The Union Budget 2025-26 is highly anticipated by Corporate India amidst economic challenges such as a sliding rupee, global uncertainties, and sluggish demand. Businesses are keen to see measures that stimulate growth, manufacturing, and employment. Below are key corporate tax expectations for the upcoming budget:
1. Re-Introduction of Concessional Tax Rate
i) Section 115BAB’s concessional 15% tax rate for companies incorporated after October 1, 2019, expired on March 31, 2024.
ii) Extension of this benefit is sought to attract new investments and boost domestic manufacturing.
iii) Proposal to offer the 15% rate to Global Capability Centers (GCCs) is also under consideration.
iv) India’s position as a global hub for GCCs can be leveraged to generate jobs and drive economic growth.
2. Innovation Through Production-Linked Incentives (PLI)
i) Introduction of PLIs focused on Research and Development (R&D) is recommended.
ii) Additional deductions for R&D expenditures could be linked to criteria such as increased turnover or employment generation.
3. India’s Approach to OECD Pillar 2
i) India is a signatory to the OECD’s Global Anti-Base Erosion Model Rules (Pillar 2) targeting tax avoidance by multinationals with a global turnover above €750 million.
ii) Clarity on India’s implementation roadmap is awaited, especially as other countries have already enforced these rules.
4. Simplification of Tax Regime
i) Reduction of TDS rates from 5% to 2% on several payments in 2024 marked a positive start.
ii) A simplified two- or three-tier TDS structure is proposed to reduce disputes and improve liquidity.
iii) Eliminating TDS/TCS on GST-covered transactions is suggested, as relevant data is already available through GST filings.
5. Revamping Dispute Resolution Mechanisms
i) Nearly 6 lakh tax appeals are pending, involving disputed amounts of INR 14 lakh crore.
ii) Proposed measures include:
a) Rationalizing scrutiny processes with qualitative assessments.
b) Consolidating common tax issues by industry or assessee.
c) Setting strict timelines for appellate authorities.
d) Expanding the scope of Dispute Resolution Panels (DRPs) to include domestic cases.
6. Direct Tax Code
i) The Direct Tax Code (DTC) is expected to replace the Income Tax Act, 1961.
ii) DTC aims to modernize and simplify the tax framework, ensuring efficiency and fairness for taxpayers.
The Union Budget 2025-26 holds significant importance for stakeholders, who are eager to see comprehensive reforms in corporate sector and strategies for economic growth. (Business Today)