Content

1. The Income Tax Act, 2025
2. 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  • Outdated legal language → inaccessible to common taxpayers.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.