Finance Bill, 2025, has proposed various changes in Income Tax provisions, which shall be made applicable from 1st April 2025 (Relevant Assessment year is 2026-27). Now, when the Finance Bill, 2025, has been enacted on 29th March, 2025, various amendments are effective from 1st April, 2025.
Following are the key changes in Income Tax provisions w.e.f. 1st April 2025:
1. Changes in Income Tax Slabs Rates:
- Finance Bill 2025 has proposed the following changes in Income Tax slab rates:
-
Income Tax Rate Structure: Existing vs Merged
| Existing Tax Rates |
Merged Tax Rates |
| Taxable Income |
Tax Rates |
Taxable Income |
Tax Rates |
| Up to INR 3,00,000 |
NIL |
Upto INR 4,00,000 |
NIL |
| 3,00,001 – 7,00,000 |
5% |
4,00,001 – 8,00,000 |
5% |
| 7,00,001 – 10,00,000 |
10% |
8,00,001 – 12,00,000 |
10% |
| 10,00,001 – 12,00,000 |
15% |
12,00,001 – 16,00,000 |
15% |
| 12,00,001 – 15,00,000 |
20% |
16,00,001 – 20,00,000 |
20% |
| Above 15,00,000 |
30% |
20,00,001 – 24,00,000 |
25% |
|
|
Above 24,00,000 |
30% |
- Further, a rebate under section 87A has been proposed to increase from INR 25,000 to INR 60,000/-. Such rebate shall make income tax free up to INR 12,00,000/-.
- The Amended Slab shall become applicable w.e.f. 1st April 2025, i.e., it shall apply to the income earned during FY 2025-26.
- Also, no changes are prescribed for old tax regimes, making it less beneficial for the taxpayers despite having higher deductions.
-
2. Changes in Threshold Limit for TDS Deduction:
- Following are the revised Threshold limits applicable for TDS deduction w.e.f. 1st April 2025:
TDS Threshold Limits: Until 31st March 2025 vs From 1st April 2025
| Nature of Payment |
Threshold Limit up to 31st March 2025 |
Threshold Limit w.e.f. 01.04.2025 |
| TDS on Interest on Securities (Section 193) |
| Interest paid to resident Individuals and HUF on debentures by listed companies |
5,000 |
10,000 |
| Any other interest in security |
NIL |
5,000 |
| TDS on Dividend (Section 194) |
5,000 |
1,00,000 |
| TDS on Interest other than interest on securities (Section 194A) |
| Interest paid by Banks, Co-ops, Post Office |
40,000 |
50,000 |
| Interest paid by other persons |
5,000 |
10,000 |
| Interest to senior citizens |
50,000 |
1,00,000 |
| TDS on payment of rent (Section 194I) |
INR 2,40,000 per annum |
INR 50,000 per month |
| TDS on Compensation for acquisition of immovable property (Section 194LA) |
2,50,000 |
5,00,000 |
| Professional/technical/royalty/Section 28(VA) (Section 194J) |
Aggregate > INR 30,000 in PY |
INR 50,000 |
| Insurance Commission (Section 194D) |
15,000 |
20,000 |
| Commission on lottery tickets (Section 194G) |
15,000 |
20,000 |
| Commission or Brokerage (Section 194H) |
15,000 |
20,000 |
| Winnings from lottery, crossword, etc. (Section 194B) |
INR 10,000 per FY |
INR 10,000 per transaction |
| Winnings from horse race (Section 194BB) |
INR 10,000 per FY |
INR 10,000 per transaction |
| Remuneration to Partners (Section 194T) |
NIL |
20,000 per annum |
c. Removal of TCS on sale of goods (Section 206(1H))
- As per Section 206C(1H) of the Income Tax Act, 1961, the seller is required to collect TCS at the rate of 0.1% where the aggregate amount of consideration exceeds INR 50,00,000/- during the financial year.
- The seller is required to collect the TCS and deposit the same to the account of the government monthly.
- The Union Budget has proposed to revoke TCS on the sale of goods w.e.f. 01.04.2025.
d. Changes in Threshold Limit for TCS
- Following are the revised Threshold limits applicable for TCS Collection w.e.f. 1st April 2025:
TCS Threshold Limits: Until 31st March 2025 vs From 1st April 2025
| Nature of Payment |
Threshold Limit up to 31st March 2025 |
Threshold Limit w.e.f. 01.04.2025 |
| Remittance under LRS and overseas tour program package (Section 206C(1G)) |
7,00,000 |
10,00,000 |
| Remittance under LRS for education if financed through educational loans (Section 206C(1G)) |
7,00,000 |
TCS Provisions Not Applicable |
e. Abolition of Equalisation Levy
- Equalisation Levy was imposed at the rate of 6% on online advertisement service, digital advertising service provided by non-resident to:
- a person resident in India and carrying on business of profession; or
- A non-resident having a permanent establishment in India
- Further, an equalization levy is also levied on e-commerce services at the rate of 2%.
- The equalization levy was imposed through Finance Act 2016 at the rate of 6% w.e.f. 1st April 2020.
- Finance Act, 2025, has abolished the provisions of the equalization levy, reducing the tax burden on digital ad consumers and lowering costs on platforms like Google and Meta.
Conclusion:
The removal of the Equalization Levy, Higher slab rates, the TCS requirement on the sale of goods, and the TCS on foreign remittances for educational purposes is a positive development. This change will simplify compliance and ultimately lower costs for consumers. Additionally, the increased threshold limit for TDS provisions will further ease compliance requirements.
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