From revised tax slabs to higher tax deduction at source (TDS) limits, the start of the new financial year marks the implementation of several tax changes. While many of these were announced over recent months, the most critical revisions were introduced by Finance Minister Nirmala Sitharaman in her February Union Budget. With the Finance Bill 2025 now passed in Parliament, these provisions take effect from April 1.
Tax slab changes
Starting April 1, key income tax revisions aimed at providing relief to individuals and senior citizens come into effect. The revised tax slabs under the new regime increase the basic exemption limit to ?4 lakh per annum. Consequently, individuals earning up to ?4 lakh in the financial year 2025-26 (April 1, 2025 – March 31, 2026) will not be required to pay income tax.
Additionally, salaried individuals with an income of up to ?12.75 lakh per annum will effectively be tax-free when factoring in a standard deduction of ?75,000. The government estimates that these changes will help individuals save ?1.10 lakh annually.
Higher TDS threshold for senior citizens
Senior citizens will benefit from an increased TDS threshold on interest income from banks, cooperative societies, and post office deposits. This limit has been raised from ?50,000 to ?1 lakh, reducing the amount of tax deducted at source.
TDS on house rent payments
Budget 2025 has revised the TDS threshold for house rent payments made by non-individuals and companies. TDS will now be deducted on rent payments of ?50,000 per month or more.
Relief on occupation of two properties
Taxpayers can now declare two properties as self-occupied without needing to justify non-occupation. This change aims to reduce the tax burden and provide greater financial flexibility.
Changes to Tax Collected at Source (TCS)
The threshold for TCS on foreign travel, investments, and other large transactions has been increased from ?7 lakh to ?10 lakh.
PAN-Aadhaar linkage requirement
From April 1, any investor who has not linked their PAN with Aadhaar will have their dividend payouts suspended. Additionally, in such cases, TDS rates will increase, and no credit will be reflected in Form 26AS.
UPI linkage with non-functional mobile numbers
For UPI users, mobile numbers linked to UPI that have not been used for an extended period must be updated. Failure to do so will result in the UPI account becoming inaccessible.
TDS on salary payments
As per the Budget announcements, TDS on payments to partners—whether under salary, remuneration, commission, or bonus—has been revised under Section 194T of the Income Tax Act. A 10% TDS will now apply if the total salary, remuneration, commission, bonus, or interest paid to a partner within a financial year exceeds ?20,000.
Abolishment of 6% equalisation levy
Effective April 1, the 6% equalisation levy, commonly known as the "Google Tax," has been abolished. This levy, primarily imposed on online advertising services, was removed through an amendment to the Finance Bill 2025 on March 24. The move is expected to ease the tax burden on Indian consumers of digital advertising.
Extended deadline for updated tax returns
The deadline for filing updated tax returns (ITR-U) has been extended from 24 months to 48 months (four years). Taxpayers now have more time to voluntarily disclose income and correct past omissions. The earliest return that can be updated under this provision is for the assessment year 2022-23.
Expert views
Tax experts believe these changes will bring much-needed relief to taxpayers. Sandeep Jhunjhunwala, Partner at Nangia Andersen LLP, said, “"As we commence FY 2025-26, several key income tax amendments warrant attention for effective compliance and strategic planning. The revised TDS framework for salary payments under the new tax regime incorporates the enhanced slab rate and rebate under Section 87A, ensuring alignment with the updated tax rate structure. Similarly, TDS on non-salary domestic payments must reflect the revised threshold limits and rates.
In a move to ease compliance, the removal of TCS on the sale of goods exceeding prescribed limits reduces administrative burdens for sellers, while the elimination of ITR filing verification requirements for tax deduction and collection streamlines processes for deductors and collectors. To further facilitate voluntary income disclosure, the extended 48-month deadline for filing updated tax returns (ITR-U) provides taxpayers with greater flexibility.
Additionally, to support early-stage businesses, start-ups incorporated between April 1, 2025, and April 1, 2030, can avail of a 100% income tax exemption on profits for any three consecutive years within their first decade, subject to compliance with other conditions stipulated under Section 80-IAC. However, in contrast to these taxpayer-friendly measures, the restriction on the carry-forward of accumulated losses in cases of amalgamation or business reorganisation to a maximum of eight years may constrain the ability of successor entities to fully utilise tax benefits, potentially affecting long-term restructuring strategies."
Sandeep Sehgal, Partner-Tax at AKM Global, echoed similar views:
"The proposed tax reforms introduce a taxpayer-friendly overhaul, featuring a full tax rebate for incomes up to ?12 lakh, revised tax slabs that lower overall liabilities, and key compliance relaxations. The elimination of the 6% equalisation levy and higher TDS thresholds offer significant relief to both businesses and individuals, fostering a more efficient and growth-driven tax ecosystem. Effective April 1, 2025, these changes aim to create a more inclusive, streamlined, and pro-growth tax framework, aligning with the broader vision of economic efficiency and expansion."
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