Major Income Tax Amendments applicable from 1st April 2025
Here are the major changes in income tax which will be effective from 1st April, 2025 i.e. from FY 2025-26:
1. Basic exemption limit hiked in New Tax Regime:
Slab Tax Rates
Upto Rs.4,00,000 Nil
4,00,001- 8,00,000 5%
6,00,001-12,00,000 10%
12,00,001-16,00,000 15%
16,00,001-20,00,000 20%
20,00,001-24,00,000 25%
More than 15,00,000 30%
2. Increase in Rebate under Section 87A:
Taxpayers with income up to ₹12 lakh will pay zero tax under the new tax regime. The rebate limit has been raised from ₹7 lakh to ₹12 lakh.
3. Important and Relevant changes in Tax Deducted at Source (TDS) & Tax Collected at Source (TCS):
a) TDS on Partners Remuneration, Interest or Commission
TDS will be deducted @ 10% on remuneration, commission, and interest on capital paid to partners if it exceeds ₹20,000.
Profit-sharing remains exemptunder Section 10(2A).
b) TDS on Interest on Securities (Section 193): Exemption limit increased to ₹10,000.
c) TDS on Interest on other than Interest on Securities (Section 194):
Exemption limit for Interest paid by Bank / Post Office / Co-operative society
√ To senior citizen increased from ₹50,000 to ₹1,00,000.
√ To others increased from ₹40,000 to ₹50,000.
Exemption limit for Interest paid by others increased from ₹5,000 to ₹10,000.
d) TDS on Dividend (Section 194): Exemption limit increased from ₹5,000 to ₹10,000.
e) TDS on Insurance Commission (Section 194D): Exemption limit increased from ₹15,000 to ₹20,000.
f) TDS on Commission (Section 194H): Exemption limit increased from ₹15,000 to ₹20,000.
g) TDS on Professional Fees (Section 194J): Exemption limit increased from ₹30,000 to ₹50,000.
h) TDS on Rent (Section 194I): Earlier it was applicable if it exceeds ₹2,40,000 p.a. Now applicable only if rent exceeds ₹50,000 per month.
i) TCS on Sale of Goods (Section 206C(1H)): Omitted to avoid double taxation on the same transaction where TDS under Section 194Q is applicable.
j) Omission of Sections 206AB & 206CCA: These sections mandated higher TDS/TCS rates for non-filers of ITR.
4. Increase in Foreign Remittance Limit for TCS
o The TCS exemption limit under the Liberalized Remittance Scheme (LRS) has been raised from ₹7 lakh to ₹10 lakh.
o TCS on foreign remittances now applies only beyond ₹10 lakh, at a rate of 5%.
o For overseas tour packages, TCS is 5% up to ₹10 lakh and 20% for amounts exceeding ₹10 lakh.
o TCS on education loans (under Section 80E) has been removed, which was previously levied at 0.5%.
5. Standard Deduction Enhancement
Increased from ₹50,000 to ₹75,000 for salaried individuals and pensioners under the new tax regime.
6. Extended Time Limit for Filing Updated Return:
Taxpayers can now file an updated return up to 48 months from the end of the relevant assessment year (earlier limit was 24 months)
7. Tax Benefits for Startups & IFSC
Section 80-IAC: Tax benefits for startups extended for 5 more years, now applicable to startups incorporated till March 31, 2030.
Section 80LA: Incentives for IFSC entities extended till March 31, 2030.
8. Crypto Taxation & Virtual Digital Assets
New Section 285BAA: Reporting of crypto transactions made mandatory for exchanges & intermediaries.
“Virtual Digital Assets” included in definition of undisclosed incomeunder Section 158B.
9. Changes in Taxation of Business Trusts (Section 115UA):
Capital gains under Section 112A (on listed equity) now taxed at preferential rates instead of maximum marginal rate.
10. Change in Carry Forward Period for Amalgamated Entities:
he eight-year carry-forward period for accumulated losses will now be counted from the year the loss was first recorded, rather than from the year of amalgamation.
With these changes taking effect from April 1, 2025, taxpayers must reassess their financial plans and tax-saving strategies. The new tax regime offers a higher exemption limit and standard deduction, making it more attractive.
Additionally, the TDS and TCS modifications will impact various financial transactions. Whether you are an individual taxpayer, a business owner, or an investor, staying informed about these updates will help you make better financial decisions in the new financial year.