Key Income Tax Changes applicable from 1st April 2025
The Finance Bill – 2025 has officially received the President’s assent on 29th March 2025. With a focus on simplifying tax compliance, reducing administrative burdens, and enhancing ease of doing business in India, the Finance Act – 2025 introduces several exciting amendments. Most of these provisions will come into effect on 1st April 2025. Here’s a quick roundup of the key changes that could impact your finances in the upcoming financial year (FY 2024-25):
1. Startup Incentives – Section 80-IAC
Tax benefits under Section 80-IACare a game-changer for budding entrepreneurs! Startups incorporated until 31st March 2030 (up from 31st March 2025) can now enjoy 100% tax deduction for three consecutive years within their first 10 years. This extension is a fantastic move to fuel innovation and support the entrepreneurial spirit in India.
2. No Tax for Individual Taxpayers with Income up to Rs. 12 Lakh:
Great news for individual taxpayers! The income threshold for availing the rebate under Section 87Ahas been raised from ₹7 lakh to ₹12 lakh. It means that individuals earning up to ₹12 lakh in the new tax regime will pay zero tax—a welcome relief for many.
3. Updated Return [Section 139(8A):
The time period for filing an updated return (ITR-U) has been extended from 2 years to 4 years from the end of the relevant assessment year. This change encourages voluntary compliance and revenue collection from previously unreported income.
4. Charitable Trust Related Amendment:
Some key changes here will ease the burden for smaller charitable organizations:
a)Permanent Registration:For trusts with annual income below ₹5 crore, the validity of permanent registration has been extended from 5 years to 10 years.
b)Change in “Specified Person” Rules:The threshold for identifying “specified persons” who make significant contributions has been raised. Now, an individual will be considered a specified person if their total contribution exceeds ₹ 1 lakh during the relevant financial year or ₹ 10 lakhs in aggregate up to the end of the relevant financial year. Further, the amendment excludes ‘relative’ and ‘concern in which such a person has substantial interest’ from being categorized as specified persons under Section 13(3). It will reduce the compliance burdens associated with smaller donations. Previously, individuals contributing an amount of ₹ 50,000 or more in aggregate were classified as specified persons, which could inadvertently include minor donors and impose unnecessary compliance requirements.
5. Goodbye to TCS on Goods Sales:
Section 206C(1H) as introduced in October 2020 mandates sellers with a turnover exceeding ₹10 crores to collect tax at 0.1% on sales consideration exceeding ₹ 50 lakhs. In a significant move to simplify tax compliance, the Finance Act – 2025 has removed the TCS on the sale of goods under Section 206C (1H). The abolition of this provision is sure to reduce the compliance burden on businesses.
6. Abolition of Higher TDS Rate for Non-Filers of Income Tax Returns:
The Finance Act 2021 had introduced a provision mandating higher TDS rates for taxpayers who had not filed their income tax returns (ITR) for the past two years. Effective from 01.04.2025, the provision is no more applicable. It means that the taxpayers are neither required to verify whether the recipient is a filer or not, nor required to do TDS at a higher rate. It would reduce the unwanted compliance burden of the payers. No more penal TDS for non-filers!
7. Rationalization of TDS & TCS Rates and Thresholds – Effective from 01.04.2025:
One of the key amendments by the Finance Act – 2025 is the rationalization of TDS rates and the enhancement of threshold limits for various types of income. This move is designed to reduce the compliance burden on taxpayers and provide greater liquidity. The following table summarizes the changes in TDS Tax Rates:
TDS RATE CHANGE:
| Nature of Payment (& Section) | Present TDS/TCS Threshold | New TDS/TCS Threshold w.e.f. 01.04.2025 |
| Interest on Securities (193) | Nil | 10,000/- |
| Interest other than Interest on securities (194A) | i) 50,000/- for senior citizen;
(ii) 40,000/- in case of others when the payer is a bank, co-op. society & post office (iii) 5,000/- in other cases. |
(i) 1,00,000/- for senior citizen
(ii) 50,000/- in case of others when the payer is a bank, co-op society & post office. (iii) 10,000/- in other cases |
| 1. Dividend for an individual shareholder (194)
2. Income in respect of units of a mutual fund or specified company or undertaking (194K) |
5,000/- | 10,000/- |
| 1. Winnings from lottery, crossword puzzle etc. (194B)
2. Winnings from horse race (194BB)
|
Aggregate of amounts exceeding 10,000/- during the financial year | 10,000/- in respect of a single transaction |
| 1. Insurance comm. (194D)
2. Income by way of commission, prize etc. on lottery tickets (194G) 3. Commission or brokerage (194H) |
15,000/- | 20,000/- |
| Rent (194I) | 2,40,000/- during the financial year | 50,000/- per month or part of a month |
| Fee for professional or technical services (194J) | 30,000/- | 50,000/- |
| Income by way of enhanced compensation (194LA) | 2,50,000/- | 5,00,000/- |
| Remittance under LRS and overseas tour program package [206C (1G)] | 7,00,000/- | 10,00,000/- |
|
TCS RATE CHANGE: |
||
| TCS on timber or any other forest produce (not being tendu leaves) obtained under a forest lease & TCS on timber obtained by any mode other than under a forest lease [section 206C(1)] | 2.50% | 2% |
| TCS on remittance under LRS for purpose of education, financed by loan from financial institution [206C(1G)] | 0.50% after Rs. 7 Lakh | Nil |
| TDS on Income in respect of investment in securitization trust (194LBC) | 25% if payee is Individual or HUF and 30% otherwise
|
10% |
Conclusion:
The Finance Act – 2025 is set to bring about significant changes aimed at reducing tax burdens, improving transparency, and simplifying compliance. Whether you’re a startup founder, salaried employee, or managing a charitable trust, these amendments are designed to make tax compliance less stressful and more efficient. With most of these changes coming into effect from 1st April 2025, it’s a great time to start planning your tax & compliances for the upcoming year!
[Views expressed are the personal view of the author. Readers are advised to seek professional advice before taking any decisions. Readers may forward their feedback & queries at nareshjakhotia@gmail.com. Other articles & response to queries are available at www.theTAXtalk.com]
The copy of the Chart is as under:
