The Budget 2025 has introduced significant changes to the Income Tax Act of 1961 to make the tax system simpler in India.
Shivani Verma | Mar 25, 2025 |
New Income Tax Rules from 1st April 2025: What You Need to Know?
The Budget 2025 has introduced significant changes to the Income Tax Act of 1961 in order to make the tax system simpler in India. These changes will apply from April 1, 2025, and will be applicable for the financial year 2025-26.
Income Tax Slabs for FY 2025-26 (AY 2026-27)
The Budget 2025 introduced new tax slab rates under Section 115BAC, also known as the New or Default Tax Regime. The goal is to help individuals save more and increase their disposable income. These rates will apply to income earned from FY 2025–26 onwards.
New tax slab rates for FY 2025-26:
| Income Tax Slabs | Income Tax Rates |
| Upto Rs.4 lakh | NIL |
| Rs. 4 lakh – Rs.8 lakh | 5% |
| Rs.8 lakh – Rs.12 lakh | 10% |
| Rs.12 lakh – Rs.16 lakh | 15% |
| Rs.16 lakh – Rs.20 lakh | 20% |
| Rs.20 lakh – Rs.24 lakh | 25% |
| Above Rs.24 lakh | 30% |
Higher Rebate Under Section 87A
The rebate under Section 87A for taxpayers using the New Tax Regime has been increased from Rs.25,000 to Rs.60,000. This means individuals with an income of up to Rs.12 lakhs will not have to pay any income tax.
Revised Tax Deduction at Source (TDS) Regulations
Starting in April 2025, the TDS limit for different sections will be higher. Here’s how the new limits will apply:
| Section | Before 1st April 2025 | From 1st April 2025 |
| 193 – Interest on securities | NIL | 10,000 |
| 194A – Interest other than Interest on securities | (i) 50,000/- for senior citizens; (ii) 40,000/- for others when the payer is a bank, cooperative society, or post office (iii) 5,000/- in other cases | (i) 1,00,000/- for senior citizens (ii) 50,000/- for others when the payer is a bank, cooperative society, or post office (iii) 10,000/- in other cases |
| 194 – Dividend, for an individual shareholder | 5,000 | 10,000 |
| 194K – Income in respect of units of a mutual fund | 5,000 | 10,000 |
| 194B – Winnings from lottery, crossword puzzle etc. and 194BB – Winnings from horse race | Aggregate of amounts exceeding 10,000/- during the financial year | 10,000/- in respect of a single transaction |
| 194D – Insurance commission | 15,000 | 20,000 |
| 194G – Income by way of commission, prize etc. on lottery tickets | 15,000 | 20,000 |
| 194H – Commission or brokerage | 15,000 | 20,000 |
| 194-I – Rent | 2,40,000 (in a financial year) | 50,000 per month |
| 194J – Fee for professional or technical services | 30,000 | 50,000 |
| 194LA – Income by way of enhanced compensation | 2,50,000 | 5,00,000 |
| 194T – Remuneration, Interest and Commission paid to partners | NIL | 20,000 |
| 206C(1G) – Remittance under LRS and overseas tour program package | 7 Lakhs | 10 Lakhs |
| 206C(1G) – Remittance under LRS for education if financed through educational loans | 7 Lakhs | Nil (No TCS Applicable) |
| 206C(1H) – Purchase of Goods | 50 Lakhs | Nil (No TCS Applicable) |
Extended Deadline for Updated Tax Return (ITR-U)
Taxpayers now have more time to file an Updated Tax Return. The deadline has been extended from 12 months to 48 months (4 years) after the end of the relevant assessment year.
Benefits for IFSC
The deadline for starting operations of IFSC units to avail of tax benefits has been extended to 31st March 2030.
Additionally, if a non-resident buys a life insurance policy from an IFSC office, the premium paid is fully exempt under Section 10(10D), with no limit on the premium amount.
Tax Exemption for Start-ups
Startups registered before April 1, 2030, can get a 100% tax deduction on their profits for three consecutive years within the first ten years of starting their business, under Section 80-IAC. This benefit is available if they meet certain conditions.
Remuneration Deduction for Partners
Here are the limits to calculate the maximum deduction allowed for partners’ remuneration:
| 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 book profit | 60% of the book profit |
ULIPs Taxed as Capital Gains
If the annual premium of a ULIP is more than 10% of the assured amount or exceeds Rs. 2.5 lakhs, the gains from it will be considered capital gains and taxed accordingly.
Deemed Rented Property Changes
Earlier, if you owned two self-occupied properties and could not live in them because of work or business in another city, their annual value was considered NIL for tax purposes. Now, the rule has been simplified. From April 2025, you can claim up to two house properties as self-occupied and declare NIL income on them without having to meet any specific conditions.
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