CURRENT AFFAIRS
CURRENT AFFAIRS
Description
The Finance Bill 2025 has introduced significant amendments to the taxation rules applicable to Alternative Investment Funds (AIFs). These changes aim to streamline the tax treatment of securities held by AIFs and bring more clarity and transparency to investment structures. The revisions are part of the government’s broader initiative to align tax policies with the evolving regulatory and investment landscape.
Revised Definition Of Capital Asset
One of the major updates is the modification of the definition of a capital asset under Section 2(14) of the Income Tax Act, 1961. Under the new framework, securities held by Category I and Category II AIFs will now be treated as capital assets. This amendment ensures consistency in taxation across various investment funds, reducing ambiguity and promoting uniformity.
Inclusion Of IFSC-Compliant AIFs
The updated definition of capital assets now also covers securities held by AIFs operating under the regulatory framework of the International Financial Services Centres Authority (IFSCA) or the Securities and Exchange Board of India (SEBI). This change provides greater flexibility for both domestic and offshore AIFs functioning in India and enhances the attractiveness of financial hubs like the GIFT City IFSC.
Proposed Changes To Section 10(4D)
Section 10(4D), which provides tax exemptions to certain funds, is also being amended to simplify tax benefits for investment vehicles operating within the International Financial Services Centre (IFSC). These changes are expected to encourage higher investments through AIFs and strengthen India’s capital markets.
Union Budget 2025-26 Highlights
The Union Budget 2025-26 outlines a total expenditure of Rupees 50.65 trillion, marking a 7.4% increase compared to the previous fiscal year. The proposed capital expenditure is Rupees 11.22 trillion, while the effective capital expenditure, after accounting for grants and loans to states, is projected at Rupees 15.48 trillion. The budget also targets a gross tax revenue collection of Rupees 42.70 trillion.
Fiscal Deficit And GDP Forecast
For FY 2025-26, the government has pegged the fiscal deficit at 4.4% of GDP, an improvement from 4.8% in the preceding year. The estimated Gross Domestic Product (GDP) for 2025-26 stands at Rupees 356.98 lakh crore, reflecting a 10.1% growth compared to the revised estimates of FY 2024-25.
Enhanced Allocation To States
In line with its focus on strengthening federalism, the government has allocated a total of Rupees 25.01 trillion to states, which includes devolution of taxes and funds for Centrally Sponsored Schemes. This is a significant increase of Rupees 4.91 trillion over the actual allocations of 2023-24, reaffirming the government’s commitment to supporting state-level development and welfare programs.
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