Simpler tax laws? The Finance Bill 2025 missed the memo.

Despite dangling the tantalizing prospect of a new, simpler income tax law, the finance minister introduced a bill that proposes several amendments to the existing law, the Income Tax Act, 1961. Not all of them necessary, not all of them clear.

Most have your go-to sources for a detailed summary of the changes, but here are some of the more interesting amendments:

📌 Cryptocurrencies – More Definitions, More Reporting

The government is proposing to broaden the definition of ‘virtual digital assets’ (VDAs) to include so-called ‘crypto-assets.’ Why was this necessary? What does it actually mean? Don’t hold your breath. We’re still waiting for someone in government to explain what the existing definition of a VDA even means.

A new reporting regime is also proposed – but only for crypto assets. Why not all VDAs? No clear rationale provided.

It’s unclear why the VDA withholding tax regime under Section 194S, which we were told was intended to capture VDA transaction details, isn’t being repealed, given this new proposed reporting framework.

Also, just a reminder that the provisions proposed to implement the new reporting regime are enabling, which means much of the framework will be built under rules notified by the government. It will be interesting to learn just how broadly reporting entities will be defined – and whether decentralized exchanges (DEXs) will be included.

📌 ‘Make in India’ – A Push for Manufacturing?

The government is trying to position India as a manufacturing hub, but the so-called tax ‘incentives’ don’t seem that enticing.

SEP Exemption: A new provision proposes to clarify that foreign companies will not have a Significant Economic Presence (SEP) in India if they buy goods for export. But don’t be fooled – this isn’t new. It’s just a duplication of existing Explanation 1(b) to Section 9(1)(i).

A New Presumptive Tax Regime: Under the proposed regime, the income attributable to the business of an eligible foreign company providing technology or services ‘in India’ to an Indian electronics manufacturing plant will be deemed to be 25% of “the amount paid or payable to” the foreign company and “the amount received or deemed to be received by” the foreign company. Sounds repetitive? That’s because it is. Why? Who knows.

It looks like this proposed regime relies on a couple of optimistic assumptions:

• That the foreign company will have a permanent establishment or business connection in India because without one, the question of there being taxable income doesn’t arise (unless the payments qualify as royalties or fees for technical services – more on this below).

• That the situs of the services and technology provided will be in India (this won’t necessarily always be the case.)

Would guidance on when a business connection or PE is constituted in this scenario be helpful? You bet. Would guidance on how the situs of the services and (especially) technology provided is to be determined be helpful? No doubt. Here’s hoping that’s forthcoming.

Other unanswered questions include:

• What is technology, and when is it provided?

• Will a foreign company have the option to opt out of the presumptive regime?

• Is the new regime particularly attractive (especially considering that the foreign company won’t be able to carry forward and utilize its business losses and unabsorbed depreciation)?

• If the idea was to reduce the rate on payments that can be characterized as royalties or fees for technical services, why not just say so?

• Is the new regime Pillar Two proof? If it lowers the foreign company’s effective tax rate below 15%, the savings could be negated by a QDMTT or an IRR under Pillar Two (if the company’s group revenue exceeds €750M.)

📌 M&A – Carryforward of Losses

A pragmatic change: the surviving entity in a corporate merger/succession can only carry forward the predecessor’s losses for the remainder of the available period. Makes sense. No complaints here.

📌 Transfer Pricing – A Welcome Change?

The proposal to make an arm’s length assessment valid for three consecutive financial years – if implemented well – could be a great move towards streamlining India’s transfer pricing framework.

📌 No More TCS on Sale of Goods

A few years ago, the government introduced a Tax Collected at Source (TCS) on goods, which resulted in sellers having to collect tax from buyers on sales of goods.

Because it was widely assumed that the definition of goods under the Sale of Goods Act should apply to the term's use in the Income Tax Act, this meant TCS had to be collected even on most share transactions.

This rule has now been scrapped. Good riddance to bad rubbish.

📌Repeal of the Public Debt Act, 1944

What was the issue - and how does this repeal solve for it? I have no idea. And that's a problem.