Renu Suresh
Expert
Published on: Mar 27, 2026
Income Tax Changes from April 2025: Key Revisions and New Rules
The Union Budget 2025 has announced significant revisions to the Income Tax Act of 1961, aimed at streamlining the tax system in India. These updates will be implemented from 1st April 2025 and will apply to the financial year 2025-26 and beyond. This article will outline the key changes that individuals should be aware of in order to effectively plan their finances for FY 2025-26.
Key Income Tax Changes for 2025
Revised Income Tax Slabs for FY 2025-26 (AY 2026-27)
The Budget 2025 introduced updated tax slab rates under Section 115BAC, which pertains to the New Tax Regime (also known as the Default Tax Regime). These changes aim to help individuals save more and enhance their spending capacity. The revised tax slabs will be effective for income earned in FY 2025-26 and onwards.
Here are the new income tax slabs for FY 2025-26:
Income Range | Tax Rate |
Up to Rs. 4 lakh | NIL |
Rs. 4 lakh to Rs. 8 lakh | 5% |
Rs. 8 lakh to Rs. 12 lakh | 10% |
Rs. 12 lakh to Rs. 16 lakh | 15% |
Rs. 16 lakh to Rs. 20 lakh | 20% |
Rs. 20 lakh to Rs. 24 lakh | 25% |
Above Rs. 24 lakh | 30% |
Note: The tax slab rates under the Old Tax Regime (Optional Regime) will remain unchanged.
Click here to learn more about Old Regime vs New Regime: Which is Better for You?
Increased Rebate Under Section 87A
The rebate under Section 87A for taxpayers opting for the New Tax Regime has been significantly raised to Rs. 60,000, up from the previous limit of Rs. 25,000. This enhancement allows taxpayers to enjoy tax-free income of up to Rs. 12 lakhs.
As a result, individuals earning up to Rs. 12 lakhs will not have any tax liability under the New Tax Regime.
However, the rebate for taxpayers choosing the Old Tax Regime remains unchanged at Rs. 12,500.
Changes in Tax Dedication at Source (TDS)
The Tax Deduction at Source (TDS) provisions have undergone significant revisions, effective from April 2025. These changes include increased threshold limits for various TDS sections that will benefit both individuals and businesses. Notably, the threshold for TDS on interest income for senior citizens has been raised to Rs. 1 lakh, up from Rs. 50,000. Similarly, the limits for rent and commission-related TDS have also been increased.
Here are the enhanced TDS threshold limits for various sections, effective from April 2025:
Section | Before 1st April 2025 | From 1st April 2025 |
193 - Interest on securities | NIL | Rs. 10,000 |
194A - Interest other than on securities | (i) Rs. 50,000 for senior citizens(ii) Rs. 40,000 for others (when the payer is a bank, cooperative society, or post office)(iii) Rs. 5,000 for other cases | (i) Rs. 1,00,000 for senior citizens(ii) Rs. 50,000 for others (when the payer is a bank, cooperative society, or post office)(iii) Rs. 10,000 for other cases |
194 – Dividend for individual shareholders | Rs. 5,000 | Rs. 10,000 |
194K - Income from mutual fund units | Rs. 5,000 | Rs. 10,000 |
194B - Winnings from lottery, crossword puzzles, etc. & 194BB - Winnings from horse racing | Aggregate exceeding Rs. 10,000 in the financial year | Rs. 10,000 for a single transaction |
194D - Insurance commission | Rs. 15,000 | Rs. 20,000 |
194G - Commission, prize, etc. on lottery tickets | Rs. 15,000 | Rs. 20,000 |
194H - Commission or brokerage | Rs. 15,000 | Rs. 20,000 |
194-I - Rent | Rs. 2,40,000 (annual) | Rs. 50,000 per month |
194J - Fee for professional/technical services | Rs. 30,000 | Rs. 50,000 |
194LA - Income from enhanced compensation | Rs. 2,50,000 | Rs. 5,00,000 |
194T - Remuneration, Interest, and Commission to partners | NIL | Rs. 20,000 |
Note: The provisions for other TDS sections remain unchanged.
Click here to know more about TDS Rule Changes from 1st April 2025
Changes in Tax Collected at Source (TCS)
The following changes in Tax Collected at Source (TCS) provisions will come into effect from April 2025:
Section | Before 1st April 2025 | From 1st April 2025 |
206C(1G) – Remittance under LRS and overseas tour program package | Rs. 7 Lakhs | Rs. 10 Lakhs |
206C(1G) – Remittance under LRS for education if financed through educational loans | Rs. 7 Lakhs | Nil (No TCS Applicable) |
206C(1H) – Purchase of Goods | Rs. 50 Lakhs | Nil (No TCS Applicable) |
Note: The provisions for other TCS sections will remain unchanged.
Click here to know more about TDS Rule Changes from 1st April 2025
Updated Tax Return: ITR-U
The deadline for filing an Updated Tax Return (ITR-U) has been extended from 12 months to 48 months (4 years) from the end of the relevant assessment year. This extension aims to encourage taxpayers to disclose any previously undisclosed income and pay the appropriate taxes on it.
The additional tax liability, based on the timeline for filing an updated return, is as follows:
If ITR-U is filed within | Additional Tax |
12 months from the end of the relevant AY | 25% of the additional tax (tax + interest) |
24 months from the end of the relevant AY | 50% of the additional tax (tax + interest) |
36 months from the end of the relevant AY | 60% of the additional tax (tax + interest) |
48 months from the end of the relevant AY | 70% of the additional tax (tax + interest) |
Extension of Tax Concessions for IFSC Units
The sunset date for the commencement of operations of units in the International Financial Services Centre (IFSC) that are eligible for tax concessions has been extended to 31st March 2030.
Life Insurance Exemptions for Non-Residents
Additionally, premiums paid on life insurance policies purchased from an IFSC office by non-residents will be fully exempt under Section 10(10D), with no upper limit on the premium amount
Tax Exemption for Start-ups
Under Section 80-IAC, start-ups incorporated before 1st April 2030 will be eligible for a 100% deduction on profits and gains for three consecutive years within a ten-year period, starting from the year of incorporation, provided they meet certain conditions.
Omission of Sections 206AB and 206CCA
Starting from April 2025, Sections 206AB and 206CCA of the Income Tax Act, 1961, will be omitted to ease the compliance burden on tax deductors and collectors.
Previously, tax deductors and collectors were required to verify whether the recipient had filed tax returns in order to determine the correct withholding tax. This process was cumbersome and caused delays in filing TDS and TCS returns, resulting in higher tax rates, blocked capital, and increased compliance requirements.
Enhanced Deduction on Remuneration Paid to Partners
The deduction limit for remuneration paid to partners by partnership firms and LLPs has been increased. The revised calculation limits allow for higher deductions during tax computation.
The following limits will apply to determine the maximum deduction available for remuneration paid to partners:
Book Profit | Limit |
On the first Rs. 6,00,000 of book profit or loss | Rs. 3,00,000 or 90% of the book profit, whichever is higher |
On the remaining balance of the book profit | 60% of the book's profit |
Treatment of ULIPs as Capital Gains
The proceeds from Unit Linked Insurance Plans (ULIPs) will be treated as capital gains and taxed accordingly if the premium paid exceeds 10% of the assured amount or Rs. 2.5 lakhs annually.
Relaxation of Deemed Let-Out Property Provision
Previously, the annual value of up to two self-occupied properties was deemed to be NIL only if the owner could not occupy the property due to employment, business, or professional commitments at a different location.
Under the Finance Bill 2025, the provision has been relaxed, allowing individuals to claim up to two house properties as self-occupied and declare NIL income on these properties, regardless of the reason for not occupying them. This change removes the earlier conditions and simplifies the determination of deemed let-out property.
End of Equalisation Levy (EL)
Starting from April 2025, the Equalisation Levy (EL) on online advertisements will be abolished. Previously, this levy was charged at a rate of 6% on the amount received or receivable by a non-resident for online advertisement services.
Additionally, the levy, which was also imposed on non-resident e-commerce operators at a rate of 2%, was removed in 2024.
Simplify Your Tax Filing with IndiaFilings!
Stay ahead of the tax changes in 2025! At IndiaFilings, we simplify your tax filings with expert guidance and support. Whether you need assistance with revised tax slabs, TDS/TCS updates, or filing your Updated Tax Return, our team is here to help. Contact us today to ensure smooth and compliant tax filing for FY 2025-26!