The Budget 2025 introduced several significant amendments to the Income Tax Act, 1961. New Income Tax Rules from 1st April 2025, aimed at simplifying tax structures and increasing savings for individuals and businesses.
Revised Income Tax Slabs for FY 2025-26
The government has revised the tax slabs under Section 115BAC, also known as the New Tax Regime (Default Tax Regime). These new slabs are designed to increase disposable income and encourage spending.
New Income Tax Slab Rates For FY 2025-26/AY 2026-27
| Income Range | Tax Rate |
| Up to ₹4 lakh | NIL |
| ₹4 lakh – ₹8 lakh | 5% |
| ₹8 lakh – ₹12 lakh | 10% |
| ₹12 lakh – ₹16 lakh | 15% |
| ₹16 lakh – ₹20 lakh | 20% |
| ₹20 lakh – ₹24 lakh | 25% |
| Above ₹24 lakh | 30% |
The Old Tax Regime (Optional Regime) remains unchanged.
Increased Rebate Under Section 87A
- The rebate limit under Section 87A has been increased to ₹60,000 (previously ₹25,000).
- This means individuals earning up to ₹12 lakh will have zero tax liability under the New Tax Regime.
- For taxpayers under the Old Tax Regime, the rebate remains ₹12,500.
- Salaried persons also get benefits of ZERO tax on taxable salary of 12 Lacs.
Read: Difference Between New Tax Regime vs Old Tax Regime (for FY 2024-25/ AY 2025-26)
Key Tax Deduction at Source (TDS) Changes
Significant revisions have been made to the TDS provisions, effective April 2025, to ease compliance for individuals and businesses.
Revised TDS Threshold Limits- Income Tax Changes From 1st April 2025
| Section | Previous Limit | New Limit (From April 2025) |
| 193 – Interest on securities | NIL | ₹10,000 |
| 194A – Interest (other than securities) | ₹50,000 (senior citizens) ₹40,000 (others) | ₹1,00,000 (senior citizens) ₹50,000 (others) |
| 194 – Dividend | ₹5,000 | ₹10,000 |
| 194K – Mutual Fund Income | ₹5,000 | ₹10,000 |
| 194B/BB – Lottery, betting | ₹10,000 (aggregate) | ₹10,000 (per transaction) |
| 194D – Insurance commission | ₹15,000 | ₹20,000 |
| 194H – Brokerage/Commission | ₹15,000 | ₹20,000 |
| 194-I – Rent | ₹2,40,000/year | ₹50,000/month |
| 194J – Professional Fees | ₹30,000 | ₹50,000 |
| 194T – Partner Remuneration | NIL | ₹20,000 |
Other TDS provisions remain unchanged.
Tax Collected at Source (TCS) Updates
The TCS provisions have also been updated in Income Tax Changes From 1st April 2025, with the following key changes:
| Section | Previous Limit | New Limit (From April 2025) |
| 206C(1G) – Remittance under LRS & overseas travel package | ₹7 lakh | ₹10 lakh |
| 206C(1G) – LRS remittance for education (via loan) | ₹7 lakh | No TCS |
| 206C(1H) – Purchase of goods | ₹50 lakh | No TCS |
The changes reduce compliance burdens and encourage seamless transactions.
Updated Tax Return (ITR-U) Extension
To encourage voluntary disclosure of income, the deadline for filing an Updated Tax Return (ITR-U) has been extended from 12 months to 48 months from the end of the relevant assessment year.
Read: Income Tax Return (ITR) Due Dates in India – 2025
Additional Tax Liability for Late ITR-U Filing
| Filing Timeline | Additional Tax Payable |
| Within 12 months | 25% of additional tax |
| Within 24 months | 50% of additional tax |
| Within 36 months | 60% of additional tax |
| Within 48 months | 70% of additional tax |
This update allows taxpayers more time to correct past returns while ensuring fair tax collection.
READ THIS ARTICLE TO KNOW- Can I file ITR 3-4-5 years now
Tax Benefits for International Financial Services Centre (IFSC)
- The sunset date for IFSC units to avail tax concessions has been extended to March 31, 2030.
- Life insurance policies taken from IFSC offices by non-residents are fully tax-exempt under Section 10(10D).
This move boosts foreign investments and financial services in India.
Tax Exemptions for Startups (Section 80-IAC)
- Startups incorporated before April 1, 2030, can claim 100% tax exemption on profits for three consecutive years out of ten years.
- Startups must meet specific conditions to avail this benefit.
This encourages entrepreneurship and innovation.
Omission of Sections 206AB & 206CCA
- Sections 206AB and 206CCA, which required tax deductors to verify if a recipient had filed returns, have been removed.
- This change reduces compliance burdens and simplifies tax collection.
This will speed up TDS/TCS return filings and improve business cash flow.
Higher Deduction for Partner Remuneration
The deduction for remuneration paid to partners in partnership firms & LLPs has been revised:
| Book Profit | Maximum Deduction |
| First ₹6 lakh | ₹3 lakh or 90% of book profit (whichever is higher) |
| Above ₹6 lakh | 60% of book profit |
This ensures fairer deductions and tax savings for firms.
Capital Gains on ULIPs
- ULIPs (Unit Linked Insurance Plans) with an annual premium exceeding ₹2.5 lakh will now be taxed as capital gains.
- Earlier, ULIP proceeds were fully tax-exempt under Section 10(10D).
This aligns ULIPs with mutual funds for fairer taxation.
Deemed Let-Out Property Relaxation
Previously, the annual value of up to two house properties was considered NIL only under specific conditions (e.g., employment transfers).
- Now, owners can claim NIL income on two propertieswithout any conditions.
This benefits homeowners with multiple properties.
Conclusion
The Budget 2025, Income tax changes from 1st April 2025 significantly impact individuals, businesses, and investors. Understanding these updates will help taxpayers plan finances efficiently and maximize savings. Taxpayers can get benefit of no tax till 12 lacs in new regime during the e filing of Income tax returns or online ITR filings for the financial year 2025-26 or Assessment Year 2026-27.
Frequently Asked Questions (FAQs)- on New Income Tax Changes
1. Which income tax slabs are new for FY 2025–2026?
The new tax slabs for FY 2025-26 under the New Tax Regime are as follows:
- Up to ₹4 lakh: NIL
- ₹4 lakh – ₹8 lakh: 5%
- ₹8 lakh – ₹12 lakh: 10%
- ₹12 lakh – ₹16 lakh: 15%
- ₹16 lakh – ₹20 lakh: 20%
- ₹20 lakh – ₹24 lakh: 25%
- Above ₹24 lakh: 30%
2. What is the increase in rebate under Section 87A?
Under Section 87A, the rebate has increased to ₹60,000 from the previous ₹25,000. This means taxpayers earning up to ₹12 lakh in income will have no tax liability under the New Tax Regime.
3. Will the Old Tax Regime change?
No, the Old Tax Regime remains unchanged. Taxpayers who prefer to claim exemptions and deductions can still opt for this regime. However, they will not benefit from the reduced tax slabs available under the New Tax Regime.
4. What are the TDS changes for senior citizens?
The TDS threshold for interest income under Section 194A has been increased for senior citizens to ₹1 lakh, up from the previous ₹50,000. This allows senior citizens to receive higher interest income without TDS deductions.
5. What is the update on the TDS for professional fees under Section 194J?
For professional or technical services under Section 194J, the TDS threshold has increased from ₹30,000 to ₹50,000. This will reduce the tax burden on professionals earning lower amounts.
6. How are the TCS provisions changing in Budget 2025?
The TCS provisions for remittances under the Liberalized Remittance Scheme (LRS) have been revised. The threshold has been increased from ₹7 lakh to ₹10 lakh, and the TCS on goods purchases exceeding ₹50 lakh has been removed.
7. What is the extension for filing Updated Tax Returns?
The deadline for filing an Updated Tax Return (ITR-U) has been extended from 12 months to 48 months from the end of the relevant assessment year. The tax liability increases with the delay, ranging from 25% to 70% depending on the filing timeline.
8. What tax benefits are provided for startups under Section 80-IAC?
Startups incorporated before April 1, 2030 can claim a 100% tax deduction on profits for three consecutive years out of the first ten years of their operation, provided they meet specific conditions.
9. What is the new rule for partner remuneration in partnership firms?
The limit for deduction on partner remuneration in partnership firms has been enhanced. Now, the first ₹6 lakh of book profits can qualify for a higher deduction of ₹3 lakh or 90% of book profit, whichever is higher.
10. How are ULIPs (Unit Linked Insurance Plans) taxed under the new regime?
ULIPs with a premium exceeding ₹2.5 lakh annually will now be treated as capital gains and taxed accordingly, instead of being fully exempt as before. This aligns ULIPs with the tax treatment of mutual funds.
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