Important Changes in Income tax effective from 1st April, 2025

 

Changes in TDS Rates and Limits, effective from 1st April 2025 - Comparative Chart:

Category	Previous TDS Rate/Limit	New TDS Rate/Limit	Remarks
Pre-mature withdrawals from EPF (192A)	₹50,000	₹1,00,000	TDS exemption limit raised from ₹50,000 to ₹1,00,000
Interest on Deposits (194A)	₹40,000         (general citizens) ₹50,000           (senior citizens)	₹50,000         (general citizens) ₹1,00,000        (senior citizens)	TDS exemption limit increased for general citizens. Banks will deduct TDS if annual interest exceeds ₹50,000 and for senior citizens if annual interest exceeds ₹1,00,000.
Rent Payments (194I)	₹2,40,000               per year	₹6,00,000                per year	TDS exemption limit raised, reducing tax deductions at source for rent payments.
Insurance Commission (194D)	₹15,000	₹20,000	TDS threshold for insurance commission increased, providing relief to insurance agents.
Professional fees and technical services (194J)	₹30,000	₹50,000	Raised exemption limit, reducing tax deduction on work of professionals, freelances and others.
Dividend Income (194)	₹5,000	₹10,000	TDS exemption limit for dividends raised, benefiting investors in equities and mutual funds.
Lottery Winnings and Horse Race Bets (194B&194BB)	Aggregate annual winnings exceeding ₹10,000	Single transaction exceeding ₹10,000	TDS now deducted only when a single transaction exceeds ₹10,000, simplifying the process.
Higher TDS for non-filers (206AB &206CCA)	Twice the rate applicable or 5% whichever is higher	Omitted	No TDS at higher rate applicable
Remittances Abroad (LRS)	TCS of 20%       (other purposes) TCS of 5%               (education and medical)                    on amounts over ₹7,00,000 per year   Overseas tour package: Up to ₹7 lakh TCS @ 5% Above ₹7 lakh TCS @ 20%	TCS of 20%               (other purpose)                   TCS of 5% (education and medical purposes) on amounts over ₹10,00,000 per year.   Overseas tour package: Up to ₹10 lakh TCS @ 5% Above ₹10 lakh TCS @  20%	Increase in Tax Collected at Source (TCS) rate for foreign remittances under the Liberalized Remittance Scheme (LRS).

 

 

Important changes under Income Tax Act in the case of Partnership firms and LLPs, effective from 1^st April, 2025

Particular	Up to 01.04.2025	From 01.04.2025 onwards
Tax rate	Both were taxed at a flat rate of 30%. If income exceeded Rs. 1 Crore then there was a surcharge of 12%.	Still flat rate is same as previous periods i.e. at 30%. If income exceeded Rs. 1 Crore, surcharge rate has been increased to 15%.
Deductible remuneration to working partner	For first ₹3,00,000 of book profit: Higher of ₹1,50,000 or 90% of book profit   On remainder of book profit:  60% of book profit	For first ₹ 6,00,000 of book profit: Higher of ₹.3,00,000 or 90% of book profit   On remainder of book profit:  60% of book profit
TDS	No TDS was required to be deducted on remuneration of partners.	New Section 194T has implemented TDS to be deducted @10% on partner’s remuneration if payment exceeds Rs. 20,000 in a financial year.
Disclosure Requirements have been increased	Only Standard financial disclosures were sufficient	Firms are  now required to furnish detailed partner-wise income, capital contributions, Related party transactions, Asset Liability Details, Contingent Liabilities, Guarantees and Commitments and Investment Details.

 

Changes in tax slabs, rebates and  provisions for updated returns

Income (A.Y. 2026-27)	Tax rate       (A.Y. 2026-27)	Income (A.Y. 2025-26)	Tax rate           (A.Y. 2025-26)
Up to ₹4,00,000	0%	Up to ₹3,00,000	0%
₹4,00,001-₹8,00,000	5%	₹3,00,001-₹7,00,000	5%
₹8.00.001-₹12.00.000	10%	₹7,00,001-₹10,00,000	10%
₹12,00,001-₹16,00,000	15%	₹10,00,001-₹12,00,000	15%
₹16,00,001-₹20,00,000	20%	₹12,00,001-₹15,00,000	20%
₹20,00,001-₹24,00,000	25%	Above ₹15,00,000	30%
Above ₹24,00,000	30%

• By availing the rebate under section 87A, a person earning income up to ₹12 Lakhs, shall have to pay NIL tax.
• Standard deduction for salaried employee is now of ₹75,000 (previously it was  ₹50,000).
• Relaxation of deemed let out property rule, allowing up to two properties to be declared as self occupies.
• Taxpayers can file updated return u/s 139(8A) within 48 months from the end of relevant assessment year (previously it was within 24 months from the end of relevant assessment year year)

The Union Budget for the Financial Year 2025-26

 

The Union Budget for the Financial Year 2025-26 was presented by the Finance Minister Mrs. Nirmala Sitharaman in the Lok Sabha today. Among many announcements made during the Union Budget 2025 presentation, Finance Minister Mrs. Nirmala Sitharaman proposed exempting individuals earning up to Rs. 12 lakhs annually from paying income tax, the move is aimed at providing relief to the middle class and boosting disposable income, was among the key highlights of a budget that promises transformative reforms across multiple sectors.

Other major highlights of the Budget Speech are as follows: —

1.       New Income Tax Bill to be proposed Next Week;

2.       Customs protocols to be eased;

3.       To Enhance investments, Turnover Limits, Credit limits of MSMEs revised;

4.       Revamped KYC portal to be launched in 2025 Budget;  

5.       Govt to decriminalize more offences;

6.       Rationalization of Tariff Rate Structure under Customs: 

Ø  Remove 7 Tariff Rates 

Ø  Apply Cess on a few Items 

Ø  Levy not more than one surcharges on goods subject to cess 

Ø  Full Exemption of BCD on Life saving medicines and patient assistance programmes run by Pharma companies where assistance is free

7.       35 additional Capital Goods for Mobile Phone Manufacturing to be Exempted from BCD;

8.       2 years’ Time Limit to finalize provisional Customs Assessment;

9.       Penalty to be removed on Voluntary confession of tax evasion Not applicable to audit cases already initiated by Tax Dept;

10.   TDS: Threshold amount will be increased; Tax rates will be revised;

11.   TDS on Annual Rent to be increased to 6 Lakh Rupees;

12.   TCS not applicable on Remittance for certain Education purposes;

13.   Higher TDS applicable on non-PAN cases;

14.   Time limit for updating ITR for Voluntary compliance by Taxpayers increased to 4 years;

15.   Two self-occupied properties conditions exempted from income tax;

16.   Scope of safe harbour Rules to be expanded;

17.   Digitalization is operational now to resolve income tax disputes;

18.   Delay for payment of TCS up to due date to be decriminalised;

19.   Compliance burden on small charitable trusts and institutions reduced; and

20.   Personal Income Tax changes: -

No Income Tax up to 12 Lakhs Rupees, thus no Income Tax up to Rs.12.7 Lakhs to salaried class due to Rs.70,000 Standard Deduction;

New Income slabs: -

 

Deliverance from fake calls and messages in the name of banks

The Reserve Bank of India (RBI) has introduced strict guidelines to address rising incidents of financial fraud through fake calls and SMS in the name of banks and financial institutions. The new measures, aimed at increasing transparency and security, require banks and other entities to adopt specific practices by March 31, 2025. Banks are now only permitted to use phone numbers that start with 1600 for all transaction-related calls and also, designated a phone number series starting with 140 specifically for marketing calls and SMS notifications to customers.

Key Highlights 

Use of Verified Number Series:

• Transactional Messages: Must come from numbers beginning with the 1600xx series.
• Promotional Calls: Must use the 140xx series.

This distinction will allow customers to verify whether a call or message is legitimate.

Mandatory Registration of Customer Care Numbers:

• Banks, NBFCs, stockbrokers, and other financial entities must register their customer care numbers on the Sanchar Saathi Portal of the Department of Telecommunications (DoT).
• This ensures customers can identify genuine service numbers and avoid fraudulent communication.

Monitoring of Mobile Numbers:

• Banks and payment aggregators are required to utilize the Mobile Number Revocation List (MNRL) to block access to inactive or illegal mobile numbers.
• Accounts linked to these numbers will also be monitored to prevent misuse.

Distributed Ledger Technology (DLT):

• All entities must register on the TRAI DLT platform to regulate commercial communication.
• Pre-approved templates for SMS and calls will be used, and businesses must obtain explicit digital consent from customers for promotional messages.

Customer Awareness Campaigns:

• Entities are instructed to inform customers about these changes via email, SMS, and regional language communication, helping them differentiate between legitimate and fake communications.

Mandatory Disclosure of Security Breaches:

• Any breach of security must be reported promptly to ensure transparency and enhance customer trust.

Source: RBI

Residential status and new tax regime

An NRI, when returning to India, his or her residential status immediately changes to resident individual and he or she needs to change his or her status by informing the bank.  NRO NRE and FCNR accounts is decided as per FEMA (Foreign Exchange Management Act) provisions.

So far as Income Tax provisions are concerned, residential status is governed under section 6 of The Income Tax Act, 1961.

The budget 2020 introduced a new regime under section 115BAC giving Individuals and HUF tax payers an option to pay income tax at lower rates. Starting from FY 2023-24, the new income tax regime will be set as the default option. If you want to continue using the old regime, you must submit a form at the time of return filing.

Read the complete article:  Residential status and new tax regime

Important Budget Proposals related to MSME

Payment Based Deduction: Any payment made to MSME shall be allowed as expenditure only when payment is actually made. This move brings ‘payments to MSME’ under the purview of Section 43B.

At present, Micro enterprises with turnover up to ₹ 2 crore and certain professionals with turnover of up to ₹ 50 lakh can avail the benefit of presumptive taxation. Now the  limits are enhanced to ₹3 crore and ₹ 75 lakh respectively.

Budget 2023-2024 highlights- relief under new tax regime

     Union Budget 2023-2024 provides plethora of benefits under New Tax Regime as compared to the Old Tax Regime. 

Default regime

The new tax regime for Individual and HUF, introduced by the Finance Act 2020, is now proposed to be the default regime. New Tax regime would also become the default regime for AOP (other than co-operative), BOI and AJP.

   Any individual, HUF, AOP (other than co-operative), BOI or AJP not willing to be taxed under this new regime can opt to be taxed under the old regime. For those persons having income under the head “profit and gains of business or profession” and having opted for old regime can revoke that option only once and after that they will continue to be taxed under the new regime. For those not having income under the head “profit and gains of business or profession”, option for old regime may be exercised in each year. 

Tax slabs and tax rates

Substantial relief is proposed under the new regime with new slabs and tax rates as under:

Total Income (₹)		Rate (per cent)
Upto 3,00,000	:	Nil
From 3,00,001 to 6,00,000	:	5
From 6,00,001 to 9,00,000	:	10
From 9,00,001 to 12,00,000	:	15
From 12,00,001 to 15,00,000	:	20
Above 15,00,000	:	30

Rebate

Resident individual with total income up to ₹5,00,000 do not pay any tax due to rebate under both old and new regime. It is proposed to increase the rebate for the resident individual under the new regime so that they do not pay tax if their total income is up to ₹7,00,000.

Standard Deduction

Standard deduction of ₹50,000 to salaried individual, and deduction from family pension up to ₹15,000, is currently allowed only under the old regime. It is proposed to allow these two deductions under the new regime also.

Surcharge

Surcharge on income-tax under both old regime and new regime is 10 per cent if income is above ₹50 lakh and up to ₹1 crore, 15 per cent if income is above ₹1 crore and up to ₹2 crore, 25 per cent if income is above ₹2 crore and up to ₹5 crore, and 37 per cent if income is above ₹5 crore. It is proposed that the for those individuals, HUF, AOP (other than co-operative), BOI and AJP under the new regime, surcharge would be same except that the surcharge rate of 37 per cent will not apply. Highest surcharge shall be 25 per cent for income above ₹2 crore. This would reduce the maximum rate from about 42.7 per cent to about 39 per cent. No change in surcharge is proposed for those who opt to be under the old regime.

TDS @ 10% on the benefit or perquisite paid to a resident businessman or professional arising from its business or profession

The Finance Act, 2022 had inserted a new section 194R to the Income Tax Act, 1961 providing for deduction of tax at source (TDS) @ 10% on the benefit or perquisite paid to a resident businessman or professional arising from its business or profession. Section 194R is applicable from July 1, 2022.

Section 194R(1):- Any person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession, by such resident, shall before providing such benefit or perquisite, as the case may be, to such resident, ensure that tax has been deducted in respect of such benefit or perquisite at the rate of ten percent of the value or aggregate of value of such benefit or perquisite. 

Provided that in case where the benefit or perquisite, as the case may be, is wholly in kind or partly in cash and partly in kind, but such part of cash is not sufficient to meet the liability of deduction of tax in respect of whole of such benefit or perquisite, the person responsible for providing such benefit or perquisite shall, before releasing the benefit or perquisite, ensure that tax required to be deducted has been paid in respect of the benefit or perquisite. 

Provided further that the provisions of this section shall not apply in case of resident where the aggregate value of the benefit or perquisite provided or likely to be provided to such resident during the financial year does not exceed twenty thousand rupees. 

Provided also that the provision of this section shall not apply to individual or HUF whose gross receipts or turnover does not exceed one crore rupees for business or fifty lakhs rupees for profession during the financial year immediately preceding the financial year in which such benefit or perquisite is provided by such person.

Whether sales discount, cash discount and rebates are covered under benefit or perquisite? – The answer is No, both the discounts and rebates are not covered under the benefit or perquisite, except the nature provided below:  

a) any incentive is given in form of car, TV, computers, etc. 

b) any person sponsors a trip for his/her recipient and relative upon achieving certain target. 

c) providing free ticket for an event.

The benefit or perquisite given as capital asset will be taxable in the hands of recipient as benefit or perquisite.