New income tax rules from April 2025: Changes in ULIP tax, property rules, equalization levy & more. Know how it affects your finances for FY 2025–26.
Anisha Kumari | May 27, 2025 |
New Income Tax Rules From April 2025: What to Know
The 2025 Budget has made important changes to India’s Income Tax Act to make the tax system easier than before. The new rules will start from 1st April 2025, and will be applicable to FY 2025-26.
The budget has revised the tax slabs under section 115BAC, known as New Tax Regime or Default Tax Regime. This will allow people to save more and spend more. This tax will apply to income earned from FY 2025-2026.
| Income Range | Tax Rate |
|---|---|
| Up to 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% |
The tax benefit under sec 87A for those who are using the New Tax Regime has increased from Rs. 25,000 to Rs. 60,000. Now, taxpayers whose income is up to Rs. 12 lakhs are not required to pay any tax under the new system.
For those who are using the Old Tax Regime, the tax benefit stays the same at Rs. 12,500.
From April 2025, the TDS limits for both individuals and businesses will be increased. For example, the interest income for senior citizens increased from Rs. 50,000 to Rs. 1 lakh. Same goes for the rent and commission limits.
The new higher TDS limits for different sections are shown in the table below:
| Section | Nature of Payment | Before 1st April 2025 | From 1st April 2025 |
|---|---|---|---|
| 193 | Interest on securities | NIL | Rs 10,000 |
| 194A | Interest other than Interest on securities | (i) Rs 50,000 for senior citizens (ii) Rs 40,000 for others (when payer is bank, cooperative society, or post office) (iii) Rs 5,000 in other cases | (i) Rs 1,00,000 for senior citizens (ii) Rs 50,000 for others (when payer is bank, cooperative society, or post office) (iii) Rs 10,000 in other cases |
| 194 | Dividend, for an individual shareholder | Rs 5,000 | Rs 10,000 |
| 194K | Income in respect of units of a mutual fund | Rs 5,000 | Rs 10,000 |
| 194B / 194BB | Winnings from lottery, crossword puzzle, etc. / Winnings from horse race | Aggregate of amounts exceeding Rs 10,000 during the financial year | Rs 10,000 in respect of a single transaction |
| 194D | Insurance commission | Rs 15,000 | Rs 20,000 |
| 194G | Income by way of commission, prize, etc. on lottery tickets | Rs 15,000 | Rs 20,000 |
| 194H | Commission or brokerage | Rs 15,000 | Rs 20,000 |
| 194I | Rent | Rs 2,40,000 (in a financial year) | Rs 50,000 per month |
| 194J | Fee for professional or technical services | Rs 30,000 | Rs 50,000 |
| 194LA | Income by way of enhanced compensation | Rs 2,50,000 | Rs 5,00,000 |
| 194T | Remuneration, Interest, and Commission paid to partners | NIL | Rs 20,000 |
The limit set for TCS for sending money abroad through LRS has been increased from Rs. 7 lakhs to Rs. 10 lakhs.
There will be no TCS charges on the educational loan remittances. Earlier, 0.5% TCS was applicable if the amount was over Rs. 7 lakhs.
Also, from 1st April 2025, sellers will not require to collect TCS on goods sold above Rs. 50 lakhs as this rule is no longer applicable.
| Section | Nature of Transaction | 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) | Sale of Goods | Rs 50 Lakhs | Nil (No TCS Applicable) |
For filing an Updated Tax Return the deadline has been extended from 12 months to 48 months after the AY. This provides taxpayers more time to report any missed income and pay the taxes due.
The extra tax required to be paid depends on when the updated return is filed as follows:
| If ITR-U is filed within | Additional Tax Payable |
|---|---|
| 12 months from the end of the relevant Assessment Year | 25% of additional tax (tax + interest) |
| 24 months from the end of the relevant Assessment Year | 50% of additional tax (tax + interest) |
| 36 months from the end of the relevant Assessment Year | 60% of additional tax (tax + interest) |
| 48 months from the end of the relevant Assessment Year | 70% of additional tax (tax + interest) |
Benefits for IFSC
The deadline for IFSC units has been extended to 31 March 2030 to start operations with tax benefits. Life insurance premiums paid by the non-residents at IFSC offices are completely tax free now, with no maximum limit.
Tax Break for Start-ups
Those start-ups who set up before 1 April 2030 can get 100% tax deduction on profits earned for 3 years within 10 years of starting, under specific conditions.
Removal of Sections 206AB and 206CCA
Sections 206AB and 206CCA will be removed from April 2025, to make it easier for the deductors to follow the rules. Before, the deductors had to check if recipients filed the tax returns before deducting the tax, this resulted in delays and higher tax rates. This rule is now removed.
Partnership firms and LLPs are now able to claim a higher deduction for the salary paid to partners. The rules for calculation have been updated to allow more deduction while filing the taxes.
The new limits to calculate the maximum deduction are as follows:
| Component | Rate/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 |
If the yearly premium for a ULIP is more than Rs. 2.5 lakhs or over 10% of the sum assured, from April 2025, then the amount received will be taxed as capital gains. 20% from short term and 12.5% for long term. But it will stay tax free if the premium is within the limit.
Relaxed Rule for Self-Occupied Properties
Earlier, only two homes were considered as self-occupied (with no tax or rental value), only if the owner stayed away due to work reasons. But now, from FY 2025-26, this benefit will be given even without this reason. People can have up to two homes as self-occupied and show zero income.
Equalization Levy Removed
The 6% tax (equalization levy) on digital ads paid to foreign service providers (if payment was over Rs. 1 lakh) will no longer apply from April 1, 2025.
These new tax rules are important for the FY 2025–26. Taxpayers should understand them properly and plan their income and taxes according to them.
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