UPSC CURRENT AFFAIRS – 26th March 2025

Home UPSC Current Affairs Lok Sabha Passes Finance Bill 2025 with 35 Amendments

Lok Sabha Passes Finance Bill 2025 with 35 Amendments

Why in News?

On March 25, 2025, the Lok Sabha passed the Finance Bill 2025, an essential step in completing the Union Budget 2025–26 process. The Bill includes 35 government amendments, most notably the abolition of the 6% digital tax on online advertisements. It now proceeds to the Rajya Sabha, which can only make recommendations as per Article 110 (Money Bills).

What is the Finance Bill?

The Finance Bill is introduced annually alongside the Union Budget, under Article 110 of the Constitution.
It contains provisions related to:
- Taxation (direct and indirect),
- Borrowing and fiscal management,
- Duties, cesses, and levies,
- Amendments to existing financial laws.
Once passed by Parliament and signed by the President, it becomes the Finance Act, giving legal authority to implement the Budget.

Highlights of the Union Budget 2025–26 (via Finance Bill)

Component	Details
Total Expenditure	₹50.65 lakh crore (+7.4% YoY)
Capital Expenditure	₹11.22 lakh crore (focus on infra, defence)
Effective Capital Expenditure	₹15.48 lakh crore (includes loans to states)
Gross Tax Revenue	₹42.70 lakh crore
Gross Borrowing	₹14.01 lakh crore
Fiscal Deficit Target	4.4% of GDP (down from 4.8%)
Transfers to States	₹25.01 lakh crore
Central Sector Schemes	₹16.29 lakh crore
Centrally Sponsored Schemes	₹5.41 lakh crore
Projected GDP (FY26)	₹3.56 crore crore (~10.1% growth)

Key Amendment: Abolishing the 6% Digital Tax

What Was the Digital Tax?

Introduced as the Equalisation Levy, it imposed a 6% tax on income earned by foreign digital companies from Indian advertisers.
Aimed at ensuring tax parity with Indian firms and taxing digital activity without physical presence.

Why Was It Abolished?

Compliance with Global Tax Reforms:
- India is part of the OECD-G20 BEPS framework.
- The global consensus is shifting to a two-pillar tax model for multinational digital firms.
- Removing unilateral taxes like the Equalisation Levy supports international alignment.
Boost to the Digital Economy:
- Reduces entry barriers and operational costs for foreign digital platforms.
- Promotes investment, innovation, and ease of doing business, especially in advertising and content sectors.
Improved Trade Relations:
- The levy had caused friction, particularly with the United States.
- Repealing it is likely to improve bilateral ties and prevent retaliatory tariffs.

Relevance of the Finance Bill in Governance & Economy:

Fiscal Governance:
- Grants legal authority to raise revenue and spend public funds.
- Reflects the government’s fiscal priorities, sectoral focus, and economic vision.
- Enhances budget transparency and accountability.
Centre-State Relations:
- Enables fiscal devolution through tax shares and grants.
- ₹25 lakh crore in transfers empower states to run welfare, health, and employment schemes.
- Strengthens cooperative federalism.
Economic Stability & Growth:
- Fiscal deficit reduction to 4.4% demonstrates fiscal prudence.
- Capital expenditure push aims to stimulate jobs, private investment, and infrastructure growth.
Policy Alignment & Global Positioning:
- Signals a move toward tax simplification and digital economy alignment.

Enhances India’s credibility in global digital tax reforms and supports soft diplomacy

Conclusion

The passage of the Finance Bill 2025 marks a critical milestone in India’s budgetary cycle and fiscal policy roadmap. The amendments, especially the removal of the digital tax, reflect India’s efforts to align with global norms, improve the investment climate, and promote a resilient, inclusive digital economy. It reinforces the role of the Finance Bill not just as a fiscal tool, but also as a vehicle for economic transformation and international cooperation.