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Below the Pre-budget Input on New Direct Tax Code by Kunal Gala, BDO India

“Digital infrastructure is likely to be a top priority in the Union Budget 2025, with continued investments being expected in projects like BharatNet to connect more than 6 lakh villages with high speed broadband. Investments will also focus on expanding the 5G coverage which will be essential to enable the advancements in IoT, telemedicine and smart city solutions. These will contribute in India digital transformation and bridge the rural urban divide. To bolster this effort, subsidies for establishing data centers critical for cloud computing and AI driven applications may be introduced which could attract global technology investments. It will also be crucial to implement robust cybersecurity frameworks and to ensure compliance with the Data Protection Bill to protect digital assets as India’s digital economy becomes more and more critical to its GDP growth”
 

“The Union Budget for the year FY26 is likely to face the double challenge of boosting up the economic growth and achieving fiscal consolidation. The GDP growth rate reduced to 5.4% in the second quarter of the financial year 2024-25 (against RBI projection of 6.8%) and the government has a fiscal deficit target of less than 4.5% of the GDP for the fiscal year 2025-26, so the spending priorities will have to be set properly. Corporate tax rates are not likely to be increased as India is looking to attract foreign capital especially for large scale projects. Investors remain cautious as Indian government bonds offer only ~ 2% higher yield than U.S. Treasury notes, reflecting limited risk-adjusted returns. Delaying the fiscal deficit target by a year to put more money into infrastructure and to satisfy the middle class could be a reasonable approach to turn around the economic growth and to create jobs.”