india – Pushkar Mer

UNION BUDGET 2026-27

February 2, 2026 by Pushkar Mer

Direct Taxes

The basic tax slabs for individual and HUF remain unchanged in the old and new regime.

Corporate tax rates remain unchanged

MINIMUM ALTERNATE TAX (‘MAT’)

Rate of MAT reduced from 15 to 14 per cent.

No credit for tax paid under MAT for domestic companies under old

regime.

Accumulated MAT credit available for set-off up to 15 years for

domestic companies under new regime. Utilization restricted to 25

per cent of normal tax liability.

No impact on foreign companies.

INTERNATIONAL TAXATION

Tax holiday until 2047 for income earned by a foreign company from providing cloud services using data center services procured from India. Income attributable to Indian customers is also eligible for tax exemption provided such services are routed through an Indian reseller entity.
Income of a foreign company from supply of capital goods, equipment or tooling to an Indian contract manufacturer of electronic goods based in a custom bonded area, eligible for tax exemption for a period of five years.
Overseas income of a non-resident individual providing specified services in India under a notified scheme, is exempt from tax for a period of five years.

FOREIGN ASSETS OF SMALL TAXPAYERS DISCLOSURE SCHEME, 2026 (FAST-DS 2026)

TYPE OF ASSETS OR INCOME	TAX AMOUNT PAYABLE	CONDITIONS
No disclosure in tax return	Aggregate of the below  30 per cent of FMV of the asset as on March 31, 2026,  30 per cent of undisclosed foreign income as tax, and  100 per cent of the above	Aggregate of undisclosed foreign income and FMV of undisclosed foreign assets ≤ ₹10 million
a. No disclosure in tax return but taxes paid b. No disclosure upon becoming a resident but assets acquired as non-resident	Fee of ₹0.1 million	FMV of undisclosed foreign assets

IT Sector Tax Incentives Unified Safe Harbour Framework

Software development, IT enabled services, KPO, and contract R&D services clubbed under single category with common 15.5% safe harbour margin. Threshold enhanced from ₹300 crore to ₹2,000 crore. Automated rule-driven approval process with 5-year continuity option.

Cloud Services

Tax holiday till 2047 for foreign cloud service providers using Indian data centres.

Indirect Taxes

Customs Duty Reforms

Personal Imports

Tariff rate on dutiable goods for personal use reduced from 20% to 10%. Basic customs duty exempted on 17 drugs and medicines. Seven more rare diseases added for duty exemption on personal imports.

Export Competitiveness

Duty-free import limit for seafood processing inputs increased from 1% to 3% of FOB value. Duty-free imports extended to leather and synthetic footwear exports. Fish catch in EEZ made duty-free.

Export Timeline Extension

Export time frame for final products extended from six months to one year for exporters of leather or textile garments, leather or synthetic footwear, and other leather products.

Manufacturing Support

BCD exemption extended for capital goods manufacturing lithium-ion cells. Capital goods for critical minerals processing exempted. Nuclear power project imports exempted till 2035.

Aviation Sector

BCD exempted on components for civilian and training aircraft manufacture. Raw materials for aircraft parts in defence sector MRO exempted from basic customs duty.

SEZ Domestic Sales

One-time measure allowing eligible manufacturing units in special economic zones (SEZs) to sell goods in domestic tariff area at concessional duty rates, addressing underutilization of manufacturing capacity due to global trade disruptions.

Central Goods and Services Tax(CGST) Amendments

The Union Budget 2026-27 introduces several key amendments to the CGST Act, 2017, streamlining processes and providing clarity on various tax aspects.

Section 15: Valuation of Supply

Clarifies that post-supply discounts are permissible for valuation if a credit note is issued by the supplier and the recipient reverses the input tax credit (ITC) attributable to such discount.

Section 34: Credit and Debit Notes

Aligns with the amendment in Section 15, allowing for the issuance of credit notes for post-supply discounts that meet the specified conditions.

Section 54: Refunds

Expands the scope of refund claims to include unutilized input tax credit.

Excludes cases of tax refund on exported goods (with tax payment) from certain sub-sections, streamlining export refunds.

Section 101A: National Appellate Authority (NAA)

Introduces an interim provision allowing the Government to empower existing authorities to hear appeals under Section 101B until the NAA is constituted. This ensures continuity in the appellate process.

Disclaimer

All information presented in this document is based on announcements made by the Finance Minister during the Union Budget 2026-27 speech. The applicability and enforceability of these provisions will come into effect only upon their official publication through notifications under the relevant Acts and Laws.

Survey on Foreign Collaboration in Indian Industry: 2023–2025 – Data Release

December 3, 2025 by Pushkar Mer

Reserve Bank released the results of the fifteenth round of its biennial survey on foreign collaboration in Indian industry (FCS) covering the financial years 2023-24 and 2024-25. This survey captures information on financial parameters and operations of the Indian companies having technical collaboration with foreign companies.

Highlights:

Foreign technical collaboration (FTC) agreements were primarily present in the foreign direct investment (FDI) companies, which were either foreign subsidiaries (i.e., single foreign investor holding more than 50 per cent of total equity) or foreign associate companies (i.e., foreign investors’ equity holding ranging between 10 to 50 per cent), with 68 per cent and 21 per cent share of the total FTCs, respectively.
The FTCs in the manufacturing sector entities accounted for 78.4 per cent of the total reported FTCs, of which, machinery and motor vehicles together accounted for 30.6 per cent; while FTCs in the services sector constituted 16.6 per cent.
Japan, the United States of America (USA) and Germany remained the top three countries contributing to the technical collaborations in the Indian entities.
Around 61 per cent of FTCs involved technology know-how transfer by the foreign collaborators and 8 per cent FTCs were for use of trademarks / brand names.
Royalty payments, inclusive both royalty and lump sum technical fees, was the payment mode for around two-thirds of FTCs.
Of the 601 reported FTC agreements, 187 had export restriction clauses and 188 FTC had provision for exclusive rights on assets transferred.
Manufacturing sector had the highest share in value of production among the FTC companies. Within manufacturing, motor vehicles sector had the largest share.
The exports of the FTC reporting entities grew at a faster pace (20.3 per cent) as compared to the imports (4.6 per cent) in 2024-25 – they had 17.7 per cent and 18.6 per cent shares, respectively, in the total value of production.
Average profitability of FTC reporting companies, measured by the ratio of gross profit to capital employed, stood at 14.4 per cent in the current survey round.

Extension of Time for delayed foreign remittance against import of goods or services

October 9, 2024October 9, 2024 by Pushkar Mer

Reserve Bank of India (RBI) issues Master Circular to regulate import of goods and services in India. For delay remittance following guidelines of RBI Master circular should be complied

AD Category – I banks can consider granting extension of time for settlement of import dues up to a period of six months at a time (maximum up to the period of three years) irrespective of the invoice value for delays on account of disputes about quantity or quality or non-fulfilment of terms of contract; financial difficulties and cases where importer has filed suit against the seller. In cases where sector specific guidelines have been issued by Reserve Bank of India for extension of time (i.e. rough, cut and polished diamonds), the same will be applicable.
While granting extension of time, AD Category –I banks must ensure that:

a. The import transactions covered by the invoices are not under investigation by Directorate of Enforcement / Central Bureau of Investigation or other investigating agencies;

b. While considering extension beyond one year from the date of remittance7 , the total outstanding of the importer does not exceed USD one million or 10 per cent of the average import remittances during the preceding two financial years, whichever is lower; and

c. Where extension of time has been granted by the AD Category – I banks, the date up to which extension has been granted may be indicated in the ‘Remarks’ column.

(iii) Cases not covered by the above instructions / beyond the above limits, may be referred to the concerned Regional Office of Reserve Bank of India.

(iv) The above shall be reported in IDPMS as per message “Bill of Entry Extension” and the date up to which extension is granted will be indicated in “Extension Date” column.

Key Highlights of the Budget 2024-25 dated July 23,2024

July 23, 2024 by Pushkar Mer

FISCAL DEFICIT REDUCTION

FY25 fiscal deficit have been projected at 4.9% of GDP as against 5.1% in Interim Budget. Further,

government is committed to reduce deficit below 4.5%.

* Expenditure for FY25 seen at 48.21 lakh crore and Receipts for FY25 32.07 lakh crore.

* FY25 Fiscal Deficit projected at 4.9% of GDP versus 5.1% in Interim Budget with a aim to

reach a fiscal deficit of below 4.5% next year.

2. SUPPORT TO MSMEs

New mechanism for facilitating continuation of bank credit to MSMEs during their stress

period. Further, Limit of Mudra loans increased from ₹10 lakh to ₹20 lakh.

* Turnover threshold of buyers for mandatory onboarding on TReDS platform to be reduced

from ₹500 crore to ₹250 crore.

* Financial support for 50 multi-product food irradiation units in MSME sector.

* E-Commerce Export Hubs to be set up in PPP mode to enable MSMEs and traditional artisans

to sell their products in international markets.

3. DEVELOPMENT OF INDUSTRIAL PARKS

* Investment-ready “plug and play” industrial parks to be developed in or near 100 cities.

* 12 industrial parks sanctioned under National Industrial Corridor Development

Programme.

* Critical Mineral Mission to be set up for domestic production, recycling of critical minerals,

& overseas acquisition of critical mineral assets

4. SKILLING AND INTERNSHIP PROGRAMMES

* 1,000 ITIs to be upgraded in hub & spoke arrangements in 5 years with focus on outcome

and quality in collaboration with states and industry.

* 1 crore youth to be skilled by India’s top companies in five years. Further, 12-month Prime

Minister’s Internship with monthly allowance of ₹5,000 to be spend by companies from their

CSR funds.

5. TAXES ON CAPITAL GAIN AND TDS/TCS REFORMS

* Short term gains tax on specified financial assets raised to 20% from 15%, while that on all

other financial assets and non-financial assets shall continue to attract the applicable tax rate.

Further, Long term gains tax on all financial and non-financial assets raised to 12.5%. Also,

the limit of exemption of capital gains on certain listed financial assets has been increased

from ₹1 lakh to ₹1.25 lakh per year.

* TDS rate on e-commerce operators reduced to 0.1% from 1%. Delays in payments of TDS to

be decriminalized upto their filing due date and the process of reassessment and reopening

of returns to be simplified.

* Payments made by a firm to its partner shall be subject to TDS at 10% for aggregate amounts

more than ₹20,000 in a financial year.

* TCS Levy of 1% on notified luxury goods of value exceeding ₹10 lakhs.

* TDS levy on interest exceeding ₹10,000 on Floating Rate Savings (Taxable) Bonds (FRSB)

2020 or any other notified security of the Central or State Governments

6. EMPLOYEE LINKED INCENTIVE SCHEMES

* First-time enrolments in EPFO to receive one month’s wage upon entering the workforce

in all formal sectors. A direct benefit transfer (DBT) of one month’s salary up to ₹15,000

will be provided in 3 instalments.

* Incentives to be provided to both employees and employers as per their EPFO

contributions for the first 4 years of employment.

* Reimbursement to employers up to ₹3,000 per month for 2 years towards their EPFO

contribution for each additional employee. The eligibility limit for this will be a salary of ₹1

lakh per month.

7. REDUCTION/EXEMPTION IN CUSTOM DUTIES

* Customs duties on gold, silver reduced to 6%, platinum to 6.4% and Lithium, Copper, Cobalt

have been exempted from Custom Duty. Duty has also been exempted on manufacturing of

connectors and Oxygen-fused copper.

* 3 medicines also fully exempted from custom duty for cancer patients.

8. REVISION IN TAX STRUCTURE UNDER THE NEW REGIME AND INCOME TAX REFORMS

Income Slab Applicable Tax Rate

₹Upto 3 lakh Nil

₹3-7 lakh 5%

₹7-10 lakh 10%

₹10-12 lakh 15%

₹15 lakh and above 30%

* Withdrawal of the 2% equalisation levy. Further, standard deduction for salaried

employees will be hiked to ₹75,000, from ₹50,000 under new income tax regime in FY25.

* Similarly, deduction for family pension for pensioners will be enhanced from ₹15,000 to

₹25,000

* The deduction limit increased to 14% from 10% for employers’ contribution for the

National Pension System (NPS).

* Reduction in the rate of income-tax chargeable on income of foreign company (other than

that chargeable at special rates) from 40% to 35%.

9. TAXES ON BUYBACK OF SHARES, STT ON F&O

The income from buy-back of shares by companies be chargeable in the hands of the

recipient investor as dividend, instead of the current regime of additional income-tax in the

hands of the company. Further, the cost of such shares shall be treated as a capital loss to

the investor.

* An increase in the rates of STT on sale of an option in securities from 0.0625% to 0.1%

of the option premium, and on sale of a futures in securities from 0.0125% to 0.02% of the

price at which such futures are traded.

10. LABOUR RELATED REFORMS

* Open architecture databases for the widely changing job market, and connecting potential

employees with industry will be covered in the reforms.

Shram Suvidha and Samadhan portal will be revamped to enhance ease of compliance for

industry and trade.

11. Abolishing angel tax

In addition to the angel tax abolition, the Finance Minister extended the definition of “eligible startup” under the Startup India scheme to include entities incorporated between April 1, 2016, and March 31, 2025. This extension allows more startups to benefits from the tax holiday offered under the scheme.

*Disallowances of expenses due to non-payment to MSMEs [Section 43B(h)]

March 31, 2024 by Pushkar Mer

Section 43B(h) is introduced by the Finance Act, 2023 and applicable from FY 2023-2024. The Government wants to ensure timely payments to Micro & Small Enterprises. As per MSMED Act, 2006, the definition of MSME enterprises is as under:

*Particulars* *Micro* *Small* *Medium*

Turnover <=5 crore <=50 crore <=250 crore

Investment in Plant & Machinery <=1 crore <=10 crore <=50 crore

As per MSMED Act, 2006, *the time limit for making payments* is as under:

(a) Where written agreement does not exist – within 15 days from the date of acceptance

(b) Where written agreement exist – Agreed date or within 45 days from the date of acceptance, whichever is earlier

Section 43B(h) says that if payment is not made to MSME enterprises within the specified time limit, then the expenses will not be allowed as deduction under Income Tax Act and shall be added back to the total income.

Thus, if the payment is made in subsequent year or payment is made before the due date of income tax return or filing of income tax return in the subsequent year, then the same shall not be allowed as expense in the previous financial year, however the same shall be allowed as expense in the financial year in which the payment has been made.

*Key points of Section 43B(h):*

(a) This Clause is not applicable to Medium category enterprises. It is applicable only on Micro and Small category enterprises.

(b) This Clause is not applicable on Capital expenditure (CAPEX) items, it is applicable on goods & services.

(d) This Clause is not applicable on buyers who are filing their income tax return u/s 44AD/44ADA/44AE of the Income Tax Act;

(e) This Clause is not applicable on those vendors who are not registered under MSMED Act, 2006

(f) This Clause is not applicable on those payables for invoices dated on or before 31/03/2023

Storage of Payment System Data

February 29, 2024 by Pushkar Mer

The entire payment data shall be stored in systems located only in India, except in cases clarified herein.

The data should include end-to-end transaction details and information pertaining to payment or settlement transaction that is gathered / transmitted / processed as part of a payment message / instruction. This may, interalia, include – Customer data (Name, Mobile Number, email, Aadhaar Number, PAN number, etc. as applicable); Payment sensitive data (customer and beneficiary account details); Payment Credentials (OTP, PIN, Passwords, etc.); and, Transaction data (originating & destination system information, transaction reference, timestamp, amount, etc.).

There is no bar on processing of payment transactions outside India if so desired by the PSOs. However, the data shall be stored only in India after the processing. The complete end-to-end transaction details should be part of the data.
In case the processing is done abroad, the data should be deleted from the systems abroad and brought back to India not later than the one business day or 24 hours from payment processing, whichever is earlier. The same should be stored only in India.
However, any subsequent activity such as settlement processing after payment processing, if done outside India, shall also be undertaken / performed on a near real time basis. The data should be stored only in India.
In case of any other related processing activity, such as chargeback, etc., the data can be accessed, at any time, from India where it is stored.

Banks having server outside India have been strictly directed by RBI for not sharing customer account sensitive data in bank statement

In order to be in adherence to the Reserve Bank of India (RBI) Directive, the below listed information will not be available in the periodic banks statement/s for RTGS and NEFT transactions undertaken at your end (in cases if banks are storing data outside India):-

Serial Number of the Transaction
Message to Beneficiary
Beneficiary IFSC Number
Remitting IFSC Number
Address of the Remitter
Remarks
Debit Account Number
Beneficiary Account Number
Remitter Account Number
Reject Reason Description
Sender to Receiver Information

Mercedes-Benz get stay order against demand for GST on Expat Salary

February 12, 2024 by Pushkar Mer

In a relief for the auto major Mercedes-Benz, Bombay High court has granted an interim-stay of order demanding GST dues on expat-salary payment by the company. Last year, honorable Supreme Court has held that the salary of overseas employees (deputed to Indian company) that is reimbursement to the overseas entities will be subject to service tax. This decision shakes companies. Based on this decision GST department aggressively started issuing notices to companies demanding GST on reimbursement of expat salary. Directorate General of GST Intelligence (DGGI) recovers INR 2,500 Crores GST dues not paid on expat salaries. Many companies deposited GST on reimbursement of expat salaries. Some companies decided to challenge GST notices. However, rules are not yet clarified and companies are advices to analyze Supreme Court (SC) decision made in case of Northern operating Systems Pvt Ltd and check facts. If facts are matching with NOS arrangements, then GST need to be deposited, if company can differentiate facts, it can decide to challenge GST demand notice in court. This decision will be huge impact on company’s cash flow because GST demand will be calculated w.e.f. 01.07.2027 and interest and penalty will also be required to be deposited under section 73/74 of CGST Act.

Digitalization of Import/Export documentation in India

December 20, 2023 by Pushkar Mer

Information technology (IT) simplified export import functioning in India. It made all working of Custom department and Banking system very easy and systematic.

There are three revolutionary changes witnessed by Indian exporters/importers which transforms physical documentation into digitalization.

Directorate General Foreign Trade (DGFT) launched eBRC platform in 2012, RBI launched EDPMS and IDPMS system in 2014 and 2016 respectively.

eBRC platform introduced by Directorate General of Foreign Trade (DGFT) in 2012. Prior to eBRC era, it was quite cumbersome task to get Bank Realization Certificate (BRC) from AD. Once export gets inward remittance from overseas vendors, Original physical Exchange Control Copy of shipping bills needs to be submitted along with BRC application, thereafter AD was issuing BRC to exporter.

Export Data Processing and Monitoring System (EDPMS) was launched by RBI in March 2014 to monitor payments against Export Bill (Shipping Bill) . It is a system where all export transactions are captured and followed up till their realization. Outstanding get recorded by AD mentioned in shipping bill at the time of export.

AD send reminders to exporter if inward remittance not received within time period of 6 months.

If exporter continuous ignored communication from AD, then AD is liable to report to RBI for default of such exporters, thereafter RBI initiate panel action against violation of FEMA provisions.

IDPMS (IMPORT DATA PROCESSING AND MONITORING SYSTEM) LAUNCHED BY RESERVE BANK OF INDIA (RBI) IN 2016

This was the revolutionary step for digital control of Import towards a paperless documentation. Prior to IT based IDPMS era, importers and custom department required to keep original copies of bill of entry (Original for custom, duplicate for availing CENVAT Credit, Triplicate exchange control copy for making foreign remittance against imported goods). If importer lost triplicate copy, it required huge documentation process to make remittance against import. Bank mandatorily required Exchange Control Copy to avoid double payment against single bill of entry.

Post IDPMS era, importer does not require to keep original bill of entry, photocopy of bill of entry is enough for availing Input Tax Credit (ITC) and Bank also does not ask for original bill of entry for making foreign remittances.

In order to enhance ease of doing business and facilitate efficient data processing for payment of import transactions and effective monitoring thereof, Import Data Processing and Monitoring System has been developed in consultation with the customs authorities and other stakeholders.

RBI does not directly interact with imports. RBI interact with importers through Authorized Dealer (AD).

An Authorized Dealer (AD) is any person specifically authorized by the Reserve Bank under Section 10(1) of FEMA, 1999, to deal in foreign exchange or foreign securities

If we will have to start import transactions with overseas vendors, you would have to first get your self registered with Directorate General of Foreign Trade (DGFT) and get a Import Export Code (IEC). You would have to register AD code with Custom Department. For registering Code with Custom, you would have to submit details of AD code of your banker on banker letter head.

Primary data on import transactions from Customs and SEZ will first flow to the RBI secured server and thereupon depending on the AD code shall be shared with the respective banks for taking the transactions forward. The AD bank shall enter every subsequent activity, viz. document submission, outward remittance data, etc. in IDPMS so as to update the RBI database on real time basis.

All transactions are being updating in IDPMS, so there is no risk of double remittance, as a result no need of physical exchange control copy of bill of entry. If you will proceed double remittance by mistake, bank will deny for such remittance because after remittance it will automatically remove from outstanding list and will shift to settled bill of entry.

If you will not make foreign remittance within time limit as per RBI guideline, AD will send you reminders for settlement of outstanding to overseas vendors. If you will ignore such reminders, AD will be liable to intimate RBI for default of FEMA. RBI will initiate penal action against importer towards violation of FEMA.