India’s budget seeks to stimulate foreign commercial investment:

The Union of India’s budget 2025-26 is a daring step towards the transformation of India’s economic landscape. By focusing on the reduction of the tax burden of taxpayers with intermediate income, this budget aims to invigorate consumption, to attract foreign investments and to ensure budgetary stability.

While India continues its journey to becoming a global economic power, these reforms play a crucial role in promoting sustainable growth. Explore new reforms affecting organizations do business in India.

American commercial investment in India considerations

India’s budgetary reforms are particularly looking to increase foreign investments (obtain details below on the modification of foreign direct investment rules). As the most populous country in the world, it is a key market for American goods and services. And with Current prices On goods from China, Mexico and Canada, India can be a location to consider for manufacturing.

The 2025-26 union budget introduces several key tax and political reforms that could benefit American customers with investments or commercial operations in India. The increase in the limit of direct foreign investment (IDE) in the 100% insurance sector (for companies that invest the entire premium in India) presents a lucrative opportunity for American insurance companies looking for full ownership in Indian companies.
Source: Government of India, Ministry of Finance

In addition, the simplified rules of compliance for world cash centers and investment funds at the International Center for Financial Services (IFSC), including Gujarat International Finance Tech-City (Gift City), make India a more attractive destination for financial companies.

The budget also introduces the tax advantages for start-ups, promoting an environment more favorable to innovation and entrepreneurship. These incentives could help us, investors to seek to enter or develop in the growing start -up ecosystem of India. Overall, the budget aims to stimulate India’s economic growth while providing foreign investors better regulatory clarity and market access.

Union of India budget 2025-26: tax reforms for economic growth

The Union 2025-26 budget focuses on the reduction of the tax burden and compliance on taxpayers with intermediate income in order to stimulate consumption, attract foreign capital and ensure budgetary stability.

The highlights of the main tax proposals are:

Taxation

• The corporate tax rate for national companies and foreign companies remains unchanged at 25% and 35%, respectively (the more overload and CES).
• Start-ups formed before April 1, 2030 continue to benefit from a three-year tax day in the first 10 years of operation, provided they meet certain conditions.
• Non-residents providing services or technologies for the manufacture of electronics notified in India will be taxed on 25% of their gross receipts.
• The interior ships recorded under the Indian ship law, 2021, now benefit from the tonnage tax regime where the tax is calculated on the basis of the net tonnage (capacity) of ships instead of real profits.

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Transfer price

• Transfer price The audits can be evaluated in blocks of three exercises instead of each year, if they are opted by the taxpayer.
• Taxpayers can apply the length price of the arm determined for international national transactions and previously specified to similar transactions for the next two years, except in research cases, with deadlines and procedures prescribed.

IDE and foreign institutional investment (FII)

• The IDE limit in the insurance sector increased from 74% to 100%, allowing a complete foreign property, provided that the bonuses won are reinvested in India.
• Revenues for the rental of ships, dividends between IFSC units engaged in the rental of ships and the product of the life insurance of the policies purchased via IFSC insurance intermediaries, including those of Gift City, are exempt from tax.
• Simplified rules of compliance are introduced for world cash centers and investment funds in IFSC, including Gift City, in order to improve its position as a global financial center.
• The long -term capital gains tax on listed obligations, debentures and units of unit input of placement held by FIIs increased from 10% to 12.5%, from April 1, 2026.

Compliance reforms

• The calendar for the filing of a updated income tax return has been extended from two years to four years from the end of the relevant evaluation year.
• The definition of virtual digital assets now includes all cryptographic assets, and the declaration of cryptographic transactions to the tax authorities is compulsory.

Products and services tax reforms (TPS)

• The Input Services Distributor (ISD) now includes reverse charge mechanism transactions (RCM) and the inter-state IT DSI likely to RCM.
• The Supreme Court ruled that “the factory or the machines” under article 17 (5) (d) (d) is different from “the factory and the machines” and requires a functional test to determine if a building is considered a “plant”, leading to a proposal aimed at replacing “the factory or the machines” by “the factory and the machines” for more clarity.
• A track and trace mechanism has been introduced for specified goods with a unique identification mark to combat tax evasion and improve the transparency of the supply chain.
• Transactions involving goods stored in special economic areas or free trade storage areas before export or authorization to the national tariff zone will be processed as neither an offer of goods nor a provision of services.
• The violations of the unique identification marking requirements, which oblige secure and non -removable notes on certain goods to prevent tax evasion and fraud, can cause strict sanctions.

How can the CLA help with foreign commercial considerations in India

India’s new budget seems friendly with foreign commercial investments, but sometimes the challenges reside in details. The CLA International Tax Team Can guide you through the maze of tax regulations of India, ensuring compliance and strategic tax planning of your global operations.