Budget 2025: Ahead of the much-awaited Union Budget 2025, the US-India Tax Forum (USISPF) has put forth recommendations to bolster India's economic competitiveness. The proposals center on promoting investment, fostering innovation, and advancing sustainability to position India as a prominent player in the global economy.
The US-India Strategic Partnership Forum (USISPF) advocated for tax reforms aimed at simplifying direct taxation. Among the key recommendations are:
> Simplifying TDS rates: Proposing a reduction in the complexity of Tax Deduction at Source (TDS) by limiting it to two or three rates. This would alleviate the compliance burdens on businesses and enable them to concentrate on growth.
> Achieving tax parity for foreign banks: Suggesting alignment of tax rates for foreign bank branches with those applicable to domestic banks, in order to enhance India's attractiveness for foreign investment.
> Concessional tax rate for FPIs: Proposing a 10% tax rate on dividend income for Foreign Portfolio Investors (FPIs) to stimulate capital inflows.
> Supporting GIFT City: Recommending exemption of dividends in GIFT City and provision of tax exemptions on financial transactions to position it as a key global financial hub.
> Implementing transfer pricing reforms: Calling for the expansion of Safe Harbor Regulations and acceleration of the Advance Pricing Agreement (APA) process to promote transparency and predictability.
Manufacturing, healthcare, and renewable energy
Enhancing Manufacturing: Extending favorable tax rates for new manufacturing projects in key industries such as renewable energy, electric vehicles, and semiconductors to encourage growth and innovation.
Improving Healthcare Accessibility: Reducing tariffs on essential medications, including cancer treatments and vaccines, and maintaining exemptions for specified drugs through Patient Assistance Programs to ensure affordability and availability.
Promoting Renewable Energy and EV Usage: Providing incentives to manufacturers in the renewable energy and electric vehicle sectors to aid in the achievement of India's sustainability objectives and boost job opportunities.
Indirect taxation
The USISPF called for overhauling India’s indirect taxation system to align with global standards:
The US-India Strategic Partnership Forum (USISPF) has recommended an overhaul of India's indirect taxation system to bring it in line with global standards. This includes simplifying customs tariffs by implementing a three-tier system (0%, 5%, and 10%) to incentivize investment in sectors like electronics manufacturing.
Digital economy
the USISPF has proposed measures such as introducing refund mechanisms for the equalization levy and simplifying tax compliance for foreign digital service providers. These recommendations aim to streamline taxation procedures and promote India as a leading tech destination.
Streamlining tax compliance for digital service providers will facilitate easier adherence to tax regulations for foreign companies lacking permanent establishments in India, bolstering India's reputation as a technology hub.