01/04/2025
Top 10 Key Income Tax Changes Effective April 1, 2025
1. Revised Tax Slabs under the New Tax Regime
0%: Up to 4 lakh (previously 3 lakh)
5%: 4 lakh to 8 lakh
10%: 8 lakh to 12 lakh
15%: 12 lakh to 16 lakh
20%: 16 lakh to 20 lakh
25%: 20 lakh to 24 lakh
30%: Above 24 lakh
The basic exemption limit has increased from 3 lakh to 4 lakh, meaning no tax is payable on income up to 4 lakh. No changes have been made to the tax slabs under the old tax regime, which continues to offer deductions and exemptions
2. Increased Rebate under Section 87A
The tax rebate under Section 87A for the new tax regime has been raised from 25,000 to 60,000. This makes income up to 12 lakh tax-free under the new regime (previously 7 lakh). For salaried individuals, the standard deduction of 75,000 (increased in prior budgets) pushes the tax-free income limit to 12.75 lakh. The old regime retains its rebate of 12,500, applicable up to 5 lakh of taxable income.
3. Enhanced TDS Threshold Limits
Several Tax Deducted at Source (TDS) thresholds have been revised to ease the burden on small taxpayers: Interest Income for Senior Citizens Increased from 50,000 to 1 lakh, Rent Payments Raised from 2.4 lakh to 6 lakh annually, Bank Deposits Increased from 40,000 to 50,000 annually for interest income, Commissions Threshold raised for certain commission payments (specific limits may vary by section).
4. TCS Limit Adjustments
Tax Collected at Source (TCS) thresholds have been updated: Liberalised Remittance Scheme (LRS) TCS now applies only on remittances exceeding 10 lakh (previously 7 lakh), offering relief for smaller overseas transactions, International Tour Packages TCS rate reduced from 20% to 15%.
5. Extended Deadline for Updated Returns (ITR-U)
The time limit for filing an Updated Income Tax Return (ITR-U) has been extended from 12 months to 48 months (4 years) from the end of the relevant assessment year.
6. Partners Salary and Interest – TDS Clarification
Salary and interest paid to partners by a partnership firm remain exempt from TDS under Section 194J or other applicable sections, provided they are within the limits specified in the partnership deed and Section 40(b). However, a new clarification mandates that any excess payment beyond the allowable limit under Section 40(b) will attract TDS at 10% if it exceeds 20,000 in a financial year, treating it as a professional or technical fee.
7. Startup Tax Benefits Extended
Under Section 80-IAC, startups incorporated before April 1, 2030, can claim a 100% deduction of profits for three consecutive years out of ten, subject to conditions. This extends the previous deadline (March 31, 2025) to encourage entrepreneurship.
8. IFSC Tax Concessions
The deadline for commencing operations in International Financial Services Centres (IFSCs) to claim tax benefits has been extended to March 31, 2030. Life insurance premiums paid by non-residents in IFSCs are fully exempt under Section 10(10D), with no cap on the premium amount.
9. Simplified Compliance
Sections 206AB and 206CCA, which imposed higher TDS/TCS rates for non-filers of returns, have been omitted to reduce compliance burdens on deductors and collectors.
10. Other Notable Changes
ULIP Taxation Proceeds from Unit Linked Insurance Plans (ULIPs) exceeding an annual premium of 2.5 lakh will be taxed as capital gains. Perquisites Employer-provided amenities and overseas medical travel expenses for employees or their families are exempt from being treated as taxable perquisites.
Know new Rules and Be Complied
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