Introduction:
As we step into the new financial year, significant amendments to the Income Tax Act, 1961 are set to take effect from April 1, 2025. These changes impact income tax slabs, TDS (Tax Deducted at Source), TCS (Tax Collected at Source), and various tax incentives aimed at simplifying compliance and providing relief to taxpayers.
Whether you are an individual taxpayer, a business owner, or a financial professional, staying informed about these updates is crucial for seamless tax planning. In this article, we break down the 15 key income tax changes in a clear and concise manner, ensuring you understand their impact and how to adapt accordingly.
Below is a comprehensive overview of the key modifications:
1. Revised Income Tax Slabs under the New Tax Regime
The tax slabs have been restructured to provide relief to taxpayers:
| Income Range (₹) | Tax Rate (%) |
| Up to 4,00,000 | Nil |
| 4,00,001 – 8,00,000 | 5 |
| 8,00,001 – 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 |
| Above 24,00,000 | 30 |
Note: The Old Tax Regime remains unchanged and is available as an option
.2. Enhanced Rebate under Section 87A
The rebate under Section 87A has been increased to ₹60,000, effectively making income up to ₹12 lakh tax-free under the New Tax Regime.
3. Adjustments in Tax Deducted at Source (TDS) Thresholds
To ease the compliance burden, TDS threshold limits have been revised:
| Section | Nature of Payment | Previous Threshold (₹) | Revised Threshold (₹) |
| 193 | Interest on securities | Nil | 10,000 |
| 194A | Interest other than on securities | ||
| – Senior Citizens | 50,000 | 1,00,000 | |
| – Others (banks, co-op societies, post offices) | 40,000 | 50,000 | |
| – Other cases | 5,000 | 10,000 | |
| 194 | Dividend for individual shareholders | 5,000 | 10,000 |
| 194K | Income from mutual fund units | 5,000 | 10,000 |
| 194D | Insurance commission | 15,000 | 20,000 |
| 194H | Commission or brokerage | 15,000 | 20,000 |
| 194I | Rent | 2,40,000 annually | 50,000 per month |
| 194J | Professional/technical services fees | 30,000 | 50,000 |
| 194LA | Compensation on land acquisition | 2,50,000 | 5,00,000 |
| 194T | Remuneration/interest/commission to partners | Nil | 20,000 |
4. Removal of Tax Collected at Source (TCS) on Sale of Goods
Previously, Section 206C(1H) mandated a 0.1% TCS on the sale of goods exceeding ₹50 lakh, leading to potential double compliance issues alongside TDS under Section 194Q. Effective April 1, 2025, this TCS requirement has been abolished, simplifying transactions and reducing compliance burdens for sellers.
5. Modifications in TCS Provisions
Key changes include:
- Liberalized Remittance Scheme (LRS) & Overseas Tour Packages: The TCS threshold has been raised from ₹7 lakh to ₹10 lakh.
- Education-Related Remittances through Loans: TCS has been removed, facilitating easier financial arrangements for students.
6. Rationalization of ‘Forest Produce’ Definition
The term “forest produce” has been clearly defined, and TCS now applies specifically to “forest produce under a forest lease,” providing clarity and reducing ambiguities in tax applicability.
7. Enhanced TDS on Partner’s Remuneration, Interest, and Commission
A 10% TDS is now applicable on remuneration, commission, and interest paid to partners exceeding ₹20,000, while profit-sharing remains tax-free under Section 10(2A).
8. Increased Exemption Limits for Various Payments
The exemption limits for TDS on interest, dividends, and commissions have been elevated, benefiting taxpayers by reducing the instances where TDS is applicable.
9. Extended Timeline for Filing Updated Returns
Taxpayers now have up to 48 months to file updated returns, offering greater flexibility and time to ensure compliance.
10. Extended Tax Benefits for Startups
Tax incentives under Section 80-IAC have been extended, supporting the growth and sustainability of startups in the country.
11. Incentives for International Financial Services Centre (IFSC)
Incentives for units in IFSCs have been extended until March 31, 2030, promoting international financial activities and investments.
12. Stricter Reporting Norms for Cryptocurrency Transactions
Transactions involving virtual digital assets are now subject to enhanced reporting requirements under Section 285BAA, ensuring greater transparency and regulatory oversight.
13. Removal of Higher TDS/TCS Rates for Non-Filers
Sections 206AB and 206CCA, which imposed higher TDS/TCS rates on non-filers of income tax returns, have been omitted to reduce compliance burdens and capital blockage.
14. Tax Relief for Salary Arrears and Digital Tools
Tax relief has been introduced for salaried individuals receiving arrears, and exemptions are provided for digital tools such as laptops and software provided by employers, acknowledging the evolving work environment.
15. Increased Deductions and Revised Tax Slabs
Additional deductions have been introduced, and tax slabs have been revised to provide greater relief to taxpayers and stimulate economic growth.
These amendments reflect the government’s commitment to creating a more efficient and taxpayer-friendly system. Taxpayers are advised to familiarise.
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