Context:
The 2025 Budget has introduced a new presumptive tax regime with an aim to attract foreign nationals to work in India’s electronics manufacturing sector. This will further the growth prospect in sectors such as semiconductors and electronics, which will grow massively and require skilled talent from across the world.
Key Highlights:
Proposed presumptive tax regime
- Govt has made a proposal stating that only 25% of the total remuneration received by non- residents working for electronics manufacturing enterprises will go into the ambit of taxable profit.
- This might lead to much lower tax on such income where the effective rate may be just less than 10% only for foreign national.
- This will attract global talent in semiconductor and electronics sectors, helping them access top-tier skills and technology.
Safe Harbour Provision
- A safe harbour provision will be introduced for non-residents who store components intended for electronics manufacturing in India.
- This measure is intended to strengthen warehousing facilities for semiconductor and electronics products, as in other countries such as Malaysia, Taiwan, Japan, and South Korea.
- It is intended to simplify procedures and minimize tax disputes, thus providing more compliance and certainty for non-residents.
Electronics Manufacturing Expansion
- India’s electronics manufacturing sector is expected to double to over $200 billion in the next three to four years, driven by the new Budget proposals.
- The reforms are set to attract large-volume electronics manufacturing to India.
Employment Opportunities
- Employment in the sector, currently at 2.5 million, is projected to quadruple over the next four years, providing significant job opportunities.
Specific Sectoral Measures –
- Customs duty cuts for key materials – lithium battery scrap and raw materials for mobile phone batteries-will be sought to be utilized to spur manufacturing in these sectors.
- The India AI mission has been allocated ₹2,000 crores, where the money would be used in setting up the AI labs and data curation units across India.
- The scheme for out sourced assembly and testing units has been increased to ₹3,900 crore; the scheme for semiconductor fabrication units has seen an increase from ₹1,200 crore to ₹2,500 crore.
