New Delhi: Finance Minister Nirmala Sitharaman further announced sweeping reforms on Sunday aimed at simplifying taxation, supporting IT and cooperative sectors, and attracting global investment.
Income Tax Overhaul:
Sitharaman said minor offences under the Income Tax Act, such as non-production of books or TDS issues on payments in kind, will now be decriminalized and attract fine only. Serious offences will carry simple imprisonment up to two years, with courts empowered to convert sentences into fines. Non-disclosure of foreign assets under ₹20 lakh will get retrospective immunity from 1-10-2024.
Cooperative Sector Boost:
Deductions for primary cooperatives supplying milk, oilseeds, fruits, and vegetables will be extended to cattle feed and cotton seeds produced by members. Dividend income of cooperatives will be deductible under the new tax regime if distributed to members. National cooperative federations will get a three-year exemption on dividend income for investments till 31-1-2026, provided dividends are passed to member cooperatives.
IT Sector Incentives:
All IT services—including software development, IT-enabled services, KPO, and contract R&D—will be grouped under a single category with a safe harbour margin of 15.5%. The threshold for safe harbour has been raised to ₹2000 crore, with automated approvals valid for five years. Unilateral Advance Pricing Agreements (APAs) for IT companies will be fast-tracked, targeted for completion within two years, extendable by six months.
Global Investment & Manufacturing:
Foreign companies providing cloud services globally from India will get a tax holiday till 2047, with a 15% safe harbour for related entities. Non-residents involved in component warehousing will get a safe harbour at 2% profit, while those supplying capital goods to small manufacturers in bonded zones will get a five-year exemption. Global experts working in India may get exemption on non-India sourced income for five years, and MAT exemption applies to non-residents paying tax on a presumptive basis.
Other Tax Measures:
Buybacks will be taxed as capital gains for all shareholders, with promoters paying extra tax (22% corporate, 30% non-corporate).
TCS rationalization: liquor, scrap, minerals at 2%; tendu leaves at 2%.
STT increase: futures to 0.05%; options premium and exercise to 0.15%.
MAT reforms: brought forward MAT credit allowed only in the new regime, MAT becoming final tax at 14% from April 2026.
Sitharaman said the reforms aim to simplify taxation, deter misuse, boost IT and cooperative sectors, and make India a preferred destination for global investment.
