As India moves into the financial year 2025-26, businesses must prepare for a series of regulatory updates that impact taxation, compliance, and corporate governance. These changes are designed to enhance transparency, improve ease of doing business, and align with global best practices.
Here’s a comprehensive look at the key regulatory reforms that will take effect from April 1, 2025.
1. Corporate Taxation Updates
The corporate tax landscape in India remains largely stable, but a few significant updates will affect businesses in the upcoming financial year.
- Corporate Tax Rates: Domestic companies opting for the concessional tax regime under Section 115BAA will continue to be taxed at 22% (plus a 10% surcharge and 4% cess), while new domestic manufacturing companies under Section 115BAB can avail a 15% tax rate (plus applicable surcharge and cess). Companies under the regular regime will be taxed at 30% (25% for turnover up to ₹400 crore).
- TDS/TCS Adjustments: The threshold for certain TDS and TCS deductions has been revised, affecting businesses engaging in high-value transactions. Companies must review their tax deduction policies to avoid penalties.
- Advance Tax Payment: Large businesses with a turnover exceeding ₹100 crore will be required to ensure timely quarterly advance tax payments, as any delays will attract interest penalties.
To navigate these evolving tax norms effectively, businesses may consider consulting Corporate Tax Services for compliance and tax optimization strategies.
2. GST Compliance Reforms
The Goods and Services Tax (GST) regime continues to evolve with stricter compliance requirements to enhance tax transparency.
- E-Invoicing Expansion: From April 1, 2025, businesses with an annual turnover above ₹5 crore must adopt e-invoicing for B2B transactions, lowering the previous ₹10 crore threshold. This measure aims to curb tax evasion and improve invoicing accuracy.
- Mandatory ITC Verification: Businesses can now claim Input Tax Credit (ITC) only if invoices are reflected in their GSTR-2B. This move will tighten the reconciliation process and prevent fraudulent claims.
- Increased Late Fees for GST Filings: Delayed GST return filings will attract higher penalties, with significant fines for businesses failing to submit GSTR-1 and GSTR-3B on time.
3. Labour Law Implementation
India’s long-awaited labour law reforms—covering wages, industrial relations, social security, and occupational safety—are expected to come into effect in FY 2025-26.
- New Wage Code: The updated wage structure mandates that basic pay must constitute at least 50% of total salary, impacting take-home salary and PF contributions.
- Social Security for Gig Workers: The government is introducing a social security fund for gig and platform-based workers—those engaged in freelance, short-term, or contract jobs through digital platforms like Swiggy, Uber, and Ola. Employers hiring such workers will be required to contribute to this fund.
- Flexible Work Regulations: Companies can introduce a four-day workweek model, provided employees complete the mandated 48 working hours per week.
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4. Foreign Direct Investment (FDI) Policy Updates
To attract global investors, the government has revised certain FDI norms across key sectors.
- Retail and E-commerce: Multi-brand retail FDI remains capped at 51%, but new local sourcing rules aim to streamline investment processes.
- Defence Sector: FDI in the defence sector remains at 74% under the automatic route, with further approvals required for investments exceeding this limit.
- Foreign Entity Compliance: Foreign companies operating in India must now furnish additional quarterly compliance reports on taxation and operational activities.
5. SEBI Guidelines for Listed Companies
The Securities and Exchange Board of India (SEBI) has tightened corporate governance and disclosure norms for publicly traded companies.
- Enhanced Disclosure Requirements: Companies must disclose significant financial developments, acquisitions, or risks within 24 hours.
- ESG Reporting Mandates: Large corporations with a market capitalization above ₹5,000 crore must submit detailed Environmental, Social, and Governance (ESG) reports in their financial filings.
- Stronger Insider Trading Regulations: New surveillance mechanisms have been implemented to track stock price manipulations and unauthorized data leaks.
6. Data Protection and Cybersecurity Compliance
With the increasing focus on data security, businesses will need to comply with the upcoming Digital Personal Data Protection (DPDP) Act.
- Mandatory Data Localization: Companies processing sensitive personal data must store such data within India.
- User Consent and Privacy Protections: Firms must obtain explicit consent before collecting or processing personal information, with severe penalties for non-compliance.
- Cybersecurity Audits: Financial and fintech companies must conduct quarterly cybersecurity audits and submit reports to the Reserve Bank of India (RBI).
7. Strengthened Environmental Regulations
India is pushing for greater corporate accountability in sustainability and environmental impact.
- Carbon Footprint Disclosures: Large industries must include carbon emission data in their annual sustainability reports.
- Green Building Compliance: New commercial and residential construction projects exceeding 10,000 square meters must adhere to energy-efficient building codes.
- Stricter Penalties for Pollution Violations: Industries violating environmental norms will face increased fines and potential operational shutdowns.
Final Thoughts
The regulatory landscape for Indian businesses in FY 2025-26 is undergoing significant changes, affecting taxation, corporate governance, labour laws, and data privacy. Companies must stay proactive in compliance and seek professional assistance, such as Corporate Tax Services, to optimize tax strategies and avoid legal complications.
With these reforms shaping the business environment, enterprises that adapt swiftly will gain a competitive edge while ensuring long-term sustainability.
