Lok Sabha Passes Finance Bill 2025 with Major Tax Reforms
Lok Sabha Passes Finance Bill 2025 with Major Tax Reforms
The Lok Sabha on Tuesday passed the Finance Bill 2025 with 35 government amendments. Finance Minister Nirmala Sitharaman presented the revised bill on March 25, urging approval of key budget proposals. With this, the budget approval process in the Lok Sabha is complete, and the bill will now go to the Rajya Sabha for consideration. Once approved, the budget process for the financial year 2025-26 will be finalized.
Sitharaman stated that the amendments aim to streamline tax structures and boost domestic manufacturing. The bill exempts 35 EV battery components and 28 mobile manufacturing items from customs duties. The government has also removed the 6% digital tax on online advertisements. Changes have been made in the safe harbor framework to ensure business clarity and ease of investment.
Custom duty rationalization has been fast-tracked. Seven custom tariff rates have been removed to correct duty inversion and reduce input costs. Now, only cess or surcharge will be applied on imports, not both together.
The fiscal deficit for 2025-26 is projected at 4.4%, down from 4.8% this year. According to the National Statistical Office (NSO), India’s GDP for 2025-26 is estimated at ₹3,56,97,923 crore, a 10.1% increase from ₹3,24,11,406 crore in 2024-25.
The total government expenditure for 2025-26 is estimated at ₹50.65 lakh crore, a 7.4% rise from this year. Capital expenditure will be ₹11.22 lakh crore, while effective capital spending is projected at ₹15.48 lakh crore. Gross tax revenue is targeted at ₹42.70 lakh crore, and gross borrowing at ₹14.01 lakh crore. ₹25 lakh crore will be transferred to states.
India introduced the Equalization Levy (digital tax) in 2016, initially imposing a 6% tax on online ads. In 2020, a 2% tax was added on e-commerce transactions. This tax mainly impacted foreign tech giants like Google, Facebook, and Amazon.
The Finance Bill 2025 removes the 6% tax on digital ads. The government believes this will boost the digital advertising sector and improve business ease. However, critics argue it may lead to revenue loss and increased competition for local firms.
