The Union Budget 2025 maintains a stable tax environment with a focus on digital infrastructure, manufacturing, and economic growth. While there are no major changes in tax slabs, individuals and business owners should reassess their tax planning strategies. Choosing between the old and new tax regimes based on eligible deductions can help optimize tax liability. Those with significant expenses on housing, insurance, and retirement savings may benefit from the old regime, while others can take advantage of the simplified structure of the new tax system. Maximizing deductions under Section 80C, 80D, and 24(b) remains essential for effective tax planning.
Investment strategies should align with the budget’s focus areas. The stock market presents opportunities in sectors such as IT, AI, and digital infrastructure, making mutual funds, direct equity, and index funds attractive options for long-term growth. Conservative investors should continue to leverage safe instruments like PPF, EPF, Sovereign Gold Bonds, and FDs to balance risk and ensure steady returns. Real estate remains a viable investment avenue, with potential tax benefits on home loans and rental income growth in expanding urban areas.
Business owners and entrepreneurs should explore government-backed schemes offering tax reliefs and credit incentives for MSMEs and startups. The budget’s push for digital transformation and AI presents an opportunity to invest in technology-driven efficiencies, ensuring long-term business sustainability. Legal and compliance reforms are expected to streamline business operations, making it easier for enterprises to navigate taxation and labor laws with reduced administrative burdens.
Financial security remains a priority, and individuals should build a robust emergency fund covering six to 12 months’ expenses in liquid investments to manage unforeseen situations. Health and life insurance coverage should be reviewed to protect against rising medical costs and secure dependents. Retirement planning requires a structured approach, with investments in NPS, pension funds, and Senior Citizen Savings Schemes to ensure financial stability in later years.
“The key takeaway from this budget is stability over drastic reforms, making it essential for individuals and businesses to focus on strategic tax planning, sectoral investments, and financial security. Aligning with India’s growth trajectory in digital infrastructure and economic expansion will be crucial for maximizing financial opportunities in 2025 and beyond,” said Raheel Patel, Partner, Gandhi Law Associates.
a) The proposed amendments in the Budget signal a strong push towards simplifying customs and GST compliance. The introduction of a fixed timeline for finalizing provisional assessments and the option to voluntarily revise a bill of entry enhances predictability for businesses, reducing litigation and operational bottlenecks. The Budget also proposes to reduce pre-deposit amount for appeal reducing capital blockage for taxpayers. The measures would definitely assist in Ease of Doing Business in India.
b) The discontinuation of the customs settlement process post-April 2025 marks a shift towards a stricter regime. Businesses with ongoing disputes who acknowledge that customs duty is payable and their matter is pending, must act swiftly to leverage the benefits of the Settlement Commission, such as penalty waivers and phased payments, before the window closes.
c) The proposed retrospective amendment to restrict ITC on immovable property construction overturns the Supreme Court’s decision in Safari Retreats. This move clarifies legislative intent but defies cascading effect of GST and may impact industries in leasing business whose building itself is the plant.
d) The budget’s focus on duty exemptions for lithium-ion battery components, EV battery manufacturing, and mobile phone parts is a strategic step towards strengthening India’s domestic electronics and clean energy ecosystem, aligning with the government’s Make in India vision.
e) In order to promote the shipping sector, customs duty exemption has been extended to raw materials, components, consumables, and parts for ship manufacturing for another 10 years. This has been done due to the high gestation period in such sectors and expiry of earlier exemption could have led to death of this naïve sector in India.
The proposal to harmonise the concepts of significant economic presence and business connection will help in providing non-resident taxpayers much needed clarity about their tax. The budget seems to focus on reducing litigation and in this process the decision to expand the scope of safe harbour rules is a welcome move.
The extension of time period to sovereign wealth funds and foreign pension funds and units set up in the IFSC hopefully will attract higher investments and pave the road for India on its path to becoming a developed nation. The introduction of the scheme of presumptive taxation for non-residents providing services to electronics manufacturing facilities is an important incentive being provided to the Indian manufacturing set ups and is a master stroke to further provide a benefit to the Make in India initiative of the government.
The focus on units operating from the IFSCA provides the government’s commitment to provide additional benefits and incentives to the units operating there. This budget appears to have taken into consideration a lot of expectations and tried to provide significant relief after a long period of time to the middle class. No income tax for people earning income up to Rs. 12 lakh is a very significant relief that has been granted after a long period.
“The Finance Minister seems to have taken into account the long expectations of the middle class and have provided them with a relief that was sought by a large population. With a slowing economy and loss of consumption from the middle and poorer sections of the society, this was a real challenge and the Government appears to have addressed their concerns. The tax relief extended to the middle class will absolutely boost consumption to the FMCG and the consumer durable sector,” said SR Patnaik, Partner (head – taxation), Cyril Amarchand Mangaldas.
Changes in Direct Tax
The relaxation in the compliance burden is a very welcome change because individuals earning up to Rs. 12 lakhs are not required to file any tax returns. The increase of TDS applicable only for rental income exceeding Rs. 50,000 and the benefit of claiming two house properties by an individual is also a very welcome step. The increase in the monetary limits for funds remitted upto Rs. 10 lakhs is another significant relief. Moreover, the relaxation for funds remitted towards foreign education so long as it is funded by a financial institution is also a very welcome step.
Simplification of TDS and TCS provisions and decriminalisation of TCS defaults was based on market expectations and will go a long way to avoid clogging the appellate process including the courts. The increasing focus of the government on the skilling of Indian youth is a momentous cause. Providing broadband connectivity for secondary schools in every district and recognition of AI as a game changer and skill development in this area should help in employability of our youth. Some other significant steps include promotion of manufacturing of sustainable energy products as also development of India as a toy making hub of the world.
“A sincere attempt also is being made to do away with and simplify redundant non fiscal compliances.The benefits extended to small charitable institutions in the form of simplification of the application process and their ability to claim exemption for a period of ten years is a very thoughtful gesture,” said Patnaik.
Changes in Indirect Tax
The indirect tax related proposals made in Union Budget 2025 are primarily directed towards promotion of domestic manufacturing and exports from India. The proposed amendments to the Goods and Services Tax (GST) law are in line with the recommendations made by the GST Council in its recent meetings, the changes proposed under the Customs law will be beneficial in further trade facilitation.
The most prominent change proposed to the GST law is the retrospective substitution of the words ‘plant or machinery’ with ‘plant and machinery’ in Section 17(5)(d) of the Central Goods and Services Tax Act, 2017. The proposed amendment is aimed at overcoming the Supreme Court ‘s Ruling in Chief Commissioner of Central Goods and Service Tax & Ors. versus M/s Safari Retreats Private Ltd. & Ors. [Civil Appeal No. 2948 OF 2023], and thereby, expanding the applicability of restriction on Input Tax Credit (ITC) availability even to structures/ immovable property which otherwise could qualify as ‘plants’ on application of the functionality test.
“Under the Customs law, the key proposal pertains to finalisation of provisional assessments within two years, with a further extension of another year on sufficient cause being shown. Further, the importer and/ or exporter, upon clearance of the goods, can voluntarily revise the entries, which may result in payment of differential duty or claim of refund by the importer and/ or exporter. The other changes proposed in the Budget pertain to rate of customs duties/ exemptions with a view to give fillip to the ‘Make In India’ Policy and promote sectors such as textiles, critical minerals, electronics goods and telecommunication,” said Shashank Shekhar, Partner, DMD Advocates.
