxpayers

RATIONALIZING PENALTY & PROSECUTION

1. Integrated Assessment & Penalty Proceedings

Current System: Separate assessment and penalty orders

Proposed Change: Single common order for both assessment and penalty

Interest on Penalty:

• No interest liability during appeal to First Appellate Authority
• Immunity applies irrespective of appeal outcome

Pre-Payment Reduction:

• Current: 20% of demand
• Proposed: 10% of demand
• Calculation: Only core tax (excluding penalties)

Benefit: Reduced litigation, faster resolution, lower penalty burden during appeals

2. Return Update After Reassessment Initiation

Eligibility: Taxpayers with initiated reassessment proceedings

Mechanism: File updated return with additional 10% tax surcharge

Process:

• 10% surcharge over standard applicable tax rate for that year
• Updated return becomes primary basis for assessing officer proceedings
• Original return superseded

Benefit: Late correction opportunity; reduced back-taxes through voluntary disclosure

Rationale: Encourages voluntary correction before formal assessment conclusion

3. Misreporting Immunity Framework

Current Rule: Immunity from penalty/prosecution applies to underreporting

Extension: Apply immunity framework to misreporting cases

Additional Tax Obligation:

• 100% of tax amount as additional income tax (beyond regular tax + interest)
• Penalty immunity: Available
• Prosecution immunity: Available

Benefit: Taxpayers can correct misstatements with penalty immunity but full tax liability

4. Technical Default Penalties Conversion to Fee

Penalties Converted to Fee:

• Failure to get accounts audited
• Non-furnishing of transfer pricing audit report
• Default in furnishing financial transaction statement

Benefit: Reduced penalty quantum; simplified compliance characterization; cost reduction

5. Prosecution Framework Rationalization

Principle: Maintain deterrence for serious offenses while being proportionate

Changes Implemented:

Decriminalization

• Non-production of books of account and documents → No criminal liability
• TDS payment requirement non-compliance in kind transactions → Decriminalized
• Minor offences → Fine only (no imprisonment)

Graduated Prosecution

• Remaining prosecutions graded by offense severity
• Maximum imprisonment: 2 years (reduced from current longer periods)
• Court power to convert imprisonment to fine

Benefit: Proportionate penalty system; focuses criminal prosecution on serious violations

6. Non-Immovable Foreign Asset Prosecution Immunity

Current Provision: Penalty-free for non-disclosure <₹20 lakh

Proposed Extension: Also provide prosecution immunity

Effective Date: Retrospective from 1st October 2024

Benefit: Protects taxpayers with small unreported foreign real estate from criminal liability

COOPERATIVES TAX SUPPORT

1. Cooperative Deduction Expansion

Current Scope: Primary cooperatives supplying milk, oilseeds, fruits, vegetables (member-produced)

Extended Scope: Add cattle feed and cotton seed (member-produced)

Tax Impact: Deduction allowed to cooperatives for these expanded products

Benefit: Enhanced support for agricultural input supply cooperatives

2. Inter-Cooperative Dividend Deduction

Provision: Dividends received by cooperatives from other cooperatives

Tax Treatment: Deduction allowed under new tax regime

Condition: Dividend must be further distributed to member cooperatives

Benefit: Tax-neutral cooperative dividend flow; incentivizes cooperative networks

3. National Cooperative Federation Dividend Exemption

Eligible Entity: Notified national cooperative federation

Exemption Period: 3 years

Investment Scope: Investments made in companies up to 31st January 2026

Conditions:

• Exemption applies only to dividend income
• Dividends must be further distributed to member cooperatives

Benefit: Tax incentive for cooperative investment in corporate entities

SUPPORTING IT SECTOR AS GROWTH ENGINE

Sector Context

Global Leadership Areas:

• Software development services
• IT-enabled services
• Knowledge process outsourcing
• Contract R&D (software-related)

Characteristics: Inter-connected business segments with synergies

1. IT Services Unified Category & Safe Harbour

Consolidation: All IT services segments clubbed under single category: Information Technology Services

Safe Harbour Margin: Single uniform margin of 15.5% applicable to all IT services

Benefit: Simplified transfer pricing compliance; consistency across segments

2. Safe Harbour Threshold Enhancement

Current Threshold: ₹300 crore turnover

Proposed Threshold: ₹2,000 crore turnover

Impact: 567% increase; covers larger IT services companies

Benefit: More IT companies qualify for certainty; reduced transfer pricing disputes

3. Automated Safe Harbour Approval & Continuity

Approval Process: Automated rule-driven mechanism (no tax officer discretion)

Application & Continuity: Once applied by company:

• Automatic approval
• Can continue for 5 consecutive years uninterrupted
• Company choice to continue or discontinue

Benefit: Certainty, predictability, reduced compliance interactions

4. Advance Pricing Agreement (APA) Fast-Tracking

Service: Unilateral APA for IT services

Standard Timeline: 2 years (vs. longer historical timelines)

Extension Possibility: Additional 6 months on taxpayer request (total 2.5 years)

Benefit: Faster dispute resolution; certainty for pricing methodologies

5. Modified Returns Facility for Associated Entities

Current Provision: Modified return facility available to APA-entering entity

Extension: Extend same facility to associated entities of APA-entering company

Benefit: Consistency across group entities; synchronized compliance

ATTRACTING GLOBAL BUSINESS & INVESTMENT

1. Data Centre Cloud Services Tax Holiday

Objective: Enable critical infrastructure development; boost data centre investment

Beneficiary: Foreign companies providing cloud services globally

Tax Holiday Period: Till 2047 (22 years)

Condition: Must provide services to Indian customers through Indian reseller entity

Service Model:

• Global customer service: Any jurisdiction
• Indian customer service: Mandated through resident Indian entity

Benefit: Long-term tax certainty; incentivizes FDI in data centre infrastructure

2. Related Entity Data Centre Safe Harbour

Scenario: Foreign company with Indian related entity providing data centre services

Safe Harbour Margin: 15% profit on cost

Tax Impact: Substantially lower than competing jurisdictions

Benefit: Encourages multinational group data centre consolidation in India

3. Electronic Manufacturing Just-In-Time Logistics Safe Harbour

Context: Global electronic manufacturing efficiency requires component warehousing

Beneficiary: Non-residents warehousing components for electronic manufacturing

Location: Bonded warehouse (duty-free zone)

Safe Harbour Margin: 2% of invoice value

Effective Tax: ~0.7% (substantially below competing jurisdictions)

Benefit: Competitive warehousing costs attract electronics manufacturing supply chains

4. Toll Manufacturing Capital Goods Exemption

Objective: Promote India as toll manufacturing destination

Beneficiary: Non-resident providing capital goods, equipment, tooling to toll manufacturers

Tax Exemption Period: 5 years

Facility Location: Bonded zone

Benefit: Reduces capex costs for non-resident investors; attracts manufacturing contracts

5. Global Non-Resident Expert Income Exemption

Objective: Attract global talent for long-term India engagement

Beneficiary: Non-resident experts

Exemption Scope: Global (non-India sourced) income

Duration: 5 years

Requirement: Work under notified schemes/arrangements

Benefit: Competitive total compensation packages; attracts senior global expertise

6. Non-Resident Minimum Alternate Tax (MAT) Exemption

Current Rule: All non-residents potentially subject to MAT

Proposed Change: Exempt non-residents paying tax on presumptive basis from MAT

Benefit: Reduced tax burden; encourages non-resident business participation

TAX ADMINISTRATION MODERNIZATION

1. ICDS Integration into IndAS

Current System: Separate accounting standards—IndAS for financial reporting, ICDS for tax

Proposed Change: Incorporate ICDS requirements into Indian Accounting Standards (IndAS)

Implementation:

• Joint Committee: Ministry of Corporate Affairs + Central Board of Direct Taxes
• Timeline: Effective from tax year 2027-28
• Impact: Single integrated accounting standard

Benefit: Eliminates dual compliance; aligns financial and tax accounting; reduces complexity

2. Accountant Definition Rationalization

Objective: Support PM Modi’s vision of home-grown accounting firms becoming global leaders

Action: Rationalize accountant definition for Safe Harbour Rules applicability

Benefit: Enables Indian CA firms to serve more clients under safe harbour; enhances professional scope

OTHER DIRECT TAX PROPOSALS

1. Buyback Taxation Rationalization

Background: Previous buyback tax regime aimed at preventing promoter abuse

Refinement: Protect minority shareholder interests through capital gains taxation

New Framework:

All Shareholders

• Buyback taxed as Capital Gains (not income)
• Uniform treatment across shareholders

Promoter Additional Tax

• Additional buyback tax on promoter buybacks
• Effective tax rate: 22% (corporate promoters)
• Effective tax rate: 30% (non-corporate promoters)

Rationale: Disincentivizes tax arbitrage misuse while providing capital gains treatment

2. Tax Collected at Source (TCS) Rationalization

Specific Goods Rate Reduction

Items Affected:

• Alcoholic liquor
• Scrap materials
• Minerals

New Rate: 2% TCS (consolidated)

Tendu Leaves Rate Reduction

Current Rate: 5% TCS Proposed Rate: 2% TCS

Benefit: Simplified rate structure; reduced compliance burden

3. Securities Transaction Tax (STT) Adjustment

Objective: Align STT with market maturity; address futures market efficiency

Futures STT Increase

• Current Rate: 0.02%
• Proposed Rate: 0.05%
• Rationale: Moderate increase for derivatives market stabilization

Options STT Increase

• Options Premium: 0.10% → 0.15%
• Options Exercise: 0.125% → 0.15%
• Rationale: Convergence to uniform rate; market integrity

4. Corporate Tax Regime Transition Incentive

Background: 2019 Corporate Tax Regime introduced simplified system with lower rates

Challenge: Limited adoption of new regime

Incentive Mechanism:

MAT Credit Set-Off Restriction

• Brought-forward MAT credit: Usable only in new regime
• New regime limitation: ¼ (25%) of tax liability
• Old regime: No MAT credit set-off available

Benefit: Financial incentive encouraging new regime adoption

5. Minimum Alternate Tax (MAT) Finalization

MAT to Final Tax Conversion:

• MAT becomes final tax (not provisional with credit)
• No further MAT credit accumulation from 1st April 2026
• Effectively changes MAT role from provisional to definitive tax

Rate Adjustment:

• Current MAT Rate: 15%
• New Final Tax Rate: 14% (1% reduction)
• Benefit: Lower effective tax rate offsetting credit elimination

Transition:

• Brought-forward MAT credits (through 31st March 2026): Continue available for set-off
• Mechanism: Subject to ¼ limitation in new regime

INDIRECT TAXES REFORM

Overview: Customs & Central Excise

• Simplify tariff structure • Support domestic manufacturing capacity • Promote export competitiveness • Correct duty inversions • Facilitate global trade participation

CUSTOMS & EXCISE: EXEMPTIONS & TARIFF SIMPLIFICATION

1. Long-Standing Exemptions Review

Action: Remove outdated/long-continuing customs duty exemptions

Criteria for Removal:

• Items now manufactured domestically
• Imports minimal or negligible

Benefit: Protect domestic industry; simplify tariff; increase revenue

2. Tariff Schedule Modernization

Current System: Duty rates scattered across various customs notifications

Proposed Change: Incorporate effective rates directly into tariff schedule

Benefit: Simplified rate ascertainment; reduced notification checking; enhanced clarity

SECTOR-SPECIFIC EXPORT PROMOTION

1. Marine & Seafood Export Support

Duty-Free Input Import Enhancement

Current Limit: 1% of FOB (Free on Board) value of previous year export turnover

Proposed Limit: 3% of FOB value

Scope: Specified inputs used in seafood product processing for export

Benefit: Increased input availability; competitive production costs; export competitiveness

2. Leather Product Export Expansion

Shoe Uppers Duty-Free Facility

Current Availability: Shoe/synthetic footwear exports only

Extension: Also applicable to Shoe Uppers exports

Benefit: Expands tariff support across leather product categories

Export Timeline Extension

Current Period: 6 months from initial export clearance

Proposed Period: 1 year from clearance

Applicable Products:

• Leather/textile garments
• Leather/synthetic footwear
• Other leather products

Benefit: Longer supply chain management window; operational flexibility

ENERGY TRANSITION & SECURITY

1. Lithium-Ion Battery Manufacturing Support

Extension of Duty Exemption: Capital goods used for manufacturing Lithium-Ion Cells

Expansion: Also include battery energy storage systems (BESS) manufacturing

Scope: Basic customs duty exemption extended to BESS production equipment

Benefit: Incentivizes domestic battery and energy storage ecosystem development

2. Solar Glass Manufacturing Support

Input Material: Sodium antimonate (used in solar glass)

Exemption: Basic customs duty exemption on import

Benefit: Reduces solar glass production costs; supports renewable energy manufacturing

NUCLEAR POWER SECTOR SUPPORT

1. Capital Goods Exemption Extension & Expansion

Current Exemption: Capital goods for Nuclear Power Projects (till specific year)

Proposed Changes:

• Extension: Till year 2035 (extended timeline)
• Expansion: Apply to all nuclear plants irrespective of capacity

Current Limitation: Previously capacity-restricted

Benefit: Long-term certainty; uniform support across all nuclear facilities; supports energy security

CRITICAL MINERALS PROCESSING

Capital Goods Duty Exemption

Beneficiary: Capital goods imports for critical minerals processing in India

Tax Exemption: Basic customs duty

Strategic Importance: Supports domestic critical mineral value chain; reduces import costs

Benefit: Attracts processing investments; reduces dependency on imported processed minerals

BIOGAS & RENEWABLE ENERGY

Biogas Blended CNG Excise Support

Current Situation: CNG subject to Central Excise duty calculation on full value

Proposed Change: Exclude biogas value from excise duty calculation

Calculation: Excise only on fossil CNG portion

Benefit: Tax incentive for biogas blending; environmental benefit; renewable energy promotion

CIVIL & DEFENCE AVIATION

1. Civilian Aircraft Manufacturing Support

Components & Parts: Basic customs duty exemption

Aircraft Types: Civilian, training, and other aircraft

Scope: All parts and components for manufacturing

Benefit: Reduces aircraft production costs; supports aviation manufacturing ecosystem

2. Defence Aircraft Maintenance Support

Raw Materials: Basic customs duty exemption

End Use: Parts manufacture for maintenance, repair, overhaul (MRO)

Beneficiary: Defence sector units

Benefit: Reduces MRO costs; supports defence sector self-reliance

ELECTRONICS SECTOR VALUE ADDITION

Microwave Oven Manufacturing Support

Components: Specified parts used in microwave oven manufacturing

Exemption: Basic customs duty

Strategic Goal: Deepen value addition in consumer electronics sector

Benefit: Cost reduction; competitiveness; value-added manufacturing promotion

SPECIAL ECONOMIC ZONES (SEZ) SUPPORT

SEZ-DTA Concessional Sales

Challenge: SEZ manufacturing unit capacity underutilization due to global trade disruptions

Measure: One-time special provision enabling SEZ→Domestic Tariff Area (DTA) sales

Sales Mechanism:

• Concessional duty rates on sale to DTA market
• Quantity limitation: Prescribed proportion of annual exports
• Time-bound: Special one-time measure

Regulatory Framework: Necessary changes to ensure level-playing field between SEZ and DTA units

Benefit: Revives underutilized capacity; supports manufacturing during disruptions

EASE OF LIVING—CUSTOMS DUTY SIMPLIFICATION

1. Personal Use Goods Duty Reduction

Current Rate: 20% on dutiable goods imported for personal use

Proposed Rate: 10% on dutiable goods

Scope: Applies to all goods imported for personal consumption

Benefit: Reduces personal import costs; travel-related relief; expatriate support

2. Cancer Drugs Duty Exemption

Beneficiary: Cancer patients

Items: 17 critical drugs/medicines

Exemption: Basic customs duty

Benefit: Reduced treatment costs; healthcare accessibility; patient relief

3. Rare Disease Medicines Exemption Expansion

Current Coverage: Select rare diseases with import duty exemption

Expansion: 7 additional rare diseases added

Scope: Personal imports of drugs, medicines, Food for Special Medical Purposes (FSMP)

Benefit: Treatment accessibility for rare disease patients; cost reduction

CUSTOMS PROCESS MODERNIZATION

Strategic Objective

India’s growing global trade role requires customs processes with minimal intervention, faster goods movement, and enhanced certainty for trading community.

TRUST-BASED CUSTOMS SYSTEMS

1. Authorised Economic Operator (AEO) Duty Deferral Enhancement

Tier-2 & Tier-3 AEO Deferral Period Extension

Current Deferral Period: 15 days

Proposed Period: 30 days

Beneficiary: AEOs certified at Tier 2 or Tier 3 level

Benefit: Doubles payment deferral; improves cash flow management; operational flexibility

2. Manufacturer-Importer Duty Deferral

Eligibility: Manufacturer-importers meeting AEO standards

Facility: Same duty deferral facility available to AEO-accredited entities

Incentive Effect: Encourages progression to full Tier-3 AEO accreditation

Benefit: Cost reduction; operational efficiency; compliance incentive

3. Advance Ruling Validity Extension

Objective: Enable business planning certainty

Current Validity: 3 years from issuance

Proposed Validity: 5 years from issuance

Binding: Ruling binding on Customs authority

Benefit: Extended certainty; multi-year planning horizon; reduced reinterpretation risk

4. Whole-of-Government AEO Recognition

Approach: Leverage AEO accreditation across government agencies

Mechanism: Government agencies recognize and provide preferential treatment to AEO-accredited entities

Areas: Cargo clearance, inspections, compliance verification

Benefit: Consistent trust-based treatment; streamlined government interactions

5. Risk System Trusted Importer Recognition

Mechanism: Regular importers with established, trusted supply chains recognized in risk systems

Effect: Automated verification minimization for recognized entities

Benefit: Reduced physical inspections; faster clearance; operational efficiency

6. Export Cargo Electronic Sealing & Factory Clearance

Modernization: Electronic sealing technology integration

Process: Export cargo cleared directly from factory premises to ship

Elimination: Separate port-level clearance procedures

Benefit: Reduced transit time; lower logistics costs; enhanced supply chain efficiency

7. Automatic Clearance for Compliant Imports

Trigger: Goods without compliance requirements

Process:

• Trusted importer files bill of entry
• Goods arrive at port
• Automatic Customs notification for clearance formalities
• Immediate release upon arrival (post-duty payment)

Benefit: Seamless imports; minimal documentation; immediate availability

8. Customs Warehousing Framework Transformation

Current System: Officer-dependent approvals; manual processes

Proposed System: Warehouse operator-centric model

• Self-declarations (operator-based compliance)
• Electronic tracking (real-time visibility)
• Risk-based audit (targeted inspection)

Structural Changes:

• Elimination of officer-dependent approvals
• Reduced transaction delays
• Lower compliance costs

Benefit: Modernization; efficiency; cost reduction; compliance through systems

EASE OF DOING BUSINESS—CUSTOMS CLEARANCE

1. Integrated Multi-Agency Digital Window

Objective: Seamless single-window clearance across government agencies

Timeline: By end of FY2026-27

Scope: Seamlessly interconnected digital platform

Components: All clearance approvals from Government agencies

Benefit: Reduced bureaucracy; single-window efficiency; faster clearance

2. Compliance-Heavy Categories Fast-Tracking

Target Sectors: Foods, drugs, plant, animal, wildlife products (70% of interdicted cargo)

Action: Operationalize integrated digital window processes

Timeline: April 2026

Benefit: Reduces clearance delays for regulated items; addresses inspection bottleneck

3. Zero-Compliance Goods Immediate Release

Eligible Goods: Items with no compliance requirements

Process:

• Online importer registration completed
• Duty payment made
• Immediate Customs clearance authorization

Timing: Same-day or next-day release

Benefit: Streamlined process; no documentation delays; enhanced competitiveness

4. Customs Integrated System (CIS) Rollout

Scope: Single, integrated, scalable platform for all Customs processes

Timeline: Rollout completion in 2 years (by end FY2027-28)

Integration: Replaces fragmented legacy systems

Benefit: Unified interface; data consistency; automation capability; future-ready infrastructure

5. Non-Intrusive Scanning Technology Expansion

Technology: Advanced imaging and AI-powered risk assessment

Expansion Plan: Phased rollout across major ports

Target Goal: Scan every container across major ports

Benefit: Enhanced security; reduced physical inspections; faster container movement

NEW EXPORT OPPORTUNITIES

1. Fisheries EEZ & High Seas Support

Objective: Enable Indian fishermen to fully harness ocean economic value

Geographic Scope: Exclusive Economic Zone (EEZ) and High Seas

Duty-Free Fish Catch

Benefit: Fish caught in EEZ/High Seas → Duty-free

Requirement: Caught by Indian fishing vessels

Export Treatment

Classification: Landings on foreign ports → Treated as goods export

Benefit: Export benefits, incentives, support apply

Safeguards

Measures: Anti-misuse protections during:

• Fish catch
• Transit
• Transshipment

Benefit: Prevents false claims; ensures compliance; legitimate export support

2. E-Commerce Small Business Export Support

Target Beneficiaries: Small businesses, artisans, start-ups

Objective: Access global markets via e-commerce platforms

Courier Export Value Cap Removal

Current Limit: ₹10 lakh per consignment

Proposed Limit: No value cap

Benefit: Unlimited export value capability; scalable business growth

Rejected/Returned Consignment Handling

Modernization: Technology-enabled identification and processing

Benefit: Efficient returns management; cost reduction; customer satisfaction

EASE OF LIVING—TRAVEL & SETTLEMENT

1. Baggage Clearance Rules Revision

Objective: Address genuine passenger concerns; modernize travel provisions

Revisions:

• Enhanced duty-free allowances aligned with present-day travel realities
• Clarity on temporary carriage of goods (imports and exports)

Benefit: Reduced travel hassles; updated provisions; passenger relief

2. Penalty Settlement Provision

Challenge: Honest taxpayers willing to settle tax disputes face penalty stigma

Solution: Alternative settlement mechanism

Process: Taxpayers can close cases by paying additional amount in lieu of penalty

Benefit: Removes negative connotation; facilitates voluntary settlement; dispute closure

Tax Treatment: Amount paid characterized as settlement fee (not penalty)

SUMMARY: DIRECT & INDIRECT TAX REFORM PILLARS

Pillar	Focus	Outcome
New Income Tax Act 2025	Modernization & Simplification	Ordinary citizen compliance ease; outdated provisions removal
Ease of Living	Taxpayer relief measures	Reduced TCS/TDS; timeline extensions; disclosure simplification
Penalty & Prosecution	Rationalization & Proportionality	Integrated proceedings; graduated prosecution; immunity frameworks
IT Sector Support	Growth enablement	Unified safe harbour; threshold increase; APA fast-tracking
Global Business Attraction	FDI & Infrastructure	Data centre tax holiday; safe harbours; talent attraction
Cooperatives	Sector support	Extended deductions; dividend flow incentives
Customs Modernization	Process efficiency	Trust-based systems; automation; AEO recognition
Export Promotion	Competitiveness enhancement	Seafood, leather, minerals support; E-commerce facilitation
Energy & Strategic Sectors	Infrastructure support	Battery, solar, nuclear, critical minerals duty support
Sector-Specific Support	Manufacturing promotion	Electronics, aviation, biogas, SEZ assistance

KEY STATISTICS & TARGETS

Direct Tax Reforms:

• New Income Tax Act: 64-year modernization
• IT Services Safe Harbour Threshold: ₹300 cr → ₹2,000 cr (567% increase)
• Data Centre Tax Holiday: Till 2047 (22 years)
• Prosecution Maximum Imprisonment: Reduced to 2 years

Indirect Tax Reforms:

• Electronic Sealing: Factory-to-ship clearance
• AEO Deferral: 15 days → 30 days (100% increase)
• Advance Ruling Validity: 3 years → 5 years
• E-Commerce Value Cap: Removed (unlimited)
• CIS Rollout: 2-year completion timeline

Ease of Living Measures:

• Cancer Drug Duty Exemption: 17 drugs
• Rare Disease Coverage: +7 additional diseases
• Personal Use Duty Reduction: 20% → 10%
• Motor Accident Interest: Full tax exemption

Budget Contribution: Tax policy modernization supporting Viksit Bharat transformation through simplified compliance, global business attraction, sector-specific incentives, and ease-of-living relief measures.