The Union Budget 2025 introduced several key amendments under the Income Tax framework, effective from Financial Year 2025–26. These reforms are aimed at increasing tax efficiency, providing relief to taxpayers, and promoting ease of compliance. The most notable changes include revised tax slabs under the New Tax Regime, enhanced rebate limits, simplified TDS/TCS rules, and modifications to presumptive taxation schemes.
✅ Revised Income Tax Slabs under New Tax Regime
Under the default New Tax Regime (Section 115BAC), the following tax slab rates are applicable for income earned during FY 2025-26:
| Income Range (₹) | Tax Rate |
| Up to ₹4,00,000 | NIL |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Note: The Old Tax Regime remains optional and continues with the existing slab structure.
🧾 Old Tax Regime Slabs (Optional)
| Income Range (₹) | Tax Rate |
| Up to ₹2,50,000 | NIL |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
🎁 Enhanced Rebate under Section 87A
The rebate under Section 87A has been increased to ₹60,000 under the New Tax Regime. As a result, individuals with a total income of up to ₹12,00,000 will not be liable to pay any income tax, offering substantial relief to middle-income earners.
📊 TDS and TCS Provisions for FY 2025–26
The Income Tax Bill 2025 retains the core structure of TDS and TCS rules while introducing some critical updates:
◾ Applicable TCS Transactions Include:
- Sale of alcohol, tendu leaves, minerals, scrap (1% – 5%)
- Sale of motor vehicles above ₹10,00,000 (1%)
- Foreign remittances exceeding ₹7,00,000 (5%)
◾ TDS Sections (Key Areas):
- Section 194A – Interest income
- Section 194I – Rent
- Section 194J – Professional/technical fees, royalty
- Section 194H – Commission
- Section 194C – Contract payments
To simplify compliance (excluding salaries), the Income Tax Board has reorganized several provisions under Section 393 of the Income Tax Bill 2025 in a tabular format.
Penalty for Non-Compliance:
Default in complying with TDS/TCS rules will result in defaulter status, along with 1% monthly interest on unpaid dues.
📈 Enhanced TDS Thresholds from April 1, 2025
To reduce compliance burden for small taxpayers and streamline deductions, the government has revised the threshold limits under multiple TDS sections, effective 1st April 2025:
| Section | Nature of Payment | Earlier Threshold | New Threshold (w.e.f. April 2025) |
| 193 | Interest on securities | NIL | ₹10,000 |
| 194A | Interest (Non-Securities) | (i) ₹50,000 for senior citizens | (i) ₹1,00,000 for senior citizens |
| 194 | Dividend (individuals) | ₹5,000 | ₹10,000 |
| 194K | Income from mutual fund units | ₹5,000 | ₹10,000 |
| 194B / 194BB | Lottery, crossword, horse race | Aggregate > ₹10,000 per FY | ₹10,000 per transaction |
| 194D | Insurance commission | ₹15,000 | ₹20,000 |
| 194G | Lottery ticket commission/prizes | ₹15,000 | ₹20,000 |
| 194H | Commission or brokerage | ₹15,000 | ₹20,000 |
| 194-I | Rent | ₹2,40,000 per year | ₹50,000 per month |
| 194J | Professional/technical fees | ₹30,000 | ₹50,000 |
| 194LA | Compensation on land acquisition | ₹2,50,000 | ₹5,00,000 |
| 194T | Payments to partners | NIL | ₹20,000 |
🧮 Changes to Presumptive Taxation Scheme
The Income Tax Bill 2025 has introduced an additional clause for “profit claimed to have been actually earned” under Section 58, modifying the presumptive taxation model for eligible businesses and professionals.
◾ Eligible Taxpayers:
- Resident individuals, HUFs, and partnership firms (excluding LLPs) involved in business or specified professions (e.g., doctors, lawyers, architects).
- Not applicable to commission agents, brokers, or specified professionals.
◾ Presumptive Income Calculation:
- 6% of turnover/receipts through banking or digital modes
- 8% for cash or non-digital receipts
- OR actual profit declared, whichever is higher
◾ Reporting Lower Profits:
If income declared is less than the above thresholds and total income exceeds the basic exemption limit, taxpayers must:
- Maintain regular books of account
- Get accounts audited and file an audit report
🔚 Conclusion
The Income Tax changes for FY 2025–26 signal a shift toward greater flexibility, taxpayer-friendly thresholds, and streamlined compliance. The revised tax slabs under the new default regime, a significant rebate under Section 87A, and increased TDS thresholds provide meaningful relief to individuals, senior citizens, and businesses alike. Simultaneously, changes to presumptive taxation and TDS structure encourage transparency in income reporting. As these provisions come into effect from April 2025, taxpayers must review their tax strategy, update compliance procedures, and consult professionals if required to fully leverage the new rules.
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Disclaimer: Aim of this article is to give basic knowledge about the topic to people who are not in touch with Indian tax norms. When anybody is dealing with these kinds of cases practically, he shall consider all relevant provisions of all applicable Laws like FEMA/Income Tax/RBI /Companies Act etc.
