Income Tax,TDS and TCS changes in Budget 2025
Major Amendments to the Income Tax
Act, 1961 in Budget 2025 (Applicable from FY 2025-26 / AY 2026-27)
The Union Budget 2025 introduced
sweeping changes to the Income Tax Act, 1961 with the aim of simplifying
India's tax system, reducing compliance burdens, and enhancing taxpayer
convenience. These amendments will come into effect from 1st April 2025 and
apply for the financial year 2025-26 (assessment year 2026-27).
Below is a comprehensive overview of
the key changes introduced:
1.
Revised Income Tax Slabs under Section 115BAC (New Tax Regime)
To boost disposable income and
encourage savings, the government revised tax slabs under the New Tax Regime:
|
Income
Range |
Tax
Rate |
|
Up to ₹4 lakh |
Nil |
|
₹4 lakh – ₹8 lakh |
5% |
|
₹8 lakh – ₹12 lakh |
10% |
|
₹12 lakh – ₹16 lakh |
15% |
|
₹16 lakh – ₹20 lakh |
20% |
|
₹20 lakh – ₹24 lakh |
25% |
|
Above ₹24 lakh |
30% |
Note: The Old Tax Regime remains
optional and unchanged.
2.
Enhanced Rebate Under Section 87A
The rebate limit under Section 87A
has been increased to ₹60,000 (from ₹25,000 earlier). Consequently, individuals
with taxable income up to ₹12 lakh will not have any tax liability under the
new regime.
3.
TDS Thresholds Revised
Effective April 2025, the thresholds
for Tax Deduction at Source (TDS) under various sections have been revised upward,
reducing the number of transactions liable for deduction:
Examples of changes:
- Section 193 (Interest on securities): Nil → ₹10,000
- Section 194A (Interest other than securities):
- Senior citizens: ₹50,000 → ₹1,00,000
- Others: ₹40,000 → ₹50,000
- Other cases: ₹5,000 → ₹10,000
- Section 194K (Mutual funds): ₹5,000 → ₹10,000
- Section 194J (Professional fees): ₹30,000 → ₹50,000
TDS Rate Reduction:
- Section 194LBC (Income from securitization trust):
- Individuals/HUFs: 25% → 10%
- Others: 20% → 10%
4.
Removal of TCS on Sale of Goods (Section 206C(1H))
To eliminate duplication and
confusion caused by simultaneous TDS and TCS, the TCS provision on the sale of
goods under Section 206C(1H) has been abolished. Going forward, only TDS under
Section 194Q will be applicable.
Benefits:
- Avoids double compliance
- Reduces seller-side paperwork
- Prevents cash flow blockage
5.
TCS Amendments
Updates under Section 206C(1G)
include:
- Threshold for remittances under Liberalised Remittance
Scheme (LRS) and foreign tours increased from ₹7 lakh to ₹10 lakh.
- No TCS on education-related remittances funded through
loans.
6.
Changes to Forest Produce TCS
Key clarifications and rate
adjustments include:
- Only forest produce obtained under a forest lease
is now taxable under TCS provisions.
- The TCS rate for such produce (excluding tendu leaves)
has been reduced from 2.5% to 2%.
- “Forest produce” is now defined based on relevant
forest laws.
7.
Relief from Prosecution for Delayed TCS Payments (Section 276BB)
Prosecution will not apply if TCS is
deposited before the due date of filing the TCS statement under the proviso to
Section 206C(3), offering relief to those who delay payment but comply before
the statement deadline.
8.
Omission of Higher TDS/TCS for Non-Filers
Sections 206AB and 206CCA, which
mandated higher TDS/TCS for non-filers, will be removed from 1st April 2025.
Impact:
- No need to verify ITR filing status of
deductees/collectees.
- Higher TDS/TCS for invalid or missing PAN will still
apply.
9.
Extended Timeline for Updated Returns (ITR-U)
The time limit for filing updated
returns has been extended from 12 months to 48 months (4 years) from the end of
the relevant assessment year. Additional tax rates apply progressively with
time.
10.
IFSC Incentives Extended
- Tax benefits now available for IFSC units set up until
31st March 2030.
- Life insurance policies issued to non-residents by IFSC
units are fully exempt under Section 10(10D), without any premium cap.
11.
Tax Exemptions for Start-Ups
Start-ups incorporated before 1st
April 2030 are eligible for 100% tax exemption on profits for any 3 consecutive
years out of 10, under Section 80-IAC.
12.
Deductions for NPS Vatsalya Scheme
Parents/guardians can claim a
deduction under Section 80CCD(1B) for contributions made towards the NPS
Vatsalya account for up to two minor children, within the ₹50,000 cap.
- Partial withdrawals (up to 25%) are exempt.
- Final withdrawals are taxable if deductions were
claimed earlier.
13.
Tax Relief on NSS Withdrawals
Withdrawals from the National
Savings Scheme (NSS) post 29.08.2024 are tax-exempt if earlier deductions under
Section 80CCA were claimed. No interest will be credited to NSS accounts after
01.10.2024.
14.
Deduction on Partners’ Remuneration (Firms)
Updated limits for deductions on
remuneration to partners:
- First ₹6 lakh of book profit: Higher of ₹3 lakh or 90%
- Remaining book profit: 60%
15.
ULIP Taxation Clarified
For ULIPs not eligible for exemption
under Section 10(10D):
- Proceeds will now be taxed explicitly under capital
gains (Section 45(1B)).
- Other life insurance policy proceeds will be taxed
under “Income from Other Sources” if exemption conditions are not met.
16.
Amendments for Charitable Trusts and Institutions
- Registration validity extended from 5 to 10 years for
trusts with income under ₹5 crore.
- Incomplete applications can now be rectified without
automatic rejection.
- Definition of “specified persons” updated—threshold
increased from ₹50,000 to ₹1 lakh annually or ₹10 lakh in aggregate.
17.
Crypto Asset Reporting Obligations
- Reporting entities must disclose crypto transactions
under a new compliance framework aligned with the Crypto-Asset Reporting
Framework (CARF).
- This supports India’s commitment to global tax
transparency under the G20 declaration.
18.
Annual Value of Self-Occupied Property Simplified
- No need to prove that the owner couldn’t occupy the
property for work-related reasons to claim nil annual value.
- Up to two self-occupied properties can be
declared as having nil annual value.
These changes mark a major step in
modernizing and streamlining India’s tax framework. Taxpayers and professionals
alike must understand and adapt to these reforms for better financial planning and
compliance.
DISCLAIMER
Airfinac.com, its author/writer and associates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.