INDEX
- Income Tax Slabs (New Tax Regime)
- Tax Rebate
- Rationalization of TCS for easing difficulties
- Rationalization of TDS for easing difficulties
- Encouraging voluntary compliance
- Reducing compliance burden
- Ease of doing business
- Additional Key Amendments
Changes Made in Direct Tax in Budget 2025
Income Tax Slabs (New Tax Regime)
The Revised new tax regime in Budget 2025 presents updated tax slabs as follows:
| Total Income | Rate of Tax |
|---|---|
| Upto ₹4,00,000 | Nil |
| From ₹4,00,001 to ₹8,00,000 | 5% |
| From ₹8,00,001 to ₹12,00,000 | 10% |
| From ₹12,00,001 to ₹16,00,000 | 15% |
| From ₹16,00,001 to ₹20,00,000 | 20% |
| From ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
These changes show the income ranges and the corresponding tax rates, which provide clear guidelines for taxpayers.
For more Details Click here Section 115BAC of the Income Tax Act: New Tax Regime Deductions, Exemptions, and Benefits – Tax lobby
Tax Rebate
In addition to the reduced tax slabs, tax rebates have been introduced. For instance, a taxpayer with an income of ₹12 lakh under the new regime will receive a benefit of ₹60,000 in tax, which accounts for 100% of the tax payable under the previous regime’s rates. This measure is expected to reduce the overall tax burden for middle-income earners.
For Detail Regarding Practical Income Tax Calculation for FY 2024-25 (AY 2025-26) in the New Tax Regime
Rationalization of TCS for easing difficulties
To reduce multiplicity of rates and compliance burden, it is proposed to bring down certain TCS rates in certain sections as below:
Section of the Act | Present TCS Rate | Proposed TCS Rate |
Section 194LBC – Income in respect of investment in securitization trust | 25% if payee is Individual or HUF, 30% otherwise | 10% |
Sub-section (1) of Section 206C – TCS on timber or any other forest produce (not being tendu leaves) | 2.5% | 2% |
Sub-section (1) of Section 206C – TCS on timber obtained by any mode other than under a forest lease | 2.5% | 2% |
Sub-section (1G) of Section 206C – TCS on remittance under LRS for the purpose of education, financed by loan from financial institution | 0.5% after ₹7 lakh | Nil |
For more Detail Click here TCS Rate and Its Collection
Rationalization of TDS for easing difficulties
Section of the Act | Present TDS Threshold (Rs.) | Proposed TDS Threshold (Rs.) |
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 payer is 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 payer is 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 or specified company or undertaking | 5,000/- | 10,000/- |
194B – Winnings from lottery, crossword puzzle, etc. | Aggregate of amounts exceeding 10,000/- during the financial year | 10,000/- in respect of a single transaction |
194BB – Winnings from horse race | – | – |
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/- during the financial year | 50,000/- per month or part of a 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/- |
206C(1G) – Remittance under LRS and overseas tour program package | 7,00,000/- | 10,00,000/- |
For more Detail on Click here TDS Tax Rate
Encouraging voluntary compliance
- Extending the time-limit to file the updated return:
It is proposed to extend the time-limit to file the updated return from the existing 24 months to 48 months from the end of the relevant assessment year. The additional tax payable shall be 60% of the aggregate of tax and interest payable on additional income for filing updated return during the period of 24 months to 36 months from the end of relevant assessment year. Additional tax payable shall be 70% of the aggregate of tax and interest payable for filing updated return during the period of 36 months to 48 months from the end of relevant assessment year subject to certain conditions.
- Obligation to furnish information in respect of crypto-asset:
It is proposed to bring amendment in the Act to provide for that a prescribed reporting entity in respect of a crypto-asset shall furnish information in respect of a transaction in such crypto asset, in a statement as prescribed. It is also proposed to align the definition of virtual digital asset accordingly.
- Annual value of the self-occupied property simplified:
It is proposed to provide that the annual value of the property consisting of a house or any part thereof shall be taken as nil, if the owner occupies it for his own residence or cannot actually occupy it due to any reason.
Reducing Compliance Burden
Several changes have been made to reduce the compliance burden on taxpayers:
Omission of TCS on Sale of Specified Goods
The proposal suggests eliminating TCS for the sale of specified goods valued over ₹50 lakh, easing the administrative burden.
Removal of Higher TDS/TCS for Non-Filers of Income Returns
Section 206AB and Section 206CCA, which imposed higher TDS/TCS on non-filers of income returns, will be omitted to reduce administrative complexity for both taxpayers and tax authorities.
Simplification of “Forest Produce” Definition
The definition of “forest produce” under Section 206C(1) has been clarified to remove ambiguity. Additionally, TCS will only be collected on forest produce obtained under a forest lease.
Ease of Doing Business
Extension of Benefits for Startups (Section 80-IAC)
The tax benefit under Section 80-IAC will be extended for an additional five years, available to eligible startups incorporated before April 1, 2030. This measure supports the growth of emerging businesses in the country.
Long-Term Capital Gain Parity for Non-Residents
There will be parity in the tax treatment of long-term capital gains on the transfer of securities between residents and non-residents. This change aims to simplify the taxation process for foreign institutional investors.
Rationalization of Tax Provisions for Charitable Trusts/Institutions
The validity period of registration for smaller charitable trusts or institutions has been increased from five years to ten years. Additionally, provisions for minor defaults in applications have been relaxed to avoid unnecessary cancellations.
Additional Key Amendments
Clarification on Unit Linked Insurance Policies
Profits from the redemption of Unit Linked Insurance Policies (ULIPs), to which the exemption under Section 10(10D) does not apply, will now be taxed as capital gains.Amendment of Definition of “Capital Asset”
The definition of “capital asset” has been revised to provide greater clarity on the taxation of securities held by investment funds.Rationalization of Transfer Pricing Provisions
Transfer pricing provisions related to arm’s length price determination will now apply for a period of three years, simplifying multi-year assessments.Exemption from Prosecution for Delayed TCS Payment
Taxpayers who fail to pay TCS on time but make the payment before the quarterly TCS statement deadline will be exempt from prosecution.