Budget 2025 Recommendations: Nasscom Stresses On International Taxation & Safe Harbor Tax Rule & More

With the Union Budget 2025-26 just around the corner, key industry bodies and organizations are sharing their recommendations to shape a progressive financial framework for India. Nasscom, the premier trade association for the IT and BPM industries in India, has submitted a comprehensive memorandum to the Ministry of Finance for the upcoming budget. The detailed report focuses mainly on crucial areas such as international taxation, safe harbour rules, Special Economic Zones (SEZs), start-ups, and measures to enhance ease of doing business.

Key Recommendations by Nasscom for Budget 2025-26

• Nasscom has highlighted the importance of improving India's international taxation policies to enhance the country's attractiveness as a global business destination. The memorandum urges the government to build upon the Union Budget 2024's announcement and implement practical measures to streamline transfer pricing and make safe harbour rules more appealing.
• Nasscom recommends increasing the threshold limits, reducing tax rates, and consolidating rate categories to make the rules more practical and beneficial for Global Capability Centers (GCCs) and IT-BPM multinational enterprises (MNEs).
• In order To reduce uncertainty, Nasscom suggests shortening the time required to conclude unilateral APAs and expediting the renewal process for APAs when the underlying facts remain unchanged. Once these changes are made, Nasscom believes India can boost the ease of doing business, attract more foreign investments, and promote the growth of GCCs.
• Nasscom has proposed measures to maximize the benefits of SEZs for the technology services sector. The association urges the government to broaden the eligible purposes for utilizing the Re-investment Reserve under Section 10AA of the Income Tax Act to ensure that companies can effectively leverage the income tax benefits during their 11th to 15th year of operation in SEZs.
• Recognizing the growing importance of start-ups, particularly in the DeepTech sector, Nasscom has made specific recommendations to enhance the availability of patient capital and foster innovation in the start-up ecosystem. Nasscom recommends extending the deferment of tax payment on Employee Stock Option Plans (ESOPs) to employees of all DPIIT-recognized start-ups. This will help retain talent and reduce the immediate tax burden on employees. The recommendation also includes establishing a government-backed DeepTech fund and creating a structured grant framework to support R&D projects.
• Nasscom has put forward a range of suggestions aimed at simplifying business operations for IT-BPM companies, e-commerce platforms, and start-ups to further enhance India's competitiveness in the global market, Nascomm suggests that all companies be allowed to carry forward business losses and accumulated depreciation under Section 72A of the Income Tax Act.

Other Key Suggestions

Nasscom's report also includes various other recommendations to make India a more attractive business destination, including Streamlining compliance requirements., Enhancing transparency in tax policies and improving dispute resolution mechanisms. As the Union Budget 2025-26 approaches, the industry is hopeful that these measures will be considered to make India a global hub for innovation and business.