Part-A

Highlights of New Income-tax Act, 2025

1. Implementation s Simplification
   • Act effective April
   • Simplified rules and forms will be notified for ease of
2. Ease of Living
   • Interest from Motor Accident Claims exempt subject to satisfaction of certain conditions and no TDS will be
   • Employee contribution to PF/ESI – Due date Deduction allowed if paid up to due date of filing ITR
   • Reduced TCS rates: overseas tours s LRS remittances to 2%.
   • Simplified TDS for manpower supply – treated as work and TDS under Contract
   • Automated process for lower or nil TDS
   • Single-window Form 15G/15H
   • Extended return revision till 31st March with nominal
   • 6-month foreign asset disclosure scheme for small
3. Penalty s Prosecution Rationalization
   • Integrated assessment s penalty
   • Taxpayers can update returns after reassessment with 10% additional
   • Penalty/prosecution immunity for misreporting or minor foreign asset non-
   • Decriminalization of certain TDS and documentation
4. Cooperatives
   • Deductions extended to cattle feed and cotton seed
   • Dividend income among cooperatives allowed as
   • 3-year exemption for national cooperative federation dividends if passed to
5. IT Sector Support
   • All IT services under one category with 5% safe harbour margin.
   • Safe harbour threshold increased to ₹2,000
   • Fast-tracked APA process; automated approvals for 5
6. Attracting Global Business s Investment
   • Cloud service companies get tax holiday till
   • Safe harbour for data centres (15%), bonded warehouses (2%).
   • 5-year tax exemption for non-residents supplying capital goods or expertise.
   • Exemption from MAT for non-residents paying presumptive

7. Tax Administration
   • ICDS integrated into Ind-AS, removing separate tax accounting from FY 2027-
   • Rationalized definition of accountant for safe harbour
8. Other Key Measures
   • Buyback tax revised: all shareholders taxed; extra tax for
   • Rationalized TCS and STT rates on select goods and
   • MAT becomes final tax; rate reduced to 14%; brought forward MAT credits usable only in new

Overview of the Budget 2025 read with Income-tax Act, 1G61 (‘IT Act, 1G61’) and Income-tax Act, 2025 (‘IT Act, 2025’)

Effective date of IT Act, 2025

The IT Act, 2025 will take effect from the 1st day of April, 2026 and will, accordingly, apply to tax year 2026-27 and for the subsequent tax years. Simplified rules and forms will be notified for ease of compliance.

Rationalizing the due date to credit employee contribution to a fund by the employer to claim the same as deduction

Currently, employer can claim a deduction for employee contributions provided the same is remitted before the due date as specified under relevant laws i.e. 15th of the next month EPF Scheme.

To simplify compliance and bring greater clarity, it is proposed to allow employers to claim the deduction as long as the employee contribution is deposited on or before the due date for filing the return of income under section 263(1) of the Act.

Exemption on interest income under the Motor Vehicles Act, 1388.

To reduce the financial distress faced by accident victims and their families it is proposed exempt the individuals or their legal heirs from tax (subject to certain conditions) on the income in the nature of interest received under the Motor Vehicles Act, 1688. This amendment will come into force from 1 April 2026 and will apply to the tax year 2026–27 and all subsequent tax years. Accordingly, no tax to be deducted at source in respect of interest on compensation amount awarded by Motor Accidents Claims Tribunal to an individual.

Hassle free Lower /No TDS deduction certificate

For small taxpayers, it is proposed that the application for issuance of certificates for lower rate or nil deduction of tax may be made electronically to the prescribed income-tax authority. The prescribed income-tax authority shall examine the application electronically and issue the certificate subject to fulfilment of conditions as may be prescribed, or reject the application if prescribed conditions are not fulfilled or the application is incomplete. The category of taxpayers and other related conditions will be prescribed by the Board by making rules in this regard.

 

TDS Relief for Home Buyers: No TAN required for property purchases from Non-residents (‘Seller’)

w.e.f. 01.10.202C

To ease compliance for resident individuals and Hindu Undivided Families (HUFs), it is proposed to relax the requirement of obtaining a Tax Deduction and Collection Account Number (TAN) for deducting tax at source (TDS) on the purchase of immovable property from a non-resident. The proposed amendment to section 367(1)(c) seeks to align the treatment by allowing resident individuals and HUFs to deduct TDS on such property transactions without the need to obtain TAN i.e., the TDS can be remitted with the PAN itself.

TDS on Manpower Supply Clarified:

It is proposed to treat supply of manpower as “work” under section 402(47), so that TDS will apply under section 363(1) i.e. 1% in case of Individual/HUF and 2% in case of other than Individual/HUF and it is not considered as professional or technical services.

Summary of the TCS changes

Section 206C(1) and 206C(1G)of IT Act 1661 vs Section 364 of the IT Act 2025.

 

Sl. No.	Nature of Receipt	Current Rate under the IT Act, 1G61	Proposed Rate in the IT Act, 2025
1.	Sale of alcoholic liquor for human consumption	1%	2%
2.	Sale of tendu leaves	5%	2%
3.	Sale of scrap	1%	2%
4.	Sale of minerals, being coal or lignite or iron ore	1%	2%
5.	Remittance under the Liberalised Remittance Scheme of an amount or aggregate of amounts exceeding ten lakh rupees	(a)   5% for purposes of education or medical treatment; (b)   20% for purposes other than education or medical treatment	(a)  2% for purposes of education or medical treatment; (b)   20% for purposes other than education or medical treatment
6.	Sale of “overseas tour programme package”, including expenses for travel, hotel stay, boarding, lodging, or any similar or related expenditure	(a)  5% of amount or aggregate of amounts up to ten lakh rupees; (b)  20% of amount or aggregate of amounts exceeding ten lakh rupees	2%

 

Relaxation in due dates:

 

Sl. No.	Particulars / Description	Due Date
1	Persons covered under ITR-1 and ITR-2	31st July
2	Non-audit businesses, partners, and their spouses whose books are not audited	31st August
3	Companies whose books are audited under tax audit or any other audit (excluding transfer pricing cases)	31st October
4	Persons having international transactions	30th November
5	Revised return where original or belated return was filed previously (Refer Note below)	31st March

Note:

Additional fee payable as follows

Revised return filed up to 31st December – Nil

Revised return filed from 01st January to 31st March:

• Total income less than INR 5 lakhs – INR 1,000
• Total income more than INR 5 lakhs – INR 5,000

Changes in the Updated return:

1. Taxpayers can file updated return in cases where the loss in the updated return is sought to be reduced as compared to original
2. Further an updated return may also be allowed in such cases where proceedings of reassessment have been initiated and notice of reassessment has been issued under section 280 of the Act (similar to that of section 148 of the IT Act, 1Sc1) with an intention to reduce

Relaxation from Black Money Act prosecution:

Prosecution under the Black Money Act will not apply to foreign assets (other than immovable property) with total value up to INR 20 lakhs – applicable retrospectively w.e.f. 01st October 2024.

Foreign Assets Disclosure Scheme:

A one-time compliance window has been enabled to benefit the following cases:

1. Category A: (Undisclosed foreign assets within INR 1 crore)

Total tax of 60% (30% regular tax and 30% additional tax) with immunity from prosecution proceedings.

2. Category B: (Disclosed but not reported up to INR 5 crore)

 

Fixed penalty fee of INR 1 lakh

Levy of penalties to be considered as ‘Fee’:

Penalties for technical delays should be converted into mandatory fee for the following defaults

1. Penalty for failure to get accounts audited (Tax Audit) Existing penalty: INR 1,50,000

Graded fee of INR 75,000 up to 1 month of delay and INR 1,50,000 more than 1 month of delay

2. Penalty for failure to furnish report under section 172 of the IT Act, 2025 (TP Audit) Existing penalty: INR 1,00,000

Graded fee of INR 50,000 up to 1 month of delay and INR 1,00,000 more than 1 month of delay

3. Penalty for failure to furnish statement of financial transaction

Penalty for failure to furnish statement of financial transaction or reportable account is converted to a fee with an upper limit of INR 1 lakh is also proposed.

Provisions of the IT Act, 1G61:

Penalty for under reporting of income levied under section 270A to be imposed within the assessment order. Further, section 220 is also proposed to be amended for charging of interest under section 220(2) only after passing of the order by CIT(A) or ITAT (for appeal against DRP orders)

Increase in penalty – Collecting door to door information:

Income-tax authorities shall collect information from the premises where business or profession is carried out, by directing the proprietor or employee or any other person, who may at that time and place, be attending in any manner to, or helping in, or carrying on of such business or profession, to furnish certain information as authorized failing to which a penalty shall be imposed up to INR 25,000 from existing INR 1,000.

Reduction in the tax rate:

Income by way of unexplained credits, unexplained investment, unexplained asset, unexplained expenditure and amount borrowed or repaid through negotiable instrument, hundi, etc. were earlier tax at 60% now reduced to 30% and penalty is waived-off provided an additional income tax of 120% is paid.

Rationalization of penalties:

 

Section under IT Act, 2025	Existing	Proposed
473	rigorous imprisonment for a term which may extend to two years and shall also be liable to fine	simple imprisonment up to two years and fine
474	rigorous imprisonment for a term which may extend to two	simple imprisonment up to 6 months and/or fine

 

 

Section under IT Act, 2025	Existing	Proposed
	years and shall also be liable to fine
475	rigorous imprisonment for a term which may extend to two years and shall also be liable to fine	simple imprisonment up to two years and fine
476(1)(b)(i) 476(1)(b)(ii)	rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years	These    offences    are            proposed   to      be            fully decriminalized.
Other case of 476		with simple imprisonment for a term up to two years, or with fine, or with both, in a case where amount of such tax exceeds fifty lakh rupees; with simple imprisonment for a term up to six months, or with fine, or with both, in a case where amount of such tax exceeds ten lakh rupees but does not exceed fifty lakh rupees; with fine, in any other case
477	rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years, and with fine	with simple imprisonment for a term upto two years, or with fine, or with both, in a case where amount of such tax exceeds fifty lakh rupees; with simple imprisonment for a term upto six months or with fine, or with both, in a case where amount of such tax exceeds ten lakh rupees but does not exceed fifty lakh rupees; with fine, in any other case.
478 (1)		with simple imprisonment for a term upto two years, or with fine, or with both, in a case where the amount sought to be evaded or tax on under-reported income exceeds fifty lakh rupees; with simple imprisonment for a term upto six months, or with fine, or with both, in a case where the amount sought to be evaded or tax on under- reported income exceeds ten lakh rupees but does not exceed fifty lakh rupees; with fine, in any other case

 

 

Section under IT Act, 2025	Existing	Proposed
478 (2)		with simple imprisonment for a term upto two years, or with fine, or with both, in a case where the amount sought to be evaded exceeds fifty lakh rupees; with simple imprisonment for a term upto six months, or with fine, or with both, in a case where the amount sought to be evaded exceeds ten lakh rupees but does not exceed fifty lakh rupees; with fine, in any other case.
479		with simple imprisonment for a term upto two years, or with fine, or with both, in a case where the amount of tax, which would have been evaded if the failure had not been discovered, exceeds fifty lakh rupees; with simple imprisonment for a term upto six months, or with fine, or with both, in a case where the amount of tax, which would have been evaded if the failure had not been discovered, exceeds ten lakh rupees but does not exceed fifty lakh rupees; with fine, in any other case
480		with simple imprisonment for a term upto two years, or with fine, or with both, in a case where the amount of tax exceeds fifty lakh rupees; with simple imprisonment upto six months, or with fine, or with both, in a case where the amount of tax, exceeds ten lakh rupees but does not exceed fifty lakh rupees; with fine, in any other case
481		in the case where a person wilfully fails to produce, or cause to be produced, the accounts and documents as are referred to in the notice served on him under section 268(1) on or before the date specified in such notice, this provision under section 481 is proposed to be fully decriminalised.
	rigorous imprisonment for a term which may extend to one year and with fine	simple imprisonment for a term upto six months, or with fine, or with both
482		with simple imprisonment for a term upto two years, or with fine, or with both, in a case where the amount of tax, which would have been evaded if the

 

 

Section under IT Act, 2025	Existing	Proposed
		statement or account had been accepted as true, exceeds fifty lakh rupees; with simple imprisonment for a term upto six months, or with fine, or with both, in a case where the amount of tax, which would have been evaded if the statement or account had been accepted as true, exceeds ten lakh rupees but does not exceed fifty lakh rupees; with fine, in any other case.
483	rigorous imprisonment for a term which shall not be less than three months but which may extend to two years and with fine	simple imprisonment for a term upto two years and shall also be liable to fine
484		with simple imprisonment for a term upto two years, or with fine, or with both, in a case where the amount of tax, penalty or interest which would have been evaded, if the declaration, account or statement had been accepted as true, or which is wilfully attempted to be evaded, exceeds fifty lakh rupees; with simple imprisonment for a term upto six months, or with fine, or with both, in a case where the amount of tax, penalty or interest which would have been evaded, if the declaration, account or statement had been accepted as true, or which is wilfully attempted to be evaded, exceeds ten lakh rupees but does not exceed fifty lakh rupees; with fine, in any other case.
485	rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years, and with fine	simple imprisonment for a term which shall not be less than six months but which may extend to three years and shall also be liable to fine
494	imprisonment which may extend to six months, and shall also be liable to fine	simple imprisonment upto one month, or with fine, or with both

 

Grant of immunity from penalty extends to misreporting u/s 270A of IT Act, 1G61 / 43G(11) of IT Act, 2025:

Immunity is now extended to cases where under-reporting of income is in consequence of misreporting. The taxpayer is required to pay an additional income-tax to the extent of 100% of the amount of tax payable on such income in lieu of the penalty.

Benefits to Cooperative Societies

Dividend:

Currently, cooperative societies can claim a deduction for income received as interest or dividend from other cooperative societies, but only under the old tax regime. Dividends received from companies are taxed in the hands of the cooperative society.

It is proposed to allow a deduction in the new tax regime for dividends received by a cooperative society from other cooperative societies, to the extent such dividends are distributed to its members.

Additionally, notified federal cooperatives will be allowed a deduction for dividends received from companies for three years, i.e., up to the tax year 2028-26, under both old and new tax regimes. This will apply only to dividends from investments made by the federal cooperative up to 31 January 2026 and subsequently distributed to its members.

Nature:

Primary cooperative societies can currently claim deduction for profits from supplying milk, oilseeds, fruits, or vegetables raised by their members to federal cooperatives, the Government, local authorities, or government companies in the same business. It is now proposed to extend this deduction to cover profits from ancillary activities such as supplying cattle feed and cotton seeds carried out by members of the primary cooperative society.

Exclusion of specified business of Non-residents which are under presumptive taxation from the applicability of Minimum Alternate Tax

The income of non-residents derived from certain business who opt for presumptive rate of taxation under section 61 of the Act are also excluded from applicability of MAT. (similar to that of section 44B, BB, BBA, BBC, BBD of IT Act, 1661)

Extension of Deduction Period and Rationalization of Tax Rate for IFSC Units

International Financial Services Centre (IFSCs) and Offshore Banking Units (OBUs) can claim 100% deduction on specified incomes for 10 consecutive years out of a 15-year period for IFSC units, and for 10 consecutive years for OBUs.

To enhance the competitiveness of IFSCs, it is proposed to extend this deduction to 20 consecutive years out of 25 years for IFSC units, and 20 consecutive years for OBUs. Further, it is proposed that the business income of these units from IFSCs, after the expiry of the deduction period, will be taxed at a rate of 15%.

Rationalization of Minimum Alternate Tax (‘MAT’) Provisions

Under the existing MAT, companies pay tax at 15% of book profits and if it exceeds regular income tax, with the excess allowed as a credit carry-forward for 15 years.

It is now proposed that MAT paid under the old regime be treated as final tax, with no new MAT credit, and the MAT rate reduced to 14% of book profits.

For companies opting for new tax regime post this amendment, they would be eligible for set off the 25% of tax liability.

For the foreign companies, it may set off the difference between normal tax and MAT in the relevant year in which normal tax is more than MAT.

Assessment:

1. Assessments not to be invalid on ground of any mistake, defect or omission on account of computer- generated DIN, if such assessment is referenced by computer generated DIN in any manner.
2. Assessing Officer for the purposes of section 148 and section 148A of the IT Act, 1661 shall mean Assessing Officer only and not the National Faceless Assessment Centre or assessment unit

Penalty for non-furnishing of statement or furnishing inaccurate information in a statement on transaction of crypto-assets

Penalty of INR 200 per day for non-furnishing of statement and INR 50,000 for furnishing inaccurate particulars and failure to correct such inaccuracy is proposed to be levied.

Non-allowability of Interest as a deduction against Dividend Income

Earlier certain deductions such as interest expenditure incurred for earning such income, subject to a ceiling of twenty per cent of the gross dividend or income from units of mutual funds is provided but now it is proposed to amend that no deduction shall be allowed in respect of any interest expenditure incurred for earning dividend income or income from units of mutual funds.

Rationalization of Taxation on Share Buybacks

Amount received by shareholders on a company’s buy-back of shares are treated as dividend income, while the cost of acquisition of the extinguished shares is separately recognized as a capital loss under section 66 of IT Act, 2025.

It is now proposed that consideration received on a share buy-back be taxed under the head “Capital Gains” instead of as dividend income.

Tax impact in the hands of promoters is as follows

• For promoters other than domestic companies, the effective tax on gains from buy-back will be 30% irrespective of period of holding (including applicable rates and additional tax).
• For promoters which are domestic companies, the effective tax will be 22% irrespective of period of

Exemption for Sovereign Gold Bonds

IT Act, 2025 exempts capital gains arising from the redemption of Sovereign Gold Bonds (‘SGBs’) issued by the Reserve Bank of India under the Sovereign Gold Bond Scheme, 2015. To ensure consistent application, it is proposed that the exemption be available only if the SGB is subscribed to at the time of original issuance and held continuously until maturity, for all series issued by the RBI.

 

Increase in Securities Transaction Tax (STT) Rates

Revision on the STT rates on options and futures is as follows:

 

Transaction Type	Existing STT Rate	Revised STT Rate	Basis of Tax
Sale of an option in securities	0.10%	0.15%	Option premium
Sale of an exercised option	0.125%	0.15%	Intrinsic price
Sale of a future in securities	0.02%	0.05%	Traded price

Integration of Income Computation and Disclosure Standards (‘ICDS’) with Accounting Standards (‘AS’) notified under Companies Act, 2013

It is proposed to form a Joint Committee comprising representatives from the Ministry of Corporate Affairs and the Central Board of Direct Taxes with the objective to explore the integration of the requirements of ICDS with the AS. Consequently, separate accounting requirements based on ICDS would be discontinued, starting from the tax year 2027-28.

Part-B

Highlights of the budget – Transfer pricing

Advance Pricing Agreement (‘APA’)

Modified return:

The Income Tax Act, 2025 allows only the signatory to file or revise returns when Advance Pricing Agreement (APA) is entered. The proposed amendment permits both the APA signatory and impacted AEs to file or modify returns within three months from the end of the month in which the APA is entered. The change applies to APAs entered on or after 1 April 2026, for tax years beginning 1 April 2026 onwards.

Time limit for concluding APAs:

APA for IT Industry has been fast-tracked to conclude it within a period of 2 years. The period of 2 years can be extended by a further period of 6 months on taxpayer’s request.

Clarifying the manner of computation of sixty days for passing the order by the Transfer Pricing Officer.

The Transfer Pricing Officer (TPO) is required to pass an order before 60 days prior to the date on which limitation under 153, or section 153B for making the order of assessment or reassessment or re- computation or fresh assessment, as the case may be, expires. It is clarified that period of C0 days to include the date of limitation in the computation. This is a retrospective amendment w.e.f. 01st June 2007.

Safe-Harbour rules

The threshold limit for IT services has been increased from existing INR 300 crores to INR 2,000 Crores with a margin of 15.5%. The same safe harbour can be continued for a period of 5 years at a stretch at its choice.

IT services include Software development services, IT enabled services, knowledge process outsourcing services and contract RsD services relating to software development.

Part-C

Highlights of the budget – Indirect taxation

• Goods and Services Tax 2017 (‘GST’)

 

Sl.no	Areas	Existing law	Amended Law	Impact
1	Transaction Value s Post- Sale Discounts	Under the existing provisions, post-sale discounts were allowed as a deduction from the transaction value only when such discounts were agreed upon before or at the time of supply. Additionally, these discounts had to be specifically linked to relevant tax invoices. Further, the recipient was required to reverse the proportionate input tax credit (ITC) attributable to the discount. In practice, linking discounts to individual invoices created significant compliance and operational challenges, especially in volume-based or year-end discounts.	The amended provision removes the requirement of invoice-level linkage and prior agreement for              post-sale discounts. Now, post-supply discounts will be allowed if: ·    The supplier issues a credit note under Section 34, and ·    The    recipient reverses proportionate ITC relating to such discount.	This   amendment brings major compliance relief to businesses. Commercial discount  practices are now aligned with GST   law, making post-sale discount mechanisms simpler, flexible, and litigation-free.
2	Credit Notes for post sales discount	Although Section 15 allowed deduction of certain post-sale discounts, Section 34 did not clearly specify whether credit notes could be issued for such	Section 34(1) has now been explicitly amended to allow issuance of credit notes for post-supply	This ensures legal consistency and clarity between valuation and credit note provisions. Taxpayers can now confidently  issue

 

 

Sl.no	Areas	Existing law	Amended Law	Impact
		discounts. This led to interpretational conflicts between valuation and documentation provisions.	discounts referred to in Section 15(3)(b).	credit notes for post- sale              discounts without              fear        of departmental objections.
3	Provisional Refund for Inverted Duty Structure	Provisional refund of 60% was available only for zero-rated supplies such as exports. Refunds arising from inverted duty structure were excluded, leading to delays and working capital blockage.	The scope of provisional refund under Section 54(6) is extended to include inverted                    duty structure refunds as well.	This ensures faster disbursement of refunds, improves cash flow, and reduces  financial stress for manufacturers facing inverted duty structures.
4	Removal                 of Minimum Refund Threshold                for Export with Tax	Refund claims for exports made with payment of tax were subject to a minimum prescribed monetary threshold of INR1000.	The amendment removes the minimum refund amount condition for exports of goods with payment of tax.	Small exporters can now claim refunds without monetary restrictions.
5	Appellate Authority                for Advance ruling	Appeals under Section 101B (For Advance Ruling) were to be heard by the National Appellate Authority, which is yet to be constituted.                      This resulted in absence of an effective appellate remedy.	A new sub-section 101A(1A) empowers the Government to authorize  existing authorities                    or tribunals to hear such appeals until the National  Appellate Authority is established w.e.f. 01.04.2026.	This amendment avoids procedural deadlock and ensures continuity in the appellate mechanism.
6	Place of Supply for Intermediary Services	As per Section 13(8)(b), the place of supply for intermediary services was deemed to be the location of the supplier. This resulted in intermediary services	Section 13(8)(b) has been                 omitted. Consequently, the place of supply will now be determined under Section 13(2),	Intermediary services provided to foreign clients will generally qualify as export of services, subject  to  other conditions. This is a

 

 

Sl.no	Areas	Existing law	Amended Law	Impact
		provided to foreign clients being taxable in India, even though consideration was received in foreign currency.	i.e., the location of the recipient.	landmark relief for service exporters, improving global competitiveness and reducing tax burden.

C.2 – Customs Act 1G62

1.   Legal s Administrative Amendments (Customs Act, 1G62)

These changes refine the jurisdiction of the Act and simplify business operations:

• Expanded Jurisdiction: Section 1 is being amended to extend the Act’s reach beyond Indian territorial waters specifically for fishing and related
• Indian-Flagged Fishing Vessels: A new definition is added to identify these
• Penalties as Charges: Penalties paid under section 28(5) will now be deemed a charge for non- payment of
• Advance Rulings: Validity is now fixed at five years (or until laws/facts change). For rulings currently in force, applicants can request a 5-year
• Fish Harvest Provisions: A new Section 56A allows fish harvested beyond territorial waters by Indian-flagged vessels to be brought into India duty-free.
• Warehouse Flexibility: Section 67 is substituted to remove the need for prior permission from a “proper officer” when moving goods between bonded
• Custody of Goods: Section 84 is amended to allow the Board to make regulations regarding the

custody of imported or exported goods

2.    Amendments to Customs Tariff Act, 1G75

The budget adjusts rates to support the MSME sector and rationalize costs for personal imports.

A. Immediate Increases (Effective 02.02.2026)

Targeted at protecting domestic MSMEs:

• Umbrellas (excluding garden umbrellas): 20% or ₹60 per piece, whichever is
• Umbrella Parts/Trimmings: 10% or ₹25 per kg, whichever is

D.New Tariff Lines s Product Identification

New categories are being created to track specific goods more accurately:

• Exotic Fruits: Specific lines for fresh/frozen/dried Cranberries and Blueberries (rates generally at 10%).
• Health s Chemicals: New lines for Artemisinin (5%), Thymidine (5%), and Gibberellic acid (5%).
• Industrial: Refrigerated containers (5%) and Battery separators (5%).

3.   AMENDMENT TO CUSTOMS RULES

• Baggage Rules, 2026: New rules replace the 2016 version to streamline airport procedures, clarify “temporary carriage” of goods, and restructure Transfer of Residence benefits for Indians and
• Deferred Duty Payment: Monthly payments are now permitted (up from the previous 15-day cycle), and a new category of “eligible importers” has been

4.  OTHER PROPOSALS INVOLVING CHANGES IN BASIC CUSTOMS DUTY RATES IN NOTIFICATIONS

 

Sl. No.	Commodity	HSN / Tariff Item	Change             in Rate	Purpose
1	Monazite	2612 20 00	2.5% to Nil	Mineral/Resource support.
2	Sodium antimonate	2841 60 00	7.5% to Nil	For    use     in         solar   glass manufacturing.
3	Potassium hydroxide	2815 20 00	Nil to 7.5%	Increase in duty (removal of previous exemption).
4	Nuclear     Power Goods	8401 30 00	7.5% to Nil	All   goods   for nuclear power generation.
5	Absorber Rods	8401 40 00	7.5% to Nil	Control/Burnable rods for nuclear power.
6	Microwave Components	Multiple              (8501, 8504, 8516)	Applicable to Nil	Specified goods for microwave oven manufacturing.

 

 

5. OTHER CHANGES PROPOSED IN THE CUSTOM NOTIFICATIONS

1.    Energy’s Power Sector

• Lithium-ion Cells: The BCD exemption for capital goods used in manufacturing Lithium-ion cells is extended to include cells for Battery Energy Storage Systems (BESS), moving beyond just electric W.E.F from 02.02.2026.
• Nuclear Power: Exemption for goods required for setting up specified Nuclear Power Projects is extended. The validity of this exemption is now pushed from 2027 to September 30, 2035.

2.    Aviation’s Defence

• Maintenance s Repair: New exemptions (S. 334A and 335A) are introduced for raw materials, components, and parts (including engines) used in the manufacture or MRO (Maintenance, Repair, and Overhaul) of aircraft.
• Defence Requirement: For certain parts, imports must be by Public Sector Units under the Ministry of Defence and require an end-use certificate from an officer of Joint Secretary rank or

3.    Healthcare’s Medicines

• New Drugs: 17 new drugs/medicines have been added to the BCD exemption
• Rare Diseases: 7 rare diseases covered under the National Policy for Rare Diseases (2021) are now This provides custom duty exemptions on drugs and special medical food imported for personal use.

4.    Critical Minerals  Chemicals

The government is simplifying the duty structure for critical minerals by shifting rates directly to the Tariff itself and removing redundant entries.

• Key Items Moved: Specific items previously under Notification 36/2024 (like salts of Beryllium/Rhenium, rare earth metal compounds, and Gallium/Germanium/Indium) are being merged into the newer Notification No. 45/2025.
• Timeline: Notification 36/2024 is proposed to be rescinded entirely by May 1, 2026.

6.  CUSTOMS DUTY EXEMPTIONS

1.    Key Extensions (Validity extended to 31.03.2028)

Of the 124 entries reviewed, 102 entries are being continued for two more years. Notable items include:

• Agriculture s Food: Frozen duck meat, various seeds/bulbs, and algal oil for aquatic
• Electronics s Tech: Components for mobile phones (lithium-ion cells), CCTV cameras, Lithium-ion batteries, and parts for LED lights/lamps.
• Industrial/Medical: Medical grade isotopes (Mo-66), inputs for orthopaedic implants, solar cell manufacturing materials (EVA/back sheets), and various machinery for semiconductor fabrication.
• Renewable Energy: Goods for the manufacture of wind-operated electricity

2.    Lapses and Expirations (Effective 31.03.2026)

22 entries will be allowed to expire on their scheduled end date. These include:

• Industrial Chemicals: Naphtha for fertilizers, LPG for specific units, and EPDM rubber for
• Consumer/Misc: Parts for video games, digital still cameras, and certain television
• Other: Metal parts for electrical insulators and pipes for

3.    Immediate Omissions s Redundancies (Effective 02.02.2026)

Certain entries are being removed immediately because they are deemed redundant or are being incorporated directly into the Tariff Act:

• Unconditional Exemptions Lapsed: Animals for zoos, artificial plasma, and alpha
• Redundant Entries: Ethylene vinyl acetate (EVA) and specific screws/bolts are being omitted as the effective BCD (Basic Customs Duty) rate will now be governed by the First Schedule of the Customs Tariff

4.    Significant Modifications

Several existing exemptions were modified to adjust their scope or duration:

• Sea-food processing: The value limit for duty-free imports increased from 1% to 3% of FOB
• Footwear/Textiles: The export time period for value-added products made from concessional inputs was extended from 6 months to 12 months.
• Precious Metals: A new sunset date of 03.2027 has been prescribed for Gold and Silver dore bars and certain gold/silver jewellery imports.

5.    Extension of validity period for certain class of exemptions (Valid up to 31.03.2028)

The validity of BCD exemptions for the following has been extended for two years:

• Precious stones imported by post on an “approval or return”
• Goods for job-work: Imports specifically for executing export
• Copper products: Cathodes, wire bars, and wire rods produced from copper
• Gold and Silver: Produced from copper anode slime exported for toll smelting/processing.

6.    Exemptions Lapsing (Expiring 31.03.2026)

The exemption for Castor oil cake and de-oiled cake (manufactured from indigenous seeds in an SEZ and brought to a DTA) will be allowed to lapse.

7.    New Sunset Date (Valid until 31.03.2028)

A new sunset date has been set for exemptions on Works of art and antiques intended for public exhibition.

8.    Omission of redundant entries (Effective 02.02.2026)

Several entries from Notification No. 36/2024-Customs are being removed because they are redundant (the BCD rate will now be governed by the First Schedule of the Customs Tariff Act, 1675). Key items affected include:

• Ores  Concentrates: Copper, Cobalt, Tin, Tungsten, Molybdenum, Zirconium, Vanadium, Antimony, and Niobium/Tantalum.
• Unwrought Metals s Powders: Tin, Tungsten, Molybdenum, Tantalum, Cobalt, Bismuth, Zirconium, Antimony, Beryllium, Hafnium, Rhenium, and Cadmium.

Note: The descriptions provided are indicative; the original notifications should be consulted for full legal details.

 

7.  OTHER HIGHLIGHTS

1.   Amendments to Social Welfare Surcharge (‘SWS’) provisions

• Minerals s Chemicals: Natural graphite, quartz, quartzite, silicon dioxide, and artificial graphite will remain exempt from SWS. This transition to a new notification (No. 11/2018-Customs) takes effect on May 1, 2026.
• Food s Beverages: Specific goods under heading 2106 60 (excluding certain alcoholic preparations) will have their concessional rates shifted to the First Schedule. SWS incidence remains unchanged, effective May 1, 2026.
• Precious Metals (Spent Catalyst): The description for spent catalyst and ash (heading 7112) is being updated to remove lapsed references e.f. 01stApril 2026.
• Personal Imports: SWS will now be levied on all goods under heading 6804 (dutiable goods imported for personal use) starting April 1, 2026.
• Electronic Toys: Parts for manufacturing electronic toys (heading 6503) are now exempt from SWS, effective immediately on February 2, 2026.

2.   Agriculture Infrastructure s Development Cess (‘AIDC’)

• Aircraft Tyres: New pneumatic rubber tyres for aircraft (tariff item 4011 30 00) will continue to attract a 5% AIDC rate.
• Technical Update: The notification is being modified to remove outdated references, effective

February 2, 2026.

C.3 – Central Excise Act, 1G44

1.   Tobacco Products s NCCD Revisions

• Revision of Tariff Rates: The Seventh Schedule to the Finance Act, 2001, is being amended to increase the tariff rates for National Calamity Contingent Duty (NCCD) on specific tobacco products from 25% to 60%.
• Targeted Products: This change applies to chewing tobacco, jarda scented tobacco, and other tobacco products including
• Effective Rate Unchanged: Despite the tariff increase, the effective rate will remain at 25% through a separate notification.
• Timeline: These tariff changes are scheduled to come into effect on May 1, 2026.

2.   Relief for Biogas and Blended CNG

• Exclusion from Transaction Value: The value of Biogas or Compressed Biogas (CBG) contained in blended CNG including the taxes paid on such biogas is now excluded from the transaction value for calculating central excise
• Effective Date: This change is effective from February 2, 2026.
• Regulatory Updates: Notification 11/2017-Central Excise is being amended, while the older notification (No. 05/2023-Central Excise) is rescinded.

 

3.   Diesel Duty Deferment

• Additional Duty Postponed: The implementation of an additional excise duty of INR 2 per litre on unblended diesel has been deferred.
• New Deadline: This levy is now pushed back until March 31, 2028.
• Timeline: This deferment takes effect starting February 2, 2026.

 

Scope Limitations:

• This document is intended solely for general informational and educational purposes and should not be treated as a substitute for professional advice. The contents do not constitute legal, tax, or financial guidance, and no conclusions should be drawn based solely on this note.
• Every taxpayer’s case is unique, and specific facts may materially affect the We strongly recommend seeking tailored advice from our team or your professional advisor before taking any action based on the information shared here. We disclaim any responsibility for loss or damage incurred as a result of reliance placed on this document.
• Tax laws and administrative procedures change frequently, and the processes described may be updated or modified by the authorities after this note is
• Merely reading or relying on this note does not create a client-advisor or professional relationship with our
• The discussion in this post may reffect procedures or practices relevant primarily to a specific country (e.g., India); different jurisdictions could have substantial
• Our opinions are not binding on any authority or court, and we offer no assurance that a contrary position will not be taken or upheld and ultimately sustained by an appellate authority or a court of
• This note does not cover any other direct or indirect taxes, Indian Foreign Exchange Control regulations, or other regulations other than amendments proposed in Union Budget
• It may not be reproduced without our prior written– CA Sirish SSS TN chapter member