All the income tax rule changes that were announced in Budget 2025 will come into effect from April 1. Let us look at a few main ones.
Individuals can now enjoy tax-free income of up to Rs 12 lakh (Rs 12.75 lakh including standard deduction of up to Rs 75,000) under the new tax regime, with no tax liability for earnings up to this limit
All the income tax rule changes that were announced in Budget 2025 will come into effect from April 1. Let us look at a few main ones.
No Tax Up To Rs 12 Lakh Under The New Regime
The rebate under Section 87A for taxpayers filing tax returns under the new tax regime has been increased from Rs 25,000 to Rs 60,000. “This means that individuals can now enjoy tax-free income of up to Rs 12 lakh (Rs 12.75 lakh including standard deduction of up to Rs 75,000) under the new tax regime, with no tax liability for earnings up to this limit. However, the rebate for taxpayers opting for the old tax regime remains unchanged at Rs 12,500,” says Suresh Surana, a Mumbai-based chartered accountant.
For the Financial Year (FY) 2024-25, the existing tax slab rates under the new tax regime are as follows: Income up to Rs 3,00,000 is tax-free, while income between Rs 3,00,001 and Rs 7,00,000 is taxed at five per cent. Earnings from Rs 7,00,001 to Rs 10,00,000 attract a 10 per cent tax rate, and income between Rs 10,00,001 and Rs 12,00,000 is taxed at 15 per cent. The 20 per cent tax rate applies to earnings from Rs 12,00,001 to Rs 15,00,000, while income above Rs 15,00,000 is taxed at 30 per cent.
However, as per the Union Budget for FY 2025-26, the revised tax slab offers tax exemption up to Rs 4,00,000. Income between Rs 4,00,001 and Rs 8,00,000 is taxed at five per cent, Rs 8,00,001 to Rs 12,00,000 at 10 per cent, and Rs 12,00,001 to Rs 16,00,000 at 15 per cent. The 20 per cent tax rate applies to income between Rs 16,00,001 and Rs 20,00,000, while Rs 20,00,001 to Rs 24,00,000 is taxed at 25 per cent. Earnings above Rs 24,00,000 are taxed at 30 per cent.
“Operationalization of the new slabs under the simplified tax regime, which will lead to tax savings of up to Rs 1,10,000 excluding surcharge and cess for individuals having taxable income of Rs 24 lakh or more,” says Tarun Garg, director, Deloitte India.
Increase In Timeline For Filing Of Updated Tax Return
“Section 139(8A) of the Income Tax Act allows taxpayers to file an updated return of income within 24 months from the end of the relevant assessment year. The Finance Act 2025 extended this period to 48 months, subject to an additional tax liability as follows,” says Surana.
After expiry of the time available for revised return and belated return and before completion of 12 months from the end of the relevant assessment year, 25 per cent of the aggregate of tax and interest payable.
After the expiry of 12 months from the end of the relevant assessment year but before completion of the period of 24 months from the end of the relevant assessment year, 50 per cent of the aggregate of tax and interest payable
After the expiry of 24 months from the end of the relevant assessment year but before completion of the period of 36 months from the end of the relevant assessment year, 60 per cent of the aggregate of tax and interest payable on additional income disclosed in the updated ITR.
After the expiry of 36 months from the end of the relevant assessment year but before completion of the period of 48 months from the end of the relevant assessment year, 70 per cent of the aggregate of tax and interest payable on additional income disclosed in the updated ITR.
Key TDS Rationalization
Senior Citizens: The Tax Deducted at Source (TDS) exemption limit on interest income for senior citizens is raised from Rs 50,000 to Rs 1 lakh, reducing their tax liability.
Rent Payments: The annual threshold for TDS on rent payments increases from Rs 2.4 lakh p.a. to Rs 50,000 per month, benefiting individuals receiving modest rental income.
Dividend Income Taxation: The TDS exemption limit on dividend income is increased from Rs 5,000 to Rs 10,000, allowing investors to retain more income before tax is deducted.
TCS Changes
For remittances under the Liberalized Remittance Scheme (LRS) and overseas tour program packages, the TDS threshold has changed.
“From April 1, we will see an upward revision to the threshold for recovering TCS on remittances under Liberalised Remittance Scheme from Rs 7 lakh to Rs 10 lakh,” says Garg.
“For remittances under LRS for education financed through educational loans, the threshold is currently seven lakh rupees, but from 1st April 2025, there will be no Tax Collected at Source (TCS) applicable. Similarly, for the sale of goods under Section 206C(1H), the threshold before 1st April 2025 is fifty lakh rupees, but from 1st April 2025, no TCS will be applicable,” says Surana.
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