On tax reforms, Sitharaman said that salaried taxpayers with an annual income above ₹12 lakh will get marginal relief, reducing tax liability significantly.
Without this relief, tax payable would have been ₹61,500, compared to ₹10,000 now. Both tax regimes will
continue until taxpayers opt out, she clarified.
It must be noted that Budget 2025 proposed these tax changes.
Sitharaman also shared insights on tax collections, stating that personal income tax collections have grown 20% YoY.
The Revised Estimates (RE) for FY24 stand at ₹12.2 lakh crore, with FY25 targeted at ₹13.6 lakh crore, factoring in a 13.14% growth. However, tax collection growth has effectively dipped 7% due to ₹1 lakh crore revenue forgone.
The government has expanded safe harbour rules in favour of assessees and introduced a scheme for determining arm’s length under transfer pricing. The period of incorporation for startups has been extended, and certain TDS and TCS thresholds have been lowered.
On compliance, Sitharaman revealed that an IT Department nudge campaign led to 11,621 taxpayers revising their returns. Many changed their status from resident to non-resident, declaring ₹29,208 crore in foreign assets and ₹1,089 crore in foreign income. SMS notifications were sent to 19,501 taxpayers in FY25, prompting voluntary disclosures.
She reiterated that the customs duty rationalisation announced in Budget 2025 is crucial. Seven customs tariff rates will be removed, and only a cess or surcharge can apply under customs duties, not both.
The government is exempting 35 capital goods for EV batteries and 28 for mobile manufacturing.
Sitharaman said that tax estimates are realistic, factoring in IT exemptions. The government aims to boost domestic production by reducing duties on raw materials and imports.