Union Budget 2025 – Startups, Investors & GIFT IFSC

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Budget 2025: Key Highlights and Analysis 

The Union Budget 2025 presents a reform-driven and growth-focused vision for India’s economic trajectory, aligning with the government’s long-term goal of Viksit Bharat 2047. With a strong emphasis on fiscal prudence, policy continuity, and structural transformation, the budget outlines measures to accelerate infrastructure growth, economic stability, and private sector participation.

India remains one of the fastest-growing major economies, with a real GDP growth forecast of 6.4% for FY 2025 and a fiscal deficit target of 4.4% for FY 2026. The budget’s total expenditure stands at ₹50.65 lakh crore, reflecting a 14% increase, largely focused on investment-led growth.

The government reiterates its commitment to inclusive development for GYAN, centering its initiatives around Garib (poor), Yuva (youth), Annadata (farmers), and Nari (women). The budget also prioritizes MSMEs, exports, energy security, and employment generation, ensuring long-term economic resilience.

Budget 2025 – Key Growth Drivers

The Union Budget 2025 is structured around six core reform domains:

1. Taxation – Simplified tax policies to enhance compliance.
2. Power Sector – Boosting clean energy investments.
3. Urban Development – Expanding infrastructure.
4. Mining – Strategic development of natural resources.
5. Financial Sector – Policy predictability and economic stability.
6. Regulatory Reforms – Improving ease of doing business.

Additionally, the budget introduces sector-specific funds, regulatory overhauls, and incentives for startups and MSMEs to drive innovation and economic growth.

Key Policy Announcements in Budget 2025

The Union Budget 2025 highlights several major reforms and policy announcements:

1. Introduction of a New Income Tax Bill

A new Income Tax Bill will be introduced to modernize and simplify India’s tax laws, promoting efficiency and predictability in the tax regime.

2. Startup and MSME Incentives

• ₹10,000 crore Fund of Funds to support startups.
• Deep Tech Fund of Funds for next-gen technology startups.
• MSME classification limits revised for investment and turnover, expanding opportunities for small businesses.
• National Manufacturing Mission to enhance ease of business, support a future-ready workforce, and drive clean tech manufacturing.

3. Investment and Business-Friendly Policies

• FDI in the insurance sector increased to 100% (from 74%).
• Fast-track merger procedures streamlined to boost corporate consolidation.
• Investor Friendliness Index to be launched for states in 2025.

4. Financial Sector and Compliance Easing

• Rationalization of TDS & TCS provisions, including:
  • Higher TDS exemption limits for various income categories.
  • Removal of higher TDS/TCS for non-filers of ITR.
  • TCS exemption threshold for overseas remittances increased from ₹7 lakh to ₹10 lakh.
• Simplified transfer pricing framework – 3-year ALP (Arm’s Length Price) assessment period to reduce litigation.
• Introduction of a revamped Central KYC registry in 2025.

5. Boosting Investments through GIFT IFSC

• Enhanced tax benefits for offshore funds relocating to GIFT IFSC.
• Exemption on capital gains and dividends for ship leasing units in IFSC, aligning it with aircraft leasing benefits.
• Simplification of fund manager compliance rules, making GIFT IFSC a more attractive financial hub.

Decoding Tax Reforms in Budget 2025

I. Startups and Other Businesses

Budget 2025 brings notable tax reforms aimed at boosting the startup ecosystem and improving business ease. Key highlights include:

1. Extension of Startup Tax Holiday: The 100% tax deduction under Section 80-IAC has been extended till March 31, 2030, supporting early-stage startups. However, the low utilization rate of this benefit (only ~2.36% of DPIIT-registered startups) signals a need for further streamlining.
2. Restrictions on Loss Carry Forward in Amalgamations: Startups and businesses undergoing mergers will now be restricted from indefinitely carrying forward losses, ensuring tax compliance and preventing evergreening of losses.
3. Rationalization of TCS on LRS & Tour Bookings: The TCS threshold under the Liberalized Remittance Scheme (LRS) has been increased from ₹7 lakh to ₹10 lakh, easing overseas transactions for businesses and individuals.
4. Higher TDS Thresholds to Improve Compliance: Businesses benefit from higher TDS applicability limits across multiple categories, reducing compliance burdens. For instance, TDS on professional services and rent has been revised, making compliance more streamlined.

📌 Treelife Insight: While these changes improve compliance efficiency, the impact on startup liquidity and cash flow management will be key to watch.

II. AIFs and Other Investors

The Budget introduces critical reforms for Alternative Investment Funds (AIFs) and institutional investors, ensuring regulatory clarity and tax stability.

1. Clarity on Tax Treatment of Securities Held by AIFs: Category I & II AIFs will have their securities classified as capital assets, ensuring uniform capital gains tax treatment rather than business income taxation.
2. Removal of TCS on Sale of Goods (Including Securities): The 0.1% TCS on sales above ₹50 lakh has been abolished, significantly reducing tax compliance burdens for investment funds and capital market transactions.
3. Reduced TDS on Securitization Trust Distributions: The TDS rate for residents receiving payments from securitization trusts has been slashed from 25%-30% to 10%, ensuring smoother fund flow within investment structures.
4. Streamlined Tax Rate for FPIs & Specified Funds: Long-term capital gains (LTCG) tax for FPIs has been standardized at 12.5%, reducing disparities and bringing tax certainty.

📌 Treelife Insight: These reforms simplify fund structures and reduce compliance friction, making India’s investment ecosystem more competitive.

III. Personal Taxation

Personal taxation changes in Budget 2025 focus on increasing exemptions, easing compliance, and rationalizing TDS/TCS:

1. Higher Basic Exemption & Rebate Under the New Tax Regime:

• Basic exemption limit raised to ₹4 lakh (from ₹3 lakh).
• Rebate under Section 87A increased to ₹12 lakh, reducing tax outgo for middle-income taxpayers.

2. Crypto Asset Reporting Mandate: Section 285BAA introduces strict reporting requirements for cryptocurrency transactions, increasing transparency in digital asset taxation.
3. Extension of Time Limit for Filing Updated Returns: Taxpayers now have up to 48 months (from 24 months) to file updated ITRs, subject to additional tax payments.
4. Tax Deduction for NPS Vatsalya Scheme: A new deduction of ₹50,000 under Section 80CCD is introduced for contributions towards NPS for minors, encouraging long-term savings.

📌 Treelife Insight: While these changes offer tax relief for middle-income earners, the lack of direct income tax cuts may leave higher-income taxpayers wanting more.

IV. GIFT-IFSC

Budget 2025 strengthens GIFT City’s role as a global financial hub with extended tax incentives and new opportunities:

1. Extension of Tax Exemptions Till 2030: Sunset clauses for tax benefits on aircraft leasing, ship leasing, and offshore banking units have been extended to March 31, 2030, boosting investor confidence.
2. Leveling the Playing Field for Category III AIFs: Non-residents investing in offshore derivative instruments (ODIs) through Category III AIFs in GIFT IFSC will now enjoy tax exemptions, making GIFT City more attractive for international funds.
3. Tax-Free Life Insurance Proceeds from IFSC Insurance Offices: Policies issued by IFSC insurers are now fully exempt from tax, driving more offshore participation in India’s insurance market.
4. Simplified Fund Management in IFSC: Investment funds based in GIFT IFSC now have relaxed compliance thresholds, making India’s first International Financial Services Centre (IFSC) more competitive with global financial hubs.

📌 Treelife Insight: These reforms strengthen India’s global positioning in financial services, but long-term success will depend on ease of implementation and market response.

Conclusion

Budget 2025 introduces progressive tax reforms aimed at simplifying compliance, encouraging investment, and driving economic growth. With reforms as the fuel, inclusivity as the guiding spirit, and Viksit Bharat as the destination, the government reaffirms its commitment to policy stability and long-term transformation.

By reducing administrative burdens, improving tax certainty, and fostering a business-friendly environment, these reforms create a strong foundation for India’s evolving economic landscape. While some measures may require further refinements, the overall direction of Budget 2025 marks a positive shift towards a predictable, stable, and globally competitive tax regime.

With the new Income Tax Bill set to be unveiled soon, anticipation is high for further transformative reforms that will shape India’s tax landscape and its emergence as a global economic powerhouse.

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Jitesh Agarwal

Founder | [email protected]

Leads the VCFO, finance tax, and regulatory functions at Treelife. Responsible for the firm’s non-operational growth and providing strategic advisory in GIFT City, helping clients navigate complex regulatory landscapes effectively.

Priya Kapasi Shah

Associate Partner | Tax & Regulatory | [email protected]

Heads Treelife’s Financial Advisory practice, specializing in investment structuring, cross-border transactions, and tax and regulatory advisory. Also leads on AIF setups and advisory services for GIFT IFSC.

Rohit Gandhi

Senior Associate | Tax & Regulatory | [email protected]

Specializes in financial due diligence, valuations, business structuring, and income tax advisory. Contributes to the Financial Advisory team by helping startups and businesses make informed strategic decisions.

Dhairya Chaniyara

Senior Associate | Financial Advisory | [email protected]

Focuses on direct tax and regulatory services with a specialization in GIFT IFSC. Brings experience from various industries, including manufacturing, FMCG, IT-ITES, and healthcare, to deliver impactful tax solutions.

Karan Dhingra

Founder's Office | [email protected]

Karan works in the Founder's Office at Treelife and comes with an experience in law, technology, and business. He plays a vital role in supporting Treelife's strategic initiatives by providing legal and technological insights. Additionally, Karan is a key contributor to Treelife's sectoral reports.

Priyal Shah

Associate | Financial Advisory | [email protected]

Integrates extensive experience in income tax and regulatory matters to provide tailored financial advisory solutions. Formerly a Tax Manager, brings a pragmatic approach to addressing client challenges.