Content
- The Income Tax Act, 2025
- Pradhan Mantri Formalisation of Micro Food Processing Enterprises (PMFME)
The Income Tax Act, 2025
Background and Evolution
- Earlier framework: Income-tax Act, 1961 governed direct taxes in India for 64 years.
- Complexity problem:
- Amended ~65 times, with 4000+ changes.
- Multiple exemptions and deductions → reduced tax base.
- Outdated legal language → inaccessible to common taxpayers.
- Fragmented structure + litigation-heavy provisions.
- Reform process:
- Announced in July 2024 by Finance Minister.
- Drafted after stakeholder consultations and Select Committee review.
- Parliament passed Income-tax (No. 2) Bill, 2025 → effective 1st April 2026.
Relevance : GS 3(Economy – Taxation), GS 2(Governance)
Rationale for the Reform
- Simplify overly complex tax law.
- Reduce litigation and compliance burden.
- Remove obsolete provisions.
- Make law digital-ready and aligned with global best practices (UK, Australia).
- Improve ease of doing business and voluntary compliance.
Guiding Principles
- Textual & Structural Simplification: Replace archaic legal jargon with plain English.
- No Major Policy Changes: Tax slabs and rates largely unchanged for continuity.
- Predictability: Focus on clarity, not revenue overhaul.
Key Features of Income Tax Act, 2025
A. Simplified Framework
- Fewer sections, reorganized chapters, structured schedules, and formulae.
- Example: TDS provisions consolidated into Section 393 (earlier scattered).
B. Tax Year Concept
- Replaces confusing “Assessment Year” & “Previous Year” with “Tax Year”.
- Defined as April 1 – March 31 (financial year).
- Enhances clarity for taxpayers.
C. Power to Frame Schemes (Section 532)
- Government can design schemes to:
- Minimize human interface via technology.
- Improve efficiency with functional specialization & economies of scale.
D. Digital-First Enforcement
- Virtual Digital Space defined (emails, servers, cloud, social media, trading accounts, websites).
- Virtual Digital Assets (VDAs): Broader scope including cryptocurrencies, tokenized assets, and other blockchain-based assets.
E. Simplified Compliance
- Streamlined filing, reduced redundancies.
- Emphasis on faceless assessments and digital compliance.
F. Dispute Resolution
- Robust taxpayer-friendly framework.
- Goal: reduce litigation backlog, improve trust-based tax culture.
Core Objectives
- Simplification: Modern drafting, clarity, reduced ambiguity.
- Digital Integration: Faceless assessment, online compliance, reduced corruption.
- Taxpayer-Centric Approach: Simplified filing, reduced litigation, transparency.
- Global Alignment: Recognition of VDAs, taxation aligned with global norms.
- Ease of Doing Business: Predictable, accessible, transparent tax framework.
Strategic Importance
- Reflects Atmanirbhar Bharat and Viksit Bharat @2047 vision.
- Enhances taxpayer trust → fosters voluntary compliance.
- Encourages digital economy adoption.
- Positions India’s tax system in line with global digital asset regulation trends.
Implications
- For taxpayers:
- Easier to understand rules, reduced confusion.
- Lower litigation burden.
- For businesses:
- Predictability, simplified TDS, clarity in compliance.
- Boosts investment climate.
- For government:
- Streamlined administration.
- Greater efficiency with technology-driven assessments.
- Potential to expand tax base by reducing exemptions.
Conclusion
- The Income Tax Act, 2025 is not a rate-change reform, but a structural clarity reform.
- It transforms taxation into a predictable, efficient, digital, and taxpayer-friendly system.
- A landmark shift from complexity → clarity, aligning India’s tax law with global best practices.
Pradhan Mantri Formalisation of Micro Food Processing Enterprises (PMFME)
Basics
- Launch: 29 June 2020, under Atmanirbhar Bharat Abhiyaan.
- Type: Centrally Sponsored Scheme (CSS).
- Duration: FY 2020-21 to FY 2025-26.
- Total Outlay: ₹10,000 crore.
- Cost Sharing:
- 60:40 → Centre: States.
- 90:10 → North-Eastern & Himalayan States.
- 60:40 → UTs with legislatures.
- 100% Centre → Other UTs.
- Coverage Goal: Support 2 lakh micro food processing units.
- Vision: “Vocal for Local in Food Processing Sector” → competitiveness, formalisation, job creation.
Relevance : GS 3(Economy & Food Processing) , GS 2 (Governance & SHGs)
Context and Need
- India has 25 lakh → 64 lakh registered food business operators (2020–2025).
- Food processing sector = vital link between agriculture and industry.
- Sector contributes significantly to:
- GDP (value addition).
- Employment (large rural base).
- Exports (USD 49.4 bn agri & processed food in FY 2024-25, ~20.4% from processed foods).
- Issues faced:
- High informality in micro food units.
- Lack of access to finance, branding, infrastructure, and technology.
- High post-harvest losses & wastage.
- PMFME fills the gap by formalising micro units and creating stronger value chains.
Key Achievements (as of June 2025)
- Funds released: ₹3,791.1 crore to States/UTs.
- Loans sanctioned: 1,44,517 loans worth ₹11,501.79 crore (Credit Linked Subsidy).
- Training: 1,16,666 beneficiaries trained.
- Seed capital support: Approved for 1,03,201 SHG members, ₹376.98 crore.
- FY 2024-25: 50,875 loans sanctioned under CLS.
- Component-wise approvals (till June 2025):
- Credit Linked Subsidy → 1,44,517 units (₹11,501.79 cr).
- Seed Capital → 3,48,907 members (₹1,182.48 cr).
- Common Infrastructure → 93 projects (₹187.20 cr).
- Branding & Marketing → 27 projects (₹82.82 cr).
Key Components
A. Support for Individual Units
- Credit-linked capital subsidy: 35% of project cost.
- Ceiling: ₹10 lakh per unit.
- Beneficiary contribution: Minimum 10%, balance via bank loan.
B. Support for Groups
- FPOs/Producer Cooperatives: 35% grant, training, credit linkage.
- Self-Help Groups (SHGs):
- Seed Capital: ₹40,000 per member (working capital, small tools).
- Priority to ODOP-linked SHGs.
- Disbursed as repayable loan via federation.
C. Branding & Marketing Support
- Target groups: FPOs, SHGs, Cooperatives, SPVs.
- Focus: ODOP products.
- Eligible activities:
- Common branding, packaging, standardisation.
- Tie-ups with retail chains & institutions.
- Quality certification & control.
- DPR support: up to ₹5 lakh for marketing/branding proposals.
D. Common Infrastructure
- Funded facilities:
- Assaying, sorting, grading, warehousing, cold storage.
- Common processing units for ODOP produce.
- Incubation centres for training + shared facilities.
Capacity Building & Research
- Lead institutes:
- NIFTEM (Kundli).
- IIFPT (Thanjavur).
- Collaborations: ICAR, CSIR labs, CFTRI, DFRL.
- Role: Skill development, R&D, product-specific training, technology transfer.
- Outcomes: 225 R&D projects, 20 patents, 52 technologies commercialised.
ODOP (One District One Product) Focus
- States/UTs identify priority products (fruits, vegetables, spices, fisheries, honey, turmeric, etc.).
- Objective:
- Promote local produce & traditional foods.
- Reduce wastage & post-harvest losses.
- Strengthen value chains (linking production, processing, marketing).
- Complement Agriculture Export Policy and cluster-based approaches.
Case Study
- Ruby Fresh Snacks, Ernakulam (Kerala):
- Started in 2011 with groundnut laddoos.
- PMFME loan (₹3 lakh in 2021) → purchased machines, expanded products.
- Profits increased from ₹12,000/day → ₹20,000/day.
- Turnover crossed ₹32 lakh in FY 2021-22.
- Showcases transformational potential of PMFME support.
Strategic Significance
- Rural development: Jobs, women empowerment (via SHGs).
- Formalisation: Micro units enter GST/FSSAI ecosystem.
- Value addition: Boosts farmer income and reduces food wastage.
- Exports: Enhances India’s processed food share in global markets.
- Economic resilience: Strengthens supply chains, aligns with Atmanirbhar Bharat.
Challenges & Way Forward
- Awareness gap among rural entrepreneurs.
- Delays in DPR preparation & credit disbursal.
- Quality standards and certification adoption need scaling.
- Need stronger retail & e-commerce linkages for ODOP brands.
- Sustainability of incubation centres and SHG-based enterprises.
Conclusion
- PMFME is a bridge between informal micro units and organised sector.
- Through credit, training, ODOP branding, and infrastructure, it transforms local producers into competitive entrepreneurs.
- Strengthens farm-to-market linkages, reduces wastage, boosts exports, and drives inclusive rural growth.
- A core driver of India’s ambition to become a global leader in food processing by leveraging local strengths.
