The Lok Sabha has passed the Finance Bill, 2025, incorporating 35 government amendments aimed at tariff rationalisation and boosting domestic manufacturing. The Bill seeks to give effect to the financial proposals of the Central Government for the financial year 2025-2026. 

The bill introduces several significant amendments aimed at reforming India's tax structure and fostering economic growth.

Key Highlights

1. Abolition of the Digital Advertisement Tax: The bill proposes the removal of the 6% Equalization Levy on digital advertisements, commonly referred to as the digital ad tax. This tax primarily affected foreign tech companies operating in India. Its removal is expected to ease international trade relations, particularly with the United States, and encourage foreign investment in India's digital economy. 

2. Revised Income Tax Slabs: The bill introduces new income tax slabs under the updated tax regime:

Up to Rs.4 lakh: Nil
Rs. 4 lakh to Rs. 8 lakh: 5%
Rs. 8 lakh to Rs. 12 lakh: 10%
Rs. 12 lakh to Rs. 16 lakh: 15%
Rs. 16 lakh to Rs. 20 lakh: 20%
Rs. 20 lakh to Rs. 24 lakh: 25%
Above Rs. 24 lakh: 30%

Additionally, the standard deduction has been increased from Rs. 50,000 to Rs. 75,000. These changes aim to reduce the tax burden on individuals, thereby increasing disposable income and stimulating consumer spending.

3. Rationalization of Tax Deduction at Source (TDS) and Tax Collected at Source (TCS): The bill proposes reducing the TDS rate on insurance commission income from 5% to 2%. This measure is intended to simplify tax compliance and benefit insurance agents by reducing the upfront tax deduction on their earnings.

4. Extension of Time-Limit to File Updated Income Tax Returns: Taxpayers will now have up to four years, an extension from the previous two-year limit, to file updated income tax returns. This amendment provides greater flexibility for taxpayers to rectify omissions or errors in their tax filings, promoting voluntary compliance and reducing litigation. 

5. Incentives for Manufacturing and Infrastructure: The bill introduces exemptions for capital goods used in the production of lithium-ion batteries for mobile phones and electric vehicles. This initiative is expected to boost domestic manufacturing in the electronics and electric vehicle sectors, aligning with the government's "Make in India" initiative. 

6. Support for Agriculture: The establishment of the Prime Minister Dhan-Dhaanya Krishi Yojana aims to enhance agricultural productivity and self-reliance in pulses. Additionally, the creation of a Makhana Board in Bihar is intended to promote the production and export of makhana, benefiting local farmers and contributing to rural development.

Implications:

The amendments introduced in the Finance Bill 2025 reflect the government's commitment to simplifying the tax regime, enhancing compliance, and fostering economic growth. By reducing tax rates and extending filing timelines, the bill aims to increase disposable income, stimulate consumer spending, and attract both domestic and foreign investment. The focus on manufacturing, infrastructure, and agriculture underscores a strategic approach to bolster key sectors of the economy, promote self-reliance, and create employment opportunities.

Overall, the Finance Bill 2025 is poised to have a multifaceted impact on India's economic landscape, with the potential to drive growth, enhance taxpayer satisfaction, and strengthen international trade relationships.