Indian Railways 2.0 – Diversifying Investment in Indian Railway Ecosystems

Indian Railways 2.0 – Diversifying Investment in Indian Railway Ecosystems

  India’s growth story is intricately linked to the development of its infrastructure, with transportation playing a pivotal role in driving economic progress. As the world’s fastest-growing major economy, India is poised to see its GDP soar, and a robust, efficient transportation network is essential to sustaining this momentum. As the backbone of India’s transportation system, Indian Railways plays a vital role in connecting the country, facilitating trade, and driving economic growth. However, in an era of rapidly changing market dynamics, railways need to diversify their revenue streams beyond traditional fare and freight incomes.

The Government of India, through the National Rail Plan (NRP) for 2030, envisions a future-ready railway system that will significantly enhance operational capacity, sustainability, and efficiency. This plan aims to increase the modal share of railways in freight to 45% by 2030, ensuring that the rail network is prepared for future demand up to 2050.

 

Financial Performance of Indian Railways: Current Figures

Indian Railways continues to be a vital component of India’s transportation infrastructure, demonstrating growth in both passenger and freight sectors. In the fiscal year 2024-25, internal revenues are estimated at ₹2,78,500 crore, marking an 8% increase over the previous year’s revised estimates. Traffic revenue contributes ₹2,78,100 crore, with 65% from freight services (₹1,80,000 crore) and 29% from passenger services (₹80,000 crore). ​The remaining 6% of the total traffic revenue (which amounts to ₹16,400 crore) can be attributed to various other revenue sources for Indian Railways. These include station and catering services, advertising rights, and other incidental services.

Looking ahead, Indian Railways projects revenues exceeding ₹3 lakh crore in the fiscal year 2025-26, an approximate 8% rise from 2024-25. Passenger revenue is expected to grow by 16% to ₹92,800 crore, while freight revenue anticipates a 4.4% increase to ₹1,88,000 crore. ​

From April to December 2024, Indian Railways generated ₹1,93,000 crore in revenue, a 4% year-on-year growth. This includes ₹1,26,000 crore from freight and ₹55,988 crore from passenger services. Capital expenditure for the same period was ₹1,92,000 crore, reflecting a 2% increase over the previous year.

 

Government’s Vision for the Future of Indian Railways

With a clear focus on enhancing operational capacities and leveraging commercial policy initiatives, the plan aims to drive growth, improve service delivery, and increase the role of railways in India’s economic development.

 

Key Government Vision Points:

  • The government aims to increase railways’ freight share to 45% by 2030 through strategic operational improvements and commercial policies.
  • A target to increase freight train speeds to 60-70 km/h to significantly reduce transit times and enhance logistics efficiency.
  • 100% electrification of the railway network, supporting sustainability and green energy initiatives to reduce carbon footprints.
  • Identifying new dedicated freight and high-speed rail corridors to meet the rising demand for fast and efficient transportation.
  • Addressing the rolling stock and locomotive requirements for both freight and passenger services, ensuring readiness for future demand.
  • Encourages private sector involvement in operations, infrastructure development, and rolling stock management to drive efficiency, investment, and innovation.
  • Capital investment plan to support these goals, ensuring funding is allocated for long-term infrastructure development and modernisation projects.

 

Government’s Vision vs Current Growth in Indian Railways (as of April 2025)

Vision Area Government Target Current Progress (as of April 2025)
Freight Modal Share Increase to 45% by 2030 Currently at 27%
Freight Train Speed Increase to 60–70 km/h Average speed increased from 22 km/h to 50 km/h
Electrification 100% of broad-gauge network 97% electrified
Dedicated Freight Corridors (DFCs) Complete Eastern and Western DFCs; plan new corridors Eastern DFC fully operational; ~80% of Western DFC commissioned; plans for additional corridors underway
Rolling Stock Modernization Expand and upgrade fleet 500 WAG-12B locomotives in service; 1,200 WAG-00 locomotives ordered from Siemens
Private Sector Participation Encourage in operations and infrastructure Initiatives include Gati Shakti Cargo Terminals and policies for private investment in rolling stock
Capital Investment ₹2.65 trillion allocated for FY 2024–25 ₹1.92 trillion spent by January 2025, focusing on safety and rolling stock
     
     
     
     
     
     
     
     

 

 Roadblocks to Indian Railways’ Vision 2030

While the government’s vision for Indian Railways is promising, some challenges could impact its ability to fully meet future demands. The goal of capturing 45% of the freight market by 2030 is ambitious, but as global trade and logistics needs evolve, more than just operational improvements will be required.

                                                                         (figure in hectares)

Zonal Railway Total railway Land Total railway land leased/licensed
Central 31,476 168
Eastern 21,082 469
East Central 33,644 2,437
East Coast 23,010 273
Northern 46,447 474
North Central 21,149 220
North Eastern 25,899 326
Northeast Frontier 48,469 1,214
North Western 27,555 87
Southern 26,953 365
South Central 40,600 237
South Eastern 34,877 970
South East Central 23,085 368
South Western 19,893 197
Western 38,275 620
West Central 23,656 183
Metro 152 0.42
Production Units 3,989 204
Total 490,211 8,812.42

Indian Railways holds a substantial land portfolio totaling 490,211 hectares across the country. Of this, only 8,812.42 hectares, accounting for merely 1.80%, have been leased or licensed for various purposes. This significant disparity indicates a considerable scope for enhanced land utilization. Effectively managing this extensive land portfolio presents significant challenges, including addressing encroachments, streamlining land acquisition processes, and developing strategic plans for optimal land use to support future railway expansions and modernization efforts.​

Lastly, while the capital investment plan is a critical part of the vision, an agile approach to funding will be essential to accommodate technological advances and global shifts. Therefore, Indian Railways must adopt a flexible strategy that integrates cutting-edge technology and adaptive investment models to address the dynamic needs of the future.

 

Non-Fare Revenue Generation in Indian Railways: A Missed Opportunity

Indian Railways, despite being one of the most used transportation networks in the world, faces challenges in maximising its non-fare revenue (NFR). Non-fare revenues include income generated from commercial activities such as land leasing, property sales, advertisements, and railway hospitals. As of now, NFR accounts for only about 3-5% of the total earnings of Indian Railways, far below the potential seen in other global railway systems. This is primarily due to the limited scope of current initiatives and the underutilisation of valuable assets owned by the Railways.

Property Sales and One-Time Revenue

One of the key sources of non-fare revenue for Indian Railways is the sale and leasing of railway land and properties. The Railways own a vast amount of land across the country, but its revenue from these assets often comes in the form of one-time sales, rather than recurring income. This transactional model has led to missed opportunities for long-term financial growth. For instance, Indian Railways has sold land and properties in metro cities to generate revenue, but the resulting income from these sales is temporary.

Current Condition of Railway Hospitals

Another area where Indian Railways could potentially enhance its non-fare revenue is its network of railway hospitals. These hospitals were initially set up to cater to the medical needs of railway employees and their families. However, with over 120 railway hospitals across India, the current state of these facilities leaves much to be desired. Additionally, while railway hospitals do generate some revenue from healthcare services provided to non-employees, the financial sustainability of these hospitals remains a concern.  In recent years, there have been calls to modernise these hospitals and make them commercially viable by offering services to the general public at competitive rates, yet challenges like infrastructure constraints, resistance to privatisation, and the need for substantial investments have made progress slow.

Underutilised Barren Lands

Despite owning a significant amount of barren and underutilised land across the country, Indian Railways faces several challenges in effectively leveraging these valuable assets. One of the primary issues is the slow pace of land development due to bureaucratic hurdles, land acquisition complexities, and the lengthy clearance processes, which often hinder timely and efficient utilisation of these lands. Additionally, the lack of proper land management strategies and the inadequate infrastructure for large-scale projects limits the potential for development.

 

 New Era of Revenue: A Strategic Approach to Transforming Assets into Income

Indian Railways has a tremendous opportunity to boost its non-fare revenue by rethinking its approach to property commercialisation and the management of its railway hospitals. Both areas have significant untapped potential that could provide sustainable, long-term revenue streams for the Railways.

 

A. Optimising Property Utilisation for Recurring Revenue

Indian Railways could shift from generating one-time revenue through land sales to a more sustainable model focused on long-term, recurring income. By choosing to lease out its vast land holdings to private developers, the Railways can enable the creation of commercial properties such as office complexes, malls, or mixed-use developments. This approach ensures a steady stream of rental income, with the added advantage of compound revenue growth over time.

 

B. Smart Infrastructure for Sustainable Growth

The adoption of advanced technologies such as Artificial Intelligence (AI) and smart building systems in the planning, design, and construction of railway-owned infrastructure can significantly enhance operational efficiency and environmental sustainability. These innovations improve energy performance and increase the appeal to high-value tenants, thereby boosting the commercial potential of the assets. Furthermore, this approach aligns with the broader goals of sustainable urban development and modernisation.

 

C. Revitalising Railway Hospitals for Financial Sustainability

The existing model for railway hospitals, which primarily focuses on providing subsidised healthcare to railway employees, has its limitations. To enhance financial sustainability, these hospitals can be modernised and expanded to serve a broader segment of the population. By partnering with leading healthcare operators or private hospital chains with expertise in managing large-scale healthcare facilities, Indian Railways can transform its hospitals into high-quality, commercially viable healthcare providers.

These partnerships could involve revenue-sharing models, where private operators manage hospital operations while contributing a percentage of the revenue to Indian Railways. This would not only enhance the quality of healthcare services for employees but also enable the hospitals to generate substantial revenue from external patients. Additionally, upgrading the infrastructure with state-of-the-art medical equipment and technology would increase patient trust and demand, further boosting the revenue potential.

 

D. Advancing the Training of Railway Doctors for a Healthier Future on Tracks

The healthcare services provided by Indian Railways are essential to ensuring the well-being of its employees and other patients. To enhance these services, a comprehensive training program should integrate advancements in medical technology, emergency care, and specialised fields such as telemedicine and mental health, which are becoming increasingly important in the fast-paced, high-stress railway environment.

Collaborations with top medical institutions, alongside the use of simulated training environments and case-based learning, will ensure that railway medical staff are well-equipped to handle the unique challenges of their roles. Furthermore, the adoption of digital health tools, AI-assisted diagnostics, and teleconsultation platforms will improve both the accessibility and quality of healthcare services across the vast railway network.

 

E. Introducing Advanced Technologies for Enhancing Railway Healthcare Systems

As Indian Railways continues its modernisation journey, implementing cutting-edge technologies such as telemedicine, AI-driven diagnostics, and electronic health records (EHR) can transform healthcare delivery within railway hospitals and clinics. Telemedicine can bridge gaps in remote areas, enabling patients to consult specialists without the need for extensive travel. AI-powered diagnostic tools can aid healthcare professionals in providing accurate and timely treatment, reducing human error and improving operational efficiency.

Additionally, high-tech ambulances, equipped with advanced medical equipment like ventilators, ECG monitors, life-saving defibrillators, and telemedicine capabilities, can offer critical care during transit. These ambulances, functioning as mobile intensive care units (ICUs), allow medical teams to stabilise patients in real-time while en route to the nearest railway hospital. With real-time telemedicine connectivity, the onboard medical staff can consult with specialists, ensuring timely and accurate decision-making, regardless of the ambulance’s location.

 

F. Repurposing Underutilised Railway-Owned Barren Land

Indian Railways owns a significant amount of barren and underutilised land across the country, which remains largely dormant despite its vast potential. One major opportunity lies in using this land for renewable energy projects, particularly solar farms. Given India’s ambitious renewable energy targets, setting up solar energy infrastructure on railway-owned land can provide a steady power supply, reduce the railway’s carbon footprint, and contribute to the national grid. This initiative would also align with India’s vision for a greener, more sustainable future.

Additionally, Indian Railways can repurpose these lands for green housing, urban development projects, or educational institutions. With the growing demand for urban expansion, developing affordable housing or educational complexes can address societal needs while generating new revenue streams. These developments could be integrated with transportation hubs, enhancing connectivity and fostering economic growth in surrounding areas.

Another valuable option is the establishment of logistics and warehousing facilities. Strategically located railway land can be transformed into key commercial hubs for e-commerce, reducing transportation costs and improving supply chain efficiency. These projects can attract private investment, contributing significantly to the growth of the national economy.

 

G. Corporate Tie-ups and Sponsorships

Corporate tie-ups and sponsorships present a lucrative opportunity for Indian Railways to generate additional revenue while simultaneously enhancing its brand visibility. Indian Railways can offer corporate entities the chance to sponsor specific trains or stations, providing companies with prominent branding opportunities on trains, station billboards, and digital platforms.

Furthermore, companies could have entire train services branded with their logos, products, or themes, creating a unique and highly visible advertising platform. These branded trains can be aligned with specific campaigns or events, making them a central element of a broader marketing strategy. Sponsorships can be both long-term and short-term, offering flexibility. For example, a tech company could sponsor a “smart train” equipped with Wi-Fi and high-tech services, using the opportunity to showcase its products or services in a highly engaging manner.

 

H. Noteworthy Mentions

In addition to the core strategies for increasing income, Indian Railways can consider several other innovative approaches to enhance its financial performance and support long-term sustainability. These honorary mentions highlight opportunities that may not immediately result in direct revenue but can significantly contribute to brand value, passenger satisfaction, and operational efficiency:

  • Commercial Utilization of Infrastructure & Real Estate
Initiative Description
Railway Stations as Advertising Hotspots Leverage high footfall areas like platforms, trains, and digital screens for targeted brand advertisements.
Railway Stations as Commercial Hubs Modernize stations with retail, offices, food courts, and entertainment zones—similar to airports.
Land Leasing for Hotels, Startups & MSMEs Lease land near stations for hospitality and entrepreneurial ventures, generating consistent rental income.
Co-working Spaces in Urban Rail Zones Convert unused rail buildings into workspaces, boosting urban productivity and rentals.
PPP Model for Infrastructure Development Collaborate with private players to co-develop stations, terminals, and warehouses without fiscal stress.
  • Premium Travel Experiences & Passenger Services
Initiative Description
Co-Branded Luxury Travel Partner with hotels and agencies to offer high-end train journeys with gourmet meals and premium concierge services.
Onboard Product Placement & Retail Introduce retail outlets onboard selling exclusive travel essentials, gadgets, and branded merchandise.
Catering via Private Players Allow private catering brands to manage onboard kitchens for better food quality and hygiene.
  • Digital Innovation & Connectivity
Initiative Description
Digital Partnerships for Wi-Fi & OTT Collaborate with telecom and OTT platforms for Wi-Fi access and entertainment onboard and at stations.
Loyalty Programs & Strategic Tie-ups Partner with airlines, banks, and hotels to reward frequent travelers through shared loyalty ecosystems.

 

  •  Sustainability & CSR Collaborations
Initiative Description
Solar Farms & Wind Energy Use surplus land for renewable energy projects, reducing carbon footprint and energy costs.
Eco Parks & Heritage Trails Repurpose scenic routes or idle land into tourist parks and railway museums.
CSR-Based Sustainability Projects Invite CSR funds for green initiatives like waste management, solarization, and water conservation.

 

  •  Logistics & Freight Development
Initiative Description
Development of Logistics Parks Use railway land for integrated logistics hubs under Gati Shakti & NLP.
Invests in Dedicated Freight Corridors Attract private logistics firms to develop efficient cargo movement infrastructure.
Inland Container Depots (ICDs) Build dry ports near industrial belts to facilitate exports and multimodal cargo connectivity.
Cold Storage & Polyhouses Set up integrated agri-logistics facilities to preserve and transport perishable goods efficiently.
  • Urban & Rural Development Projects

Initiative Description
Affordable Housing Develop housing for low-income groups using unused railway land near cities.
Smart City Integration Use land within urban rail zones for smart city projects with integrated transport and digital infra.
Agro Processing & Organic Farming Enable rural land to support organic produce and agro hubs with rail-linked supply chains.
  • Education & Skill Building

Initiative Description

Skill Development Centres

Partner with NSDC and industry to train youth in rail trades, logistics, and infrastructure-related skills.

 

Final Analysis

In summary, Indian Railways is well-positioned to evolve into a financially resilient and future-ready transport network by leveraging its extensive assets for strategic non-fare revenue generation. Moving away from short-term gains such as one-time land sales and adopting long-term models like property leasing will help establish steady, recurring income without eroding asset value.

This shift can play a vital role in offsetting fixed expenditures, easing the current overreliance on freight revenues for operational funding. In doing so, the Railways will be better equipped to allocate freight income towards infrastructure development, capacity expansion, and innovation-focused initiatives. The decoupling of operational budgets from market volatility further strengthens financial stability and long-term planning capacity.

Beyond internal gains, the broader economic impact of these reforms is significant. Strategic asset use can stimulate urban growth, generate new employment opportunities, and contribute to sustainable development. Ultimately, these measures will support the national agenda of infrastructure modernisation while ensuring that Indian Railways continues to play a central role in driving economic progress with financial independence and resilience.

Reference:

https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2116610&utm_source

(https://prsindia.org/files/budget/budget_parliament/2024/DFG_2024-25_Analysis_Railways.pdf)

 

      Written and Compiled by Sunil Kumar Gupta

The New Income Tax Bill 2025: A Modern Framework for India’s Evolving Economy

The New Income Tax Bill 2025: A Modern Framework for India’s Evolving Economy

The Indian economy has undergone a remarkable transformation in recent decades, necessitating continuous updates to its tax structure. In response to these changes, the government introduced the New Income Tax Bill in the Lok Sabha on 13th February 2025, with the primary aim of simplifying the intricate and evolving Income Tax Act of 1961. Over the years, the Act has witnessed numerous amendments, primarily through annual Union Budgets, which have brought significant changes to tax rates, exemptions, and provisions.

The New Income Tax Bill 2025, which is set to come into force on 1st April 2026, represents a comprehensive overhaul, comprising 23 chapters, 536 sections, and 16 schedules—substantially more extensive than the existing Act, which contains 23 chapters, around 298 sections, and 14 schedules. This expansion reflects the government’s effort to establish a more structured, transparent, and streamlined tax regime by eliminating ambiguities, reducing litigation, enhancing ease of compliance, and leveraging technology for efficient tax administration—ensuring the law is better aligned with the complexities of a modern, dynamic economy.

For over six decades, the Income Tax Act of 1961 has stood as the backbone of India’s tax structure. Yet, over the years, it has been subject to numerous amendments, with successive governments seeking to address emerging challenges. These frequent revisions, while well-intentioned, have often created an overly complicated and, at times, contradictory system. The New Income Tax Bill 2025, introduced in the Lok Sabha on 13th February 2025, is designed to simplify this labyrinthine framework, providing businesses, individuals, and tax professionals with a clearer, more predictable, and easily navigable set of guidelines.

As we delve into the intricacies of the bill, it becomes apparent that it is not merely an exercise in legislative reform. Rather, it represents a comprehensive recalibration of India’s tax policy—one that aligns more closely with the needs of a modern, digital, and rapidly growing economy.

The Need for Reform: Understanding the Rationale Behind the New Bill 

In order to understand the magnitude of the New Income Tax Bill, it is imperative to first grasp the challenges posed by the current system. Over the decades, the Income Tax Act of 1961 has been amended innumerable times, often in a piecemeal fashion. This ad-hoc approach has led to a patchwork of provisions that sometimes contradict one another, leaving both taxpayers and tax authorities struggling to navigate the complexities of compliance.

  • Complexity of the Existing Framework: The multiplicity of amendments over the years has made the Income Tax Act increasingly difficult to understand for the common taxpayer. The very complexity that was once intended to address a growing economy has now become a barrier to smooth tax administration. The new Bill streamlines the existing Act by reducing its length from over 800 pages to 622 pages and eliminating redundant sections.
  • Increased Disputes and Litigation: The convoluted provisions have led to an escalation in legal disputes between taxpayers and revenue authorities, further clogging an already overburdened judicial system. As of March 2024, tax disputes amounted to approximately ₹13.4 trillion, highlighting the extent of contention arising from the existing tax framework.
  • Stagnation of Innovation: In an age where global markets and digital economies are evolving rapidly, India’s tax system—laden with outdated provisions—has often failed to keep pace with technological advancements and new business models.

The New Income Tax Bill 2025 seeks to address these issues by simplifying the tax code and eliminating unnecessary provisions while also introducing a more transparent and efficient system. The Bill aims not only to modernise the tax framework but to instill greater fiscal discipline, ensuring a more robust economic future for India.

A Closer Look at the New Income Tax Bill 

The New Income Tax Bill is, at its core, a comprehensive reform designed to streamline the existing provisions while providing clarity to taxpayers and administrators alike. Its provisions can be broken down into several key areas that promise to revolutionise India’s tax system.

Here’s an overview of the key amendments:

  1. Revised Income Tax Slabs:

The tax slabs under the new tax regime have been restructured to provide relief to taxpayers. With the updated tax structure, individuals with earnings up to Rs. 12,00,000 will have no tax obligation, thanks to an increased rebate of Rs. 60,000. For salaried individuals, the tax liability will be nullified for incomes up to Rs. 12,75,000, owing to a standard deduction of Rs. 75,000.

  1. Increased Rebate Under Section 87A:

The rebate under Section 87A has been increased, resulting in zero tax liability for individuals with taxable income up to ₹12,00,000. For salaried individuals, considering the standard deduction, this limit extends to ₹12,75,000. This enhancement is designed to boost disposable income and encourage spending. ​

The standard deduction for salaried individuals has been raised to ₹75,000 under the new tax regime, up from the previous ₹50,000. This change provides additional relief to salaried taxpayers.

  1. Reduction in Highest Surcharge Rate:

The highest surcharge rate has been reduced from 37% to 25% for individuals earning more than ₹5 crore. This adjustment lowers the effective tax rate for high-income earners from 42.74% to 39%.

  1. Leave Travel Allowance (LTA) Exemption Limit Increase:

The LTA exemption limit has been increased from ₹3 lakh to ₹25 lakh, allowing employees to claim a higher tax-free amount on leave encashment.

  1. Changes in Tax Residency Rules for Non-Resident Indians (NRIs):

Significant amendments to tax residency rules have been proposed, set to take effect from April 1, 2026. These changes will impact NRIs, Persons of Indian Origin (PIOs), and frequent visitors to India, making it essential for them to understand the new regulations for effective tax planning and compliance.

  1. Updates to Tax Audit Standards (Form 3CD):

Effective April 1, 2025, amendments to Form 3CD, the tax audit form, have been introduced. These changes require businesses and tax professionals to align their tax audit procedures with the updated requirements. ​

  1. Removal of Equalisation Levy on Digital Advertisements:

The 6% equalisation levy on digital advertisements has been removed, benefiting tech companies and aligning India’s tax policies with global standards. ​

These amendments reflect the government’s commitment to simplifying the tax system, providing relief to taxpayers, and fostering economic growth.

 

A New Era of Simpler Taxation

Key features of New Income Tax Bill 2025 introduce cohesive structure, enhanced digitisation, streamlined compliance processes, recalibrated exemptions, stricter penalties for tax evasion, and improved transparency. It emphasises enhanced digitisation, leveraging technology to automate processes such as return filing, assessments, and record-keeping through secure, integrated digital platforms.

Here’s a clear tabular comparison between the Income Tax Act of 1961 and the New Income Tax Bill 2025, showing key features across major areas of reform:

Aspect Income Tax Act, 1961 New Income Tax Bill, 2025
Structural Simplification 298 sections across 23 chapters; over 800 pages; redundancies and complex provisions. 536 sections across 23 chapters and 16 schedules; reduced to 622 pages; redundant clauses removed, simplified structure.
Digital Integration Limited digital provisions; mostly manual record-keeping and filings. Emphasis on robust online filing systems, digital record-keeping, and linkage with UID for seamless compliance.
Compliance Processes Multiple forms and procedures, time-consuming especially for SMEs. Unified tax return filing system; simplified processes; lower compliance costs for businesses and individuals.
Exemption Framework Several outdated exemptions, some not aligned with current socio-economic needs. Removal of obsolete exemptions; targeted relief for low-income groups, senior citizens, and other vulnerable sections.
Enforcement & Penalties Narrow scope for digital evidence; limited reach into tax evasion through digital means. Expanded authority to access digital platforms (emails, social media, etc.); stricter penalties for evasion.
Transparency Measures Tax guidelines not easily accessible; limited real-time communication with taxpayers. Public access to tax rules online; real-time updates and assessments to build trust and reduce ambiguity.

 

 

Key Advantages in the New Income Tax Bill 2025

The New Income Tax Bill 2025 introduces significant reforms to India’s taxation system, focusing on simplifying processes, increasing transparency, and boosting economic growth. The Bill aligns India’s tax framework with global standards, improving cross-border taxation and making India more attractive for foreign investments. These changes are designed to simplify tax filing and stimulate economic growth, providing a more efficient and accessible tax system.

  • Unified ‘Tax Year’ Concept: Aligns the tax year with the financial year (April 1 to March 31), simplifying tax planning and compliance.
  • Simplification of Tax Code: Reduces complexity by condensing the tax code into 23 chapters and 536 sections, eliminating outdated and redundant provisions.
  • Revised Income Tax Slabs: Proposes tax-free income up to ₹4 lakh and more favorable tax rates for middle-income taxpayers, boosting disposable income.
  • Enhanced Powers for Tax Authorities: Grants the Central Board of Direct Taxes (CBDT) more autonomy to introduce tax schemes and reforms swiftly.
  • Removal of Redundant Exemptions: Eliminates outdated exemptions and deductions to streamline the tax process and reduce complexity.
  • Clarification on ESOP Taxation: Provides clear guidelines on the taxation of Employee Stock Ownership Plans (ESOPs), reducing confusion for employees.
  • Alignment with International Tax Standards: Aligns India’s tax laws with global best practices, improving international tax compliance and cross-border taxation.

 

Economic Implications of the New Income Tax Bill 2025

The New Income Tax Bill 2025 is more than just a technical revision of existing tax laws—it is a deliberate and strategic initiative that is poised to redefine India’s economic landscape. At its core, this is an acknowledgment of India’s evolving economic environment and the necessity for a tax system that is agile, transparent, and aligned with the demands of a modern, competitive global economy. By addressing the complexities and inefficiencies of the current framework, it is set to strengthen India’s position as a leading player on the world stage.

The impact of this reform goes far beyond the simplification of tax compliance—it will lay the groundwork for substantial economic growth, bolster fiscal responsibility, and create a tax ecosystem that promotes both investment and innovation. Let’s take a closer look at how the New Income Tax Bill 2025 will influence key economic pillars:

Income Tax Reforms to Encourage Entrepreneurship in India (2025)

Objective:

To propose amendments to the Income Tax Bill, 2025 aimed at boosting entrepreneurship, especially among startups, MSMEs, and innovation-driven businesses in India.

  1. Strengthening Tax Reliefs for Startups

Existing Framework:
Under Section 80-IAC, eligible startups are entitled to a 100% income tax exemption for any three consecutive years within their first ten years of incorporation, provided their annual turnover does not exceed ₹100 crore.

Recommended Reforms:

  • Extend the exemption duration from 3 to 7 years to better reflect real-world startup lifecycles.
  • Increase the turnover threshold from ₹100 crore to ₹150 crore to accommodate rapidly scaling startups.
  • Streamline DPIIT recognition norms to ensure timely access to benefits and eliminate procedural hurdles.
  1. Reviving and Expanding Investment-Linked Tax Breaks

Existing Framework:
Section 54GB, which once allowed capital gains exemption on residential property sales if reinvested in eligible startups, has expired.

Recommended Reforms:

  • Reinstate Section 54GB as a permanent provision.
  • Broaden its scope to cover capital gains from commercial properties.
  • Allow investments from HUFs and LLPs to qualify.
  • Introduce a “Startup Investment Deduction”:
    • Permit angel investors to deduct up to 50% of their investment (within an annual cap) in DPIIT-certified startups from their taxable income—akin to Section 80C, but designed for high-risk capital.
  1. Stimulating R&D and Innovation

Existing Framework:
Since 2020, deductions for R&D under Section 35 have been restricted to 100% of eligible expenditure.

Recommended Reforms:

  • Restore 200% weighted deduction for R&D investments by startups, especially in transformative sectors like AI, biotechnology, and clean energy.
  • Implement a “Patent Box Regime”, taxing income derived from Indian-developed patents at a preferential 10% rate, aligning India with global best practices and incentivising IP development.
  1. Simplified Tax Compliance for Entrepreneurs

Existing Framework:
Presumptive taxation under Sections 44AD and 44ADA offers simplified compliance for small businesses and professionals.

Recommended Reforms:

  • Extend presumptive taxation to eligible startups with turnover up to ₹5 crore.
  • Waive tax audit requirements for the first five years, unless turnover crosses ₹10 crore.
  • Launch a centralised startup portal that consolidates IT filings, DPIIT recognition, MCA compliance, and tracks eligibility for tax benefits in real-time.
  1. Reforming ESOP Taxation to Attract and Retain Talent

Existing Framework:
ESOPs are taxed under Section 17(2) at the point of exercise, often before any actual cash flow for employees. AMT may also apply.

Recommended Reforms:

  • Defer taxation of ESOPs to the point of share sale (liquidity event).
  • Offer capital gains exemption on ESOPs held for over 3 years in unlisted startups.
  • Exempt employees earning under ₹50 lakh annually from AMT on ESOP income.
  1. Promoting Regional and Social Entrepreneurship

Existing Framework:
There are no location- or sector-specific tax advantages for startups.

Recommended Reforms:

  • Provide an additional 10% tax rebate for startups operating in Tier-2, Tier-3 cities or rural areas.
  • Allow weighted deductions for social enterprises addressing public goods such as education, healthcare, and sanitation—modeled after CSR incentives.
  • Grant full tax exemption on income of incubators and accelerators registered under government programs like the Atal Innovation Mission or relevant state initiatives.

 

Industry-Wise Impact of the New Income Tax Bill 2025

Sectors Key Objectives Major Impacts
Foreign Investment & Corporate Enhance global investor confidence

– Transparent & predictable framework

– Alignment with BEPS norms

– Streamlined compliance for key sectors

MSMEs Reduce compliance burden and promote entrepreneurship

– Simplified tax filing

– Lower cost of compliance

– Clear rules on deductions

Digital Economy & Startups Boost India’s digital transformation

– Mandatory e-filing for all

– Real-time tax assessments

– Support for fintech, SaaS, and e-commerce

Infrastructure & Manufacturing Channel revenue into national infrastructure

– More tax revenue to fund roads, ports, power

– Tax incentives for new manufacturing units

Green Economy & Sustainability Encourage green investments

– Tax benefits for renewable energy

– Support for ESG-aligned firms

– Provisions supporting net-zero targets

Public Sector & Social Infra Increase investment in human development

– More funding for education & healthcare

– Expansion of welfare schemes like PM-JAY, PM Poshan

– Skill-building through PMKVY

Legal & Financial Services Improve tax jurisprudence & reduce litigation

– Clearer definitions reduce disputes

– Digital arbitration tools

– Faster assessments and resolutions

 

Advanced Proposals for Transforming India’s Tax Framework

1. Dynamic Taxation Using AI and Big Data

Introduce an adaptive taxation model that leverages real‑time macroeconomic data, AI analytics, and predictive modeling to modify tax rates and incentives on a continuous basis. This system would move away from static tax slabs and instead adjust based on factors such as inflation trends, GDP growth, and sector-specific performance.

2. Blockchain-Enabled Digital Compliance and Transparency

Adopt blockchain technology to support the digital infrastructure for tax filings, audits, and record-keeping. This measure would create immutable, tamper-proof ledgers for all tax-related transactions, integrating seamlessly with existing digital portals.

3. Sector-Specific and Innovation-Driven Incentives

Develop a suite of targeted fiscal incentives, including differentiated tax credits and super deductions, specifically tailored for high-growth sectors such as renewable energy, biotechnology, advanced manufacturing, and the digital economy. This approach would involve special provisions like accelerated depreciation or preferential rates under a “Patent Box Regime.”

4. Enhanced Dispute Resolution and Legal Frameworks

Establish a dedicated digital arbitration platform for resolving tax disputes, complemented by the creation of an independent taxpayer ombudsman office. The platform would incorporate AI-powered analytics to analyse historical dispute data and offer predictive insights for standardising the resolution process.

5. Expanding Green and Social Impact Tax Incentives

Extend and broaden tax relief measures specifically tied to environmental sustainability and social impact. This includes offering extended tax holidays or additional credits for investments in renewable energy, sustainable infrastructure, and projects that yield measurable social benefits, such as affordable housing, improved healthcare, or enhanced educational access.

The Future of India’s Tax System: A Concluding Analysis of the New Income Tax Bill 2025

In conclusion, the introduction of the New Income Tax Bill 2025 heralds a momentous chapter in India’s fiscal odyssey. This comprehensive reform, far from being a mere legislative amendment, represents a profound recalibration of a tax system long ensnared by the intricacies and inefficiencies of its predecessor, the Income Tax Act of 1961. With the Bill’s introduction, India takes a decisive step toward a more streamlined, transparent, and globally attuned tax framework, one that meets the demands of a digital economy while simultaneously reducing the administrative burdens on its citizens and businesses alike.

By expunging redundant provisions, integrating digital tools for greater efficiency, and reducing compliance costs, the Bill promises to unveil a simpler, more accessible tax structure. Its emphasis on fiscal transparency, coupled with a stern stance on tax evasion, underscores the government’s commitment to not only modernise the system but to cultivate an atmosphere of trust, accountability, and equitable governance.

This reform has the potential to ignite a wave of investment in key sectors—technology, manufacturing, and innovation—while providing much-needed support to India’s MSMEs, which form the very lifeblood of its economy. As the country strides forward in an increasingly competitive global environment, the New Income Tax Bill 2025 stands as a beacon of hope for a more prosperous, inclusive, and future-ready India, ready to meet the challenges of tomorrow with the resolve of today.

Reference:

For Official Numbers:

https://www.indiabudget.gov.in/doc/Finance_Bill.pdf

For Information & Detailed Reading Purposes:

https://incometaxindia.gov.in/

https://www.indiacode.nic.in/

Written and Compiled by Mr Sunil Kumar Gupta

 

Unlocking Prosperity: The E-commerce Revolution in Tier 2 and Tier 3 Cities – A Gateway to Job Creation and Economic Growth

Unlocking Prosperity: The E-commerce Revolution in Tier 2 and Tier 3 Cities – A Gateway to Job Creation and Economic Growth

The e-commerce revolution has transformed the retail landscape, connecting buyers and sellers across geographies. While Tier 1 cities dominated the initial phases of this transformation, Tier 2 and Tier 3 cities are now the epicenters of growth. These cities, often characterized by underserved markets and burgeoning consumer aspirations, are now major contributors to the e-commerce boom.

Tier 2 and Tier 3 cities accounted for 60% of India’s overall e-commerce demand in 2023, with a projected annual growth rate of 30% by 2025. This unprecedented growth is not just reshaping retail but is also creating jobs, fostering entrepreneurship, and driving inclusive economic growth.

This blog delves deep into how e-commerce is unlocking prosperity in Tier 2 and Tier 3 cities with case studies and research-backed insights.

  1. The Emergence of Tier 2 and Tier 3 Cities in E-commerce

The Growing Digital Ecosystem

The digital infrastructure in smaller cities has improved significantly, fueling e-commerce growth:

  • Affordable Internet Access: Reliance Jio’s entry into the Indian market slashed data prices, increasing internet penetration from 20% in 2016 to 50% in 2023 in rural areas. As per the latest Annual Report, its share of data traffic in India rose to about 60% in FY24.
  • Smartphone Adoption: According to a Counterpoint Research report, over 70% of smartphone sales in India now occur in Tier 2 and Tier 3 cities.
  • Digital Payments Growth: The e-commerce industry in India is growing on levers such as increased smartphone penetration, increased affluence and low data prices, providing impetus for e-retail growth. With over 950 Mn users, India is the 2nd largest internet market in the world with 131.16 Lakh Cr UPI transactions in FY 2023-24. Platforms like Paytm, UPI, and Google Pay have enabled seamless transactions in these regions, with over 40 billion UPI transactions recorded in 2023. As per the PIB Report, Digital payment transactions volume grew to 18,737 crore in FY 2023-24 from 2,071 crore in FY 2017-18 at Compounded Annual Growth Rate (CAGR) of 44%; with value of transactions at ₹3,659 lakh crore in FY23-24 from ₹1,962 lakh crore in FY17-18 at CAGR of 11%.

 

UPI transactions volume grew to 13,116 crore in FY 2023-24 from 92 crore in FY 2017-18 at CAGR of 129%; with value of UPI transactions reaching ₹200 lakh crore in FY23-24 from ₹1 lakh crore in FY17-18 at CAGR of 138%.

UPI now seamlessly facilitates live transactions in 7 countries, including key markets such as UAE, Singapore, Bhutan, Nepal, Sri Lanka, France, and Mauritius

 

 

Case Study I: Flipkart’s Localization Strategy

Flipkart localized its app interface in 11 regional languages, including Hindi and Tamil, to cater to diverse audiences. This initiative contributed to a 2x increase in new users from Tier 2 and Tier 3 cities during their 2022 Big Billion Days sale.

Case Study II: Amazon India’s Expansion

Amazon India has strategically expanded its operations to cater to the burgeoning demand in Tier 2 and Tier 3 cities. The company has established numerous fulfillment centers and delivery stations in these regions, enhancing its logistics network. This expansion has not only improved delivery times but also created employment opportunities for local populations. Amazon’s initiatives have empowered small and medium-sized businesses (SMBs) in these cities to reach a broader customer base, thereby stimulating local economies.

Case Study III: Flipkart’s Kirana Program

Flipkart’s Kirana Program exemplifies the integration of local businesses into the e-commerce ecosystem. By partnering with local kirana (grocery) stores for last-mile deliveries, Flipkart has enhanced its delivery network while providing additional income streams for these small businesses. This initiative has been particularly successful in Tier 2 and Tier 3 cities, where local stores play a crucial role in the community.

  1. E-commerce as a Catalyst for Job Creation

2.1 Direct Employment in Logistics and Warehousing

The logistics sector has seen exponential growth in smaller cities:

  • Amazon India: With over 60 fulfilment centers across the country, Amazon has created thousands of jobs in towns like Ludhiana and Guwahati. Their “I Have Space” initiative partners with over 28,000 small businesses for last-mile delivery.  Amazon has announced to invest additional $15 billion in India by 2030.
  • Flipkart’s Delivery Network: Flipkart employs over 1 lakh delivery personnel, with a significant portion operating in Tier 2 and Tier 3 towns.
  • Social media platforms like Instagram: A major chunk of the ecommerce industry is now dependent on social media platforms like Instagram, facebook marketplace. 60-70% of Instagram users report following or researching brands and products on the app.
  • Festival offers: The E-commerce websites flood with discount and various other lucrative offers at the time of various festivals worldwide like Independence Day, Diwali, Christmas, New Year, Black Friday etc.
  • Market Access and Expansion: E-commerce provides businesses in smaller cities unprecedented market access. Local enterprises, previously confined to regional markets, can now showcase their products to a national and even global audience. This expanded reach fosters growth opportunities and enables businesses to scale beyond traditional boundaries.

Case Study: Zomato’s Entry into Tier 3 Markets

In 2023, Zomato expanded operations to Tier 3 cities like Udaipur and Ajmer. Their data shows that 45% of their delivery partners in these regions transitioned from agriculture, creating stable income opportunities.

 

2.2 Empowering Entrepreneurs

Platforms like Amazon, Flipkart, and Meesho are empowering small and medium-sized enterprises (SMEs):

  • Amazon Karigar: This initiative promotes regional products like Pashmina shawls from Kashmir and Madhubani paintings from Bihar.
  • Meesho’s Seller Base: Over 65% of Meesho’s 15 million sellers come from Tier 2 and Tier 3 cities, with many reporting a 30% increase in income.

 

  • Boosting Women Entrepreneurs

E-commerce industry is even providing women with opportunities to achieve financial independence. A homemaker can start reselling sarees earning ₹50,000 per month without any upfront investment. Rural women artisans, such as those making Pattachitra paintings in Odisha, are now reaching international audiences.

  1. Economic Empowerment Through E-commerce

According to recent industry calculations, Turkey will rank first among 20 countries worldwide in retail e-commerce development between 2024 and 2029, with a compound annual growth rate of 11.6 percent. The Turkish e-commerce market is currently valued at 3.4 trillion Turkish lira. India and Brazil are also among the fastest-growing e-commerce markets globally, with a CAGRs of over 11 percent. The global retail e-commerce CAGR was estimated at 9.5 percent during the same period.

3.1 Revitalizing Local Economies

E-commerce is creating ripple effects that uplift entire communities:

  • Increased Disposable Income: A recent study revealed that 70% of rural e-commerce users reported an increase in monthly savings due to access to affordable online goods.
  • Boosting Ancillary Services: Growth in logistics has spurred demand for packaging suppliers and local transport services.

3.2 Promoting Regional Crafts

Artisans in Tier 2 and Tier 3 cities are leveraging e-commerce for market access:

  • Tribes India: The internet and the subsequent e-commerce boom opened up a whole new world for organisations and people to garner a wider reach. To expand the availability of tribal products across the entire country and the world and to get greater benefits for the tribal people, TRIFED went online with its portal www.tribesindia.com.

This new channel is being utilised in such a way that in just a single click, the handcrafted, tribal products find a larger audience – not just in India but also abroad.

A wide range of thoughtful and handcrafted products that carry an indelible mark of their rich ancient cultural heritage are procured, marketed and made available to buyers.

To ensure a wider reach to genuine art lovers, millennial fashionistas and ethnic folk, TRIBES India is making its presence felt through its TRIBES India Mobile App and its own e-commerce platform

This initiative has empowered tribal artisans from NCR Delhi, South, Madhya Pradesh, Gujarat, Rajasthan, Odisha, Magnificent Leh, Chhattisgarh, West Bengal, Jharkhand, Bihar, UP, Uttarakhand, Andhra Pradesh, North East and Maharashtra to sell directly to global consumers.

  1. Fostering Innovation

4.1 Tech-Driven Solutions

E-commerce platforms are using innovative technologies to improve services:

  • AI and Analytics: AI’s ability to analyze vast amounts of data enables e-commerce platforms to offer highly personalized shopping experiences. The AI tools predict demand patterns in smaller towns, optimizing inventory. The predictive models identify future trends, enabling e-commerce platforms to launch targeted campaigns.

At the beginning of 2024, India recorded 751.5 million internet users, reflecting an internet penetration rate of 52.4%. In January 2024, the country had 462.0 million social media users, representing 32.2% of the total population. Additionally, there were 1.12 billion active cellular mobile connections in early 2024, accounting for 78.0% of the population.

  • Drones for Delivery: Startups these days are testing drone-based deliveries in the rural parts of India. As of November 2023, there were around 13 thousand drones registered in India. Along with the growing applications, the market size has also been growing. It was estimated that by the year 2030, the Indian drone market in India would reach 2.5 trillion Indian rupees.
Latest Amendments to boost the Ecommerce Industry
  • · Government of India to amend CGST Act to allow unregistered suppliers and composition taxpayers to make intra-state supply of goods through E-Commerce Operators (ECOs).
  • · GoI aims to explore the potential for new business models and job opportunities that 5G technology can bring. Promoting the expansion of the digital economy, which encompasses the formulation of a national e-commerce strategy and the establishment of a digital industrial policy.
Source: Make in India (3rd Edition) – written and compiled by Sunil Kumar Gupta
  1. Factors Driving the E-commerce Boom
  2. The Road Ahead
  • Investment in Infrastructure

Government initiatives like Digital India and PMGDISHA are improving connectivity in smaller cities. Private players are deploying 5G networks in Tier 2 and Tier 3 towns, ensuring faster internet access.

  • Collaborative Ecosystems

Public-private partnerships can address logistical and digital literacy challenges, ensuring sustained growth.

Conclusion

The e-commerce revolution in Tier 2 and Tier 3 cities is unlocking unprecedented opportunities for job creation and economic empowerment. With research-backed data and real-world case studies, it is evident that these cities are no longer secondary markets but key drivers of India’s digital economy.

The government’s active role in promoting entrepreneurship, implementing initiatives like RSETI, and fostering digital infrastructure has played a pivotal role in catalyzing this evolution. Additionally, the recent amendments to boost the e-commerce industry and the emphasis on emerging technologies like 5G underline a commitment to creating a conducive environment for further growth.

AI on the other hand, is not just transforming e-commerce; it’s setting the stage for the future of retail. By enhancing personalization, streamlining operations, and driving innovative customer experiences, AI empowers businesses to thrive in an increasingly competitive market.

By fostering innovation, empowering entrepreneurs, and addressing infrastructure challenges, e-commerce platforms can ensure inclusive growth that benefits every corner of the country.

India’s Global Representation Shines at World Economic Forum Davos 2024

India’s Global Representation Shines at World Economic Forum Davos 2024

In a momentous stride towards global collaboration and dialogue, Mr. Vijay Goel and Mr. Sunil Kumar Gupta, Founders of Indo European Business has visited Switzerland to represent IEBF at the esteemed World Economic Forum (WEF) Annual Meeting Davos, slated to transpire against the breathtaking backdrop from January 15th to January 19th, 2024.






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IEBF has achieved a significant milestone during its visit to the WEF Annual Meeting, marked by the successful signing of Memoranda of Understanding (MoUs) with the Government of Karnataka in the prescence of Dr. Ekroop Caur, IAS, Secretary to Government, Department of Electronics, Information Technology, Biotechnology and Science & Technology; Sh. LK Atheeq, IAS, Additional Chief Secretary to Chief Minister Government of Karnataka; Smt. Gunjan Krishna, IAS, Commissioner for Industrial Development & Director of Industries & Commerce CEO, Invest Karnataka Forum, among other dignitaries. These agreements symbolize a shared commitment to pioneering initiatives that are poised to make a lasting impact on various sectors. Here are the key collaborations:

1. Manufacturing of Solar Panels, Inverters, and EV Charging Plants with Ampergia Americans:

   – Contributing to clean energy solutions and sustainable technology, boosting Karnataka’s leadership in renewable energy.

2. Providing Services for Employee Welfare Programmes with InstaPe Synergies Pvt. Ltd.:

   – Providing services that enhance the well-being of our workforce, fostering a supportive and motivated work environment.

3. Construction of Biopharmaceuticals and Cancer Diagnosis and Treatment Hospitals with Pangaea Data:

   – Spearheading healthcare infrastructure development, aiming to improve accessibility and outcomes in Karnataka.

4. Manufacture of “Smart City” Infrastructure with Faction AI:

   – Enhancing urban living through innovative infrastructure solutions, contributing to the development of Smart Cities.

These collaborations underscore IEBF’s commitment to fostering positive change. Additionally, IEBF is in the process of signing various MoUs with distinct State Government, further expanding India’s impact in global market.

Adding to the grandeur of this international gathering, the WEF witnessed the participation of five prominent Indian states Maharashtra, Karnataka, Uttar Pradesh, Telangana, and Tamil Nadu. This collective representation is designed to showcase the diverse tapestry of Indian culture, economic prowess, and historic richness, symbolizing the nation’s multifaceted essence on the global landscape.

World Economic Forum Davos

“This opportunity not only underscores the cultural, economic, and historic opulence of India but also reinforces our commitment to global collaboration and the pursuit of a more interconnected world,” Mr. Gupta stated.

This visit comes as a recognition of Mr. Goel and Mr. Gupta’s exceptional contributions and leadership in the growth of India, EU, UK, and Slovenia. Eagerly anticipating the opportunity to engage in profound discussions and collaborative endeavors, Mr. Gupta is poised to lend their perspective towards charting a course for a more promising future on the global stage.

Under the visionary leadership of Mr. Sunil Kumar Gupta, the Indo European Business Forum (IEBF) has recently spearheaded a groundbreaking Indo-Slovenian partnership. Since its inception in 2017, IEBF has played a pivotal role in facilitating the success of approximately 85% of businesses, ushering in excellence across diverse sectors such as business, finance, real estate, and art.

IEBF’s impactful initiatives extend to aiding 80% of businesses and investors in identifying lucrative investment opportunities within EU countries, the UK, and India. Mr. Goel and Mr. Gupta’s strategic leadership has positioned IEBF as a key player in fostering international collaborations, contributing significantly to the growth and success of businesses on a global scale. The forum’s commitment to excellence and its role in connecting diverse industries underscore their dedication to advancing economic partnerships and creating a robust global business network.

The Founders of IEBF, Mr. Vijay Goel and Mr. Sunil Kumar Gupta had the honor of meeting with the Hon’ble Chief Minister of Maharashtra and the Hon’ble Minister for Large & Medium Industries and signing various MoUs. These engagements highlight our dedication to strong partnerships and collaborations, reinforcing IEBF’s role in shaping a sustainable and connected future.

The World Economic Forum serves as a splendid platform for thought leaders, influencers, and decision-makers to converge and discuss critical global issues. The participation of world leaders, businessmen, professionals and the delegation from five prominent Indian states adds a unique perspective to the ongoing dialogue.

Will New Labour Codes Secure Wages and Social Security for 50 Crore Workers, Including Gig and Platform Workers?

Will New Labour Codes Secure Wages and Social Security for 50 Crore Workers, Including Gig and Platform Workers?

The introduction of four New Labour Codes introduced by the Government of India represents a significant step towards reforming and strengthening labour laws in India. The Code on Wages was enacted by the Parliament in August 2019, followed by the Industrial Relations Code in September 2020. Similarly, the Code on Social Security and the Occupational Safety, Health, and Working Conditions Code were also enacted by the Parliament in September 2020. These legislative actions signify a comprehensive effort to reform and streamline labor laws, addressing various aspects related to wages, industrial relations, social security, and occupational safety and health. The synchronized enactment of these codes demonstrates a holistic approach toward creating a more coherent and contemporary framework for labor regulations in the country.

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The landmark decision to consolidate 29 laws into four codes is a historic step toward providing women with not only job security but also respect, health, and various welfare measures. Through these labor reforms, there is a clear commitment to creating an environment that prioritizes the well-being of women in the workforce. Additionally, these changes are expected to significantly enhance the ease of doing business in the country, streamlining regulations and fostering a more conducive environment for both employers and employees. This forward-looking approach not only supports gender equality but also contributes to the overall economic development and business efficiency in the nation.

In this comprehensive reform, the government seeks to ensure that all workers have a statutory right to receive minimum wages and timely wage payments, fostering a more equitable and prosperous labour environment. To reduce ambiguity and legal disputes, these codes introduce uniform and straightforward definitions of ‘wages’ across all four labour-related regulations. Furthermore, the introduction of annual health check-ups and medical facilities aims to improve the overall well-being of workers, enhancing productivity and extending life expectancy.

These reforms also formalize the employment relationship by requiring the issuance of appointment letters to every employee, ultimately providing job security and enabling workers to claim statutory benefits such as minimum wages and social security. Additionally, the creation of a Re-skilling Fund demonstrates the government’s commitment to the skill development of workers, aligning with the changing demands of the job market.

Furthermore, the codes recognize the importance of addressing the needs of gig workers and platform workers by defining them and paving the way for the formulation of social security schemes funded by aggregators and government sources. This inclusive approach extends the benefits of the Employees’ State Insurance Corporation and the Employees’ Provident Fund Organization to unorganized workers, gig workers, and platform workers, along with their families.

The reforms also ensure that fixed-term employment (FTE) workers are entitled to the same benefits as permanent employees, promoting fairness and job security. Workers’ rights are further enhanced with provisions for annual leave with wages and the option to encash leave on demand, offering flexibility and financial security.

Moreover, the expansion of the Employees’ Provident Fund to all industries, irrespective of their scheduling, underscores the government’s commitment to improving social security and labour welfare across various sectors. In sum, these labour codes represent a transformative and forward-looking effort to foster a more inclusive, secure, and prosperous work environment for all workers in India.

The four Labour Codes aim to enhance worker protection, including those in the unorganized sector, by ensuring statutory minimum wages, social security, and healthcare. Some significant provisions of these Codes include:

  1. Establishing a statutory right for all workers to receive minimum wages and timely wage payments to support sustainable development and inclusivity.
  2. Introducing a consistent and easily enforceable definition of ‘wages’ across all four Labour Codes to prevent multiple interpretations and legal disputes.
  3. Providing annual health check-ups and medical facilities to enhance worker productivity and increase life expectancy.
  4. Requiring the issuance of appointment letters to every employee, formalizing employment contracts, increasing job security, and enabling workers to claim statutory benefits such as minimum wages and social security.
  5. Establishing a Re-skilling Fund for worker skill development.
  6. Defining gig workers and platform workers to create social security schemes, funded by aggregators and other sources, with contributions from both the Central and State Governments.
  7. Allowing the Central Government to extend benefits to unorganized workers, gig workers, platform workers, and their families through the Employees’ State Insurance Corporation and the Employees’ Provident Fund Organization.
  8. Granting fixed-term employment (FTE) workers entitlement to the same benefits available to permanent employees, including gratuity after one year of service.
  9. Ensuring that every worker is entitled to annual leave with wages after working for 180 days, compared to the current requirement of 240 days. Additionally, there is a provision for leave encashment on the worker’s request while in service at the end of the calendar year.
  10. Expanding the applicability of the Employees’ Provident Fund to all industries, as opposed to only scheduled industries as it stands presently.

Major Achievements of New Labour Codes are as follows –

  • As of December 2023, the Shram Suvidha Portal has successfully generated 4,268,334 Labour Identification Numbers (LIN). Furthermore, inspection reports for 821,283 cases have been uploaded onto the portal, reflecting the ongoing efforts to monitor and manage labor-related activities.
  • The eSHRAM portal has been established with the aim of building a National Database of Unorganized Workers, incorporating Aadhaar details to facilitate the provision of social security benefits. Eligibility for registration on the eSHRAM portal is open to any worker operating in the unorganized sector with an age ranging from 16 to 59. This database encompasses a diverse range of workers, including migrant workers, construction workers, gig workers, platform workers, and more. As of December 2023, a noteworthy achievement has been reached, with a total of 29,23,93,908 e-cards issued through the portal, marking a significant step in the coverage and support for unorganized workers across the nation.
  • As of October 2023, the All India Consumer Price Index Number for Industrial Workers (CPI-IW) has experienced a rise of 0.9 points, reaching a value of 138.4 (one hundred thirty-eight point four). In terms of the one-month percentage change, there has been a 0.65% increase compared to the previous month. This is in contrast to the 0.91% increase recorded during the corresponding months of the previous year. These figures provide insights into the fluctuations in the cost of living and inflationary trends affecting industrial workers in India.
  • As part of the Nidhi Aapke Nikat 2.0 initiative, the Employees’ Provident Fund Organization (EPFO) extended its outreach to stakeholders across all districts of the country. The monthly ‘Nidhi Aapke Nikat’ program held on April 27th, 2023, covered 666 districts with 27,592 participants. The focus was on addressing grievances, resulting in 12,437 reported issues, of which 9,816 were successfully resolved. This effort underscores EPFO’s commitment to increasing accessibility, visibility, and resolving concerns for its stakeholders nationwide.
  • As part of the celebration of Azadi Ka Amrit Mahotsav (AKAM), the Employees’ Provident Fund Organization (EPFO) has initiated a special drive to promote the filing of e-nominations by its members. In the month of September 2023, a notable achievement was reached with the filing of 3.40 lakh e-nominations. Cumulatively, as of September 30, 2023, a total of 2.07 crore e-nominations have been successfully filed, reflecting the widespread participation of members in utilizing the digital nomination process facilitated by EPFO. This effort aligns with the organization’s commitment to modernize processes and enhance member convenience.
  • The provisional payroll data released by EPFO in November 2023 reveals a positive trend, indicating the addition of 891,583 net subscribers during the month of September 2023. This data underscores the ongoing growth and engagement within the Employees’ Provident Fund Organization, with a substantial number of individuals being added to the workforce during the specified period.
  • As part of the ‘Prayaas’ initiative, the field offices of EPFO have been actively distributing Pension Payment Orders (PPOs) to members of the Employees’ Pension Scheme 1995 on the day of their superannuation. Until September 30, 2023, the field offices conducted a total of 6,751 webinars to promote and educate stakeholders about the Prayaas initiative. Furthermore, during the month of September 2023 alone, 403 PPOs were successfully handed over to subscribers, highlighting the commitment of EPFO to streamline processes and enhance member services through proactive initiatives like Prayaas.
  • As part of the efforts to boost employment generation and mitigate the socio-economic impact of the Covid-19 pandemic, the Ministry of Labour & Employment introduced the EPFO-linked Aatmanirbhar Bharat Rojgar Yojana (ABRY) scheme on December 30, 2020. As of September 23, 2023, a total of 1,52,452 establishments have likely participated in the scheme, contributing to the broader objective of fostering economic recovery and job creation in the wake of the pandemic.

While the government has undertaken several initiatives to promote employment generation in both the organized and unorganized sectors of the economy, we emphasize the need for a substantial focus on physical outreach and alternative methods. This consideration arises from the fact that a significant portion of the labor force in India lacks access to the internet or smartphones. To ensure the inclusivity of employment-related initiatives, there is a necessity to incorporate strategies that reach individuals who may face barriers to online engagement, thereby ensuring a more comprehensive and effective approach to address the diverse needs of the labor workforce.

In this article, we will delve into some of the vital provisions and implications of these groundbreaking New Labour Codes, shedding light on their potential to improve the lives of countless workers across India.

4 New Labour Codes – a revolutionary approach to protecting the interests of workers

Labour laws in India had their origins in the British Raj, but over time, many of these laws had become obsolete and ineffective. Instead of safeguarding workers’ interests, some of these outdated labour codes had hindered their progress.

In response to this, the then-current government recognized the need to eliminate redundant or irrelevant labour laws. Consequently, the 29 existing labour laws were streamlined and consolidated into 4 new labour codes, a move that was expected to bring significant benefits to all stakeholders.

Benefits of New Labour Code

New Labour Codes
  • Right to Minimum Wages for Everyone

4 labour laws are amalgamated into the Minimum Wage Code which has provided the “right to minimum wages” for the first time.

Labour Code (Wage Code) – 2019

  • For the first time since India’s independence, the government is actively working towards providing wage security, social security, and health security to workers in both organized and unorganized sectors.
  • The assurance of minimum wages extends to workers in both organized and unorganized sectors.
  • Review of minimum wage rates every five years.
  • Workers will get timely payment of their wages as a guaranteed right.
  • Male and female workers will receive equal remuneration for their work.
  • Approximately 400 million unorganized workers now have the right to a minimum wage, a significant development.
  • The introduction of a floor wage aims to eliminate regional disparities in minimum wage levels.
  • Determining minimum wages has been simplified by basing it on criteria like skill level and geographical locUnder National Data Governance Policy, GoI to set up 1 hundred labs in order to develop applications using 5G services in engineering institutions to realize a new range of opportunities, business models, and employment potential.
  • Increased wage ceiling from Rs 18,000 to Rs 24,000 in FY 28-08-2017.

In the recent G20 Summit, providing quality employment was one of the commitments. India is committed to promoting sustainable, quality, healthy, safe, and gainful employment. This commitment emphasizes the importance of employment that not only provides income but also contributes to overall well-being and safety.
Source: Make in India 3rd Edition | written and compiled by Mr. Sunil Kumar Gupta

  • Social Security for Everyone

In order to guarantee security for all workers, the Central Government consolidated nine Labour Laws into the Social Security Code. This step was taken to safeguard workers’ rights to insurance, pensions, gratuity, maternity benefits, and more.

Through this Code, a comprehensive legal framework for Social Security was established, ensuring that workers could fully access social security benefits.

Under this initiative, a systematic approach was put in place for contributions from both employers and workers. Additionally, the government had the capacity to subsidize contributions from workers in disadvantaged sections.

New Labour Codes

Social Security Code, 2020

  • By making a nominal contribution, individuals can access the privilege of receiving free medical treatment at ESIC hospitals and dispensaries.
  • The accessibility of ESIC will now be extended to workers across all sectors, including those in the unorganized sector.
  • The expansion of ESIC hospitals, dispensaries, and branches will now reach the district level, extending this service from the existing 566 districts to cover all 740 districts in the country.
  • ESIC benefits are extended to any worker involved in hazardous work, even if it’s just a single worker.
  • Platform and gig workers in emerging technology fields have the opportunity to join ESIC.
  • Plantation workers to get benefit of ESIC.
  • Institutions operating in hazardous areas are required to undergo mandatory registration with ESIC.

Expansion of Social Security

  • The pension scheme (EPFO) benefits will be extended to workers in both organized and unorganized sectors, including those who are self-employed.
  • A social security fund is being established to deliver all-encompassing social security support to the unorganized sector.
  • The necessity for a minimum service requirement to receive gratuity has been eliminated for fixed-term employees.
  • Fixed-term employees are entitled to receive the same social security benefits as permanent employees.
  • The establishment of a national worker database for the unorganized sector will be achieved through registration on a dedicated portal.
  • Employers with a workforce of over 20 employees are required to submit job vacancies online.
  • A Universal Account Number (UAN) will be introduced to cover ESIC, EPFO, and workers in the unorganized sector.
  • A Universal Account Number (UAN) based on Aadhaar to ensure effortless portability.

  • Right of Security to Workers in All Situations

To enhance workplace safety and occupational health for workers, the Occupational Safety, Health, and Working Conditions Code, 2020 has consolidated 13 existing labour laws. This Code prioritizes safeguarding the interests of workers in various sectors, including factories, mines, plantations, the motor transport industry, bidi and cigar workers, as well as contract and migrant workers.

New Labour Codes

OSH Code (Occupational, Safety, Health, Working Condition) – 2020

  • Numerous provisions within the OSH Code will improve the living conditions and well-being of Inter-State Migrant Workers.
  • The OSH Code has effectively resolved the discrepancies present in the Inter-State Migrant Workers Act, 1979. In the past, only workers hired by a contractor were acknowledged as Inter-State Migrant Workers. However, the updated provisions in the Code empower workers to become self-reliant by allowing them to self-register as Inter-State Migrant Workers on the national portal. This registration grants them a legal identity, enabling access to the benefits of various social security schemes.
  • An arrangement has been put in place for employers to offer an annual travel allowance to Inter-State Migrant Workers for their round-trip journey to their hometown.
  • Mandatory issuance of appointment letters to workers has been implemented.
  • Employers are required to provide workers with a mandatory and cost-free annual health check-up.
  • Workers engaged in construction and related activities, working in one state and relocating to another state, will receive benefits from the Building and other Construction Workers’ Cess fund.
  • The “One Nation – One Ration Card” initiative ensures that an Inter-State Migrant Worker can access ration benefits in the state where they are employed, while the rest of their family can avail these benefits in the state where they reside.
  • A national database will be established for Inter-State Migrant Workers.
  • Now, if a worker has worked for 180 days, they will be entitled to one day of leave for every 20 days of work completed, instead of the previous requirement of 240 days.

Women Empowerment Through New Labour Codes in India

  • Women workers have the right to work in all categories of establishments.
  • Women now possess the right to work during nighttime with their consent, and employers must ensure adequate safety and facilities for women workers during night shifts.
  • In 2017, amendments were made to the Maternity Benefit Act to extend paid maternity leave for female workers from 12 weeks to 26 weeks and mandate the availability of crèche facilities in all establishments employing 50 or more workers.
  • Industrial Relations (IR) Code

Through the amalgamation of three Labour Laws into the Industrial Relations Code, the Central Government has taken measures to protect the interests of both Trade Unions and workers. This Code encompasses various provisions aimed at ensuring the harmony and minimizing potential disputes between industrial units and workers in the future.

Towards the end of disputes (Industrial Relations Code) –

  • In the event of job loss, workers will be eligible for benefits under the Atal Bimit Vyakti Kalyan Yojna.
  • The Atal Bimit Vyakti Kalyan Yojna offers financial assistance to organized sector workers who lose their jobs, serving as a form of unemployment allowance. This benefit is available to workers enrolled in the ESI Scheme.
  • During the retrenchment process, workers will receive 15 days’ worth of wages dedicated to re-skilling. These wages will be directly deposited into the worker’s bank account, facilitating their ability to acquire new skills.
  • Accelerated delivery of justice to workers via the Tribunal.
  • Resolution of workers’ disputes in the Tribunal within one year.
  • Industrial Tribunals will consist of two members to expedite the resolution of cases.
  • In industrial establishments, a Trade Union that secures 51 percent of the votes will be acknowledged as the exclusive negotiating union with the authority to engage in agreements with employers.
  • In industrial establishments where no trade union garners 51 percent of the votes, a negotiating council of trade unions will be formed to facilitate agreements with the employer.

Welfare of Inter-State Migrant Workers

The government has devoted considerable effort to enhance the welfare of Inter-State Migrant Workers. Measures have been implemented to fortify the legal framework concerning these workers.

For the benefit of Inter-State Migrant Workers and those in need, the Central Government has expedited various schemes, such as Garib Kalyan and the delivery of free food grains to households.

Benefits of Codification

  • Single Registration; Single License; Single Statement; Minimum Forms
  • Common definitions
  • Reduction of Committees
  • Web-based surprise inspection
  • Use of technology – Electronic registration and licensing
  • Reduction of compliance cost and disputes

Impact of New Labour code

The impact of the new Labour Codes in India is multifaceted and has several implications for the labour landscape, the economy, and society as a whole:

  1. Enhanced Worker Protection: The introduction of statutory rights to minimum wages and timely wage payments provides workers with financial security, reducing the risk of exploitation and poverty among the labour force. This can lead to improved living standards for a significant portion of the population.
  2. Formalization of Employment: Requiring employers to issue appointment letters formalizes employment relationships, increasing job security and ensuring that workers can claim their rightful benefits. This formalization can lead to more stable employment conditions for workers.
  3. Skill Development: The creation of a Re-skilling Fund emphasizes the importance of keeping the workforce up to date with evolving job market demands. This can lead to a more skilled and adaptable labour force, contributing to economic growth.
  4. Inclusion of Gig Workers: Recognizing and providing social security benefits to gig and platform workers acknowledges the changing nature of work. This can improve the working conditions and welfare of a significant segment of the workforce.
  5. Equal Treatment for Fixed-Term Employees: Ensuring that fixed-term employees receive the same benefits as permanent employees promotes fairness in employment practices and job security for a wider range of workers.
  6. Improved Health and Well-being: The provision for annual health check-ups and medical facilities enhances workers’ overall health and productivity. Healthier workers tend to be more efficient and have a longer work life, contributing to economic growth.
  7. Streamlined Definitions and Regulations: The introduction of uniform definitions of ‘wages’ simplifies compliance for employers and reduces legal disputes. This can lead to more efficient labour market operations and less administrative burden for businesses.
  8. Social Security Expansion: Extending social security benefits to unorganized workers, gig workers, platform workers, and their families provides a safety net for a larger portion of the workforce. This can reduce economic vulnerabilities and improve social welfare.
  9. Promotion of Gender Equality: Provisions promoting gender equality can empower women to participate more actively in the labour force, potentially leading to increased economic output and improved social inclusivity.
  10. Economic Growth and Productivity: Overall, the Labour Codes can contribute to economic growth by ensuring a more efficient and inclusive labour market. With a protected and skilled workforce, businesses can operate more effectively, leading to increased productivity and, in turn, economic growth.
  11. Reduced Administrative Burden: Simplifying regulations and compliance can reduce the administrative burden on businesses, making it easier for them to focus on growth and expansion.
  12. Legal Clarity: The Labour Codes bring about legal clarity with standardized definitions and regulations. This can reduce legal disputes and lead to a more predictable and stable labour environment.
  13. Improved Working Conditions: The codes have provisions for better working conditions and safety, ensuring that workers are healthier and more motivated, which can lead to improved productivity.

The introduction of the Labour Codes in India represents a significant step toward reforming labour laws and has far-reaching implications for workers, employers, and the broader economy. The impact is expected to be positive, promoting better labour conditions, inclusivity, and economic growth. However, the successful implementation and enforcement of these codes will be critical to realizing these potential benefits fully.

Conclusion

In conclusion, the introduction of the four Labour Codes in India represents a transformative step towards reforming and strengthening labour laws in the country. These codes, which include the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health, and Working Conditions Code, 2020, are not only significant in their scale but also in their potential to create a more equitable, secure, and prosperous work environment for all.

These codes address various aspects of labour rights and welfare, with a primary goal of safeguarding the interests of workers, especially those in the unorganized sector. Some of the notable provisions include the establishment of a statutory right to minimum wages and timely wage payments, simplified definitions of ‘wages’ to reduce ambiguity, annual health check-ups and medical facilities to enhance worker well-being, and the mandatory issuance of appointment letters to formalize employment relationships.

Additionally, these codes recognize the changing nature of work and the emergence of gig workers and platform workers in new technology sectors. They lay the groundwork for social security schemes for these workers, funded through contributions from aggregators and government sources. This inclusivity extends the benefits of social security to unorganized workers, gig workers, and platform workers, along with their families.

Moreover, the codes promote fairness and job security by ensuring that fixed-term employment (FTE) workers are entitled to the same benefits as permanent employees. Workers are also granted enhanced rights, such as annual leave with wages and the option to encash leave. The extension of the Employees’ Provident Fund to all industries, irrespective of their scheduling, further underscores the government’s commitment to improving social security and labour welfare.

These labour codes are not just an exercise in legal reform; they signify a comprehensive shift towards better protection, security, and welfare for all workers in India. They aim to reduce disputes, ensure faster resolution of labour issues, and provide social security for workers across various sectors and backgrounds. By streamlining and consolidating labour laws, they reduce the compliance burden and contribute to economic and social development.

Furthermore, the specific focus on Inter-State Migrant Workers and women workers adds an essential dimension to these reforms. Provisions for Inter-State Migrant Workers enable them to gain legal identity and social security benefits, while women workers are granted rights to work at night with safety measures in place. The extension of maternity leave and mandatory crèche facilities underlines the commitment to women’s empowerment.

In essence, the four Labour Codes represent a holistic and forward-looking approach to labour reform. They aim to protect the interests of workers, reduce disputes, and promote social security and well-being. As India continues to evolve and diversify its labour force, these codes offer a promising foundation for a more inclusive, equitable, and secure work environment for all its workers. They signify a significant stride towards progress and prosperity in the labour sector, aligning with the nation’s aspirations for sustainable growth and inclusivity.


Written & Compiled by CA Sunil Kumar Gupta

Founder Chairman, SARC Associates

sunilkumargupta.com