Important Income Tax Changes 2025
Income Tax Slabs for FY 2025-26 (AY 2026-27)
With the new financial year approaching, several crucial changes in the income tax regime for FY 2025-26 (AY 2026-27) have been announced. These changes aim to enhance tax compliance, provide relief to taxpayers, and promote economic growth. Here’s a breakdown of the major updates:
Revised Income Tax Slabs
The government has introduced new tax slab rates under Section 115BAC (New Tax Regime), making it the default regime while keeping the Old Tax Regime optional. The revised tax rates are as follows:
| Income Range | Tax Rate |
|---|---|
| Up to Rs. 4 lakh | NIL |
| Rs. 4 lakh – Rs. 8 lakh | 5% |
| Rs. 8 lakh – Rs. 12 lakh | 10% |
| Rs. 12 lakh – Rs. 16 lakh | 15% |
| Rs. 16 lakh – Rs. 20 lakh | 20% |
| Rs. 20 lakh – Rs. 24 lakh | 25% |
| Above Rs. 24 lakh | 30% |
Note: The Old Tax Regime remains unchanged and is still available as an option.
Increased Rebate Under Section 87A
To provide relief to middle-income taxpayers, the rebate under Section 87A has been raised to Rs. 60,000 (previously Rs. 25,000), allowing taxpayers with an income up to Rs. 12 lakh to have zero tax liability under the New Tax Regime.
TDS (Tax Deducted at Source) Updates
Significant revisions have been made to the TDS provisions, increasing threshold limits for various categories:
| Section | Previous Limit | New Limit (Effective from April 2025) |
| 194A – Interest (Senior Citizens) | Rs. 50,000 | Rs. 1,00,000 |
| 194 – Dividend Income | Rs. 5,000 | Rs. 10,000 |
| 194H – Commission/Brokerage | Rs. 15,000 | Rs. 20,000 |
| 194-I – Rent | Rs. 2,40,000 (Annual) | Rs. 50,000 (Monthly) |
| 194J – Professional Fees | Rs. 30,000 | Rs. 50,000 |
TCS (Tax Collected at Source) Modifications
Changes in TCS regulations include:
| Section | Previous Limit | New Limit (Effective from April 2025) |
| 206C(1G) – LRS & Tour Packages | Rs. 7 lakh | Rs. 10 lakh |
| 206C(1H) – Purchase of Goods | Rs. 50 lakh | NIL (No TCS Applicable) |
| 206C(1G) – LRS for Education Loans | Rs. 7 lakh | NIL (No TCS Applicable) |
Extended Deadline for Updated Tax Return (ITR-U)
To encourage voluntary tax compliance, the deadline for filing an Updated Tax Return has been extended from 12 months to 48 months from the relevant assessment year.
Revised Deduction on Partner’s Remuneration
The deduction available to partnership firms and LLPs for remuneration paid to partners has been increased:
| Book Profit | Deduction Limit |
| First Rs. 6,00,000 | Rs. 3,00,000 or 90% (whichever is higher) |
| Balance Profit | 60% |
Relaxation in Deemed Let-Out Property Provision
Earlier, taxpayers could claim only two self-occupied properties as exempt from deemed rent. Now, any two house properties can be treated as self-occupied without any additional conditions.
Other Noteworthy Updates:
- Omission of Sections 206AB & 206CCA: These provisions, which imposed higher TDS and TCS rates for non-filers, have been removed to simplify compliance.
- Tax Exemptions for IFSC Units: The deadline for availing tax benefits has been extended to 31st March 2030.
- Start-Up Tax Exemptions: Start-ups incorporated before 1st April 2030 will continue to enjoy a 100% tax deduction on profits for three consecutive years within the first ten years of incorporation under Section 80-IAC.
Conclusion
The income tax changes for FY 2025-26 bring relief to taxpayers, simplify compliance, and encourage economic participation. With increased rebates, extended deadlines, and relaxed provisions, individuals and businesses should plan their taxes accordingly to maximize savings and compliance benefits.
For expert guidance on tax planning and compliance, consult Saptax Hub, the chartered accountants in Delhi.
