The government of India tabled its budget for the current financial year (2024-2025) in Parliament on Tuesday, announcing a slew of measures that would ease doing business in India for foreign investors.
In her budget address to fellow lawmakers, Finance Minister Nirmala Sitharaman said the government has proposed slashing the corporate tax rate applicable on foreign companies from 40% to 35%, creating a “level playing ground” with domestic players (it has progressively reduced corporate tax rates for domestic companies in the last few years).
Seeking to attract more funds into the country, Sitharaman also said rules for Foreign Direct Investment will be simplified.
In a significant move to boost its startup ecosystem, the government announced abolishing the so-called ‘Angel Tax’ for all classes of investors. The tax, introduced in 2012, was imposed if the total investment value exceeded the company’s fair market value.
New Delhi also announced setting up a ten-billion-rupee ($120 million) venture-capital fund to expand its space sector in line with country’s ambitious plans on the world stage to become a bigger player in space. The country has also allowed a 100% foreign direct investment in manufacturing of satellite systems locally.
The budget proposes significant reductions in import tariffs for some key goods and commodities, including basic custom duty on gold and silver from 10% to 6%, on cellphones and on parts used in the manufacture of handsets, from 15% to 10%.
The government has also reduced or removed custom duties on 25 critical minerals, including lithium, copper, cobalt and rare earths, all crucial for sectors like nuclear energy, renewable energy, space, defense, telecommunications and high-tech electronics.
New Delhi has also introduced ‘safe harbour rates’ (fixed tax rates) for foreign mining companies selling raw diamonds in the country. This would make India, where 90% of the world’s diamonds are being cut and polished, a more predictable market for global mining companies, and the move is aimed at reducing the risk of tax disputes and creating a more attractive investment environment. Around a third of India’s total rough-diamond imports are from Russia.
Acknowledging the aim of the government to develop India as a tourist destination, the finance minister also announced a simplified tax regime for foreign shipping companies operating domestic cruises in the country.
Overall, the budget focuses on “employment, skilling, small businesses, and the middle class,” Sitharaman noted. She announced capital expenditure at 11.1 trillion rupees ($134 billion), which is 3.4% of GDP in fiscal year 2025, which has not changed since the interim budget presented earlier this year before the general elections – underscoring the government’s commitment to update and modernize the country’s infrastructure.
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