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Income Tax, TDS, TCS Changes From 1st April 2025
Income Tax, TDS, TCS Changes From 1st April 2025

The Budget 2025 introduced major amendments to the Income Tax Act, 1961, aimed at simplifying India’s tax structure. These changes take effect from 1st April 2025 and will be applicable for FY 2025-26 (AY 2026-27).

 

1. Income Tax Slabs for FY 2025-26 (AY 2026-27)

The Budget 2025 introduced revised tax slabs under Section 115BAC (New Tax Regime) to enhance savings and boost spending capacity. These new slab rates apply to income earned in FY 2025-26 onwards.

Income Tax Slabs Income Tax Rates
Up to ₹4 lakh NIL
₹4 lakh – ₹8 lakh 5%
₹8 lakh – ₹12 lakh 10%
₹12 lakh – ₹16 lakh 15%
₹16 lakh – ₹20 lakh 20%
₹20 lakh – ₹24 lakh 25%
Above ₹24 lakh 30%

Note: Old Tax Regime (Optional) slab rates remain unchanged.

2. Increased Rebate Under Section 87A

The rebate under Section 87A has been increased to ₹60,000 from the previous limit of ₹25,000. This means taxpayers with income up to ₹12 lakh will have zero tax liability under the New Tax Regime.

3. Tax Deduction at Source (TDS) Changes

Effective April 2025, the TDS threshold limits for various sections have been increased as follows:

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 (banks, co-op societies, post offices) (iii) ₹5,000 in other cases (i) ₹1,00,000 for senior citizens (ii) ₹50,000 for others (banks, co-op societies, post offices) (iii) ₹10,000 in other cases
194 – Dividend for individual shareholder ₹5,000 ₹10,000
194K – Income from mutual fund units ₹5,000 ₹10,000
194B & 194BB – Winnings from lottery, crossword, horse race Aggregate exceeding ₹10,000 annually ₹10,000 per transaction
194D – Insurance commission ₹15,000 ₹20,000
194G – Commission/prizes on lottery tickets ₹15,000 ₹20,000
194H – Commission or brokerage ₹15,000 ₹20,000
194I – Rent ₹2,40,000 annually ₹50,000 per month
194J – Professional/technical services fees ₹30,000 ₹50,000
194LA – Compensation on land acquisition ₹2,50,000 ₹5,00,000
194T – Remuneration/interest/commission to partners NIL ₹20,000

The following changes in TDS Rates will apply from 1st April 2025:

S. No. Section of the Act Existing TDS/TCS Rate Proposed TDS/TCS Rate
1. Section 194LBC – Income in respect of investment in securitization trust 25% (if payee is an Individual or HUF) and 20% (otherwise) 10%

Note: Other TDS provisions remain unchanged.

4. Omission of TCS on Sale:

Existing Provision (Section 206C(1H))

✅ TCS at 0.1% is collected on the sale of goods (except exports and certain specified goods).
✅ Applicable if the sale value exceeds ₹50 lakh in a financial year.

Issue with Existing Provision

⚠️ TDS under Section 194Q also applies at 0.1% on the same transaction.
⚠️ Uncertainty for sellers, as they are often unaware if the buyer has deducted TDS, leading to double compliance(both TDS & TCS).

Key Change:

✅ TCS on the sale of goods (Section 206C(1H)) is removed from 01.04.2025.
✅ TDS under Section 194Q will continue.

4. Benefits to Taxpayers

✔️ No double compliance (TCS & TDS confusion removed).
✔️ Reduced compliance burden for sellers.
✔️ Avoids unnecessary liquidity blockage.

5. Effective Date

📅 From 01.04.2025, sellers are NOT required to collect TCS on the sale of goods.

5. Tax Collected At Source (TCS) Changes

The following TCS changes will be effective from April 2025:

Section Before 1st April 2025 From 1st April 2025
206C(1G) – Remittance under LRS & Overseas Tour Packages ₹7 lakh ₹10 lakh
206C(1G) – Remittance for education through loans ₹7 lakh NIL (No TCS)

Definition of “Forest Produce” Rationalized

Q1. What are the major provisions of Section 206C(1) (TCS on Sale of Specified Goods)?
➡️ Section 206C(1) mandates TCS collection on the sale of specific goods like alcohol, timber, tendu leaves, and other forest produce.

Q2. What changes were made in Finance Bill 2025?
Three major amendments:

  1. “Forest produce” has been formally defined.
  2. Scope clarification: Now, only “forest produce under a forest lease” is liable for TCS.
  3. TCS Rate Reduction:
    • TCS on timber and other forest produce (excluding tendu leaves) under a forest lease is reduced from 2.5% to 2%.

Q3. How has “forest produce” been defined?
➡️ It follows the meaning provided under State Forest Acts or the Indian Forest Act, 1927.

Q4. What are the key changes in TCS applicability on forest produce?
➡️ Earlier: TCS was applicable to all forest produce sales.
➡️ Now: Only forest produce obtained under a forest lease is liable for TCS.

Q5. What is the new TCS rate for forest produce (excluding timber and tendu leaves) under a forest lease?
➡️ The TCS rate is reduced from 2.5% to 2%.

 

Exemption from Prosecution for Delayed Payment of TCS (Section 276BB)

Q1. What is Section 276BB of the Income-tax Act, 1961?
➡️ Section 276BB provides for prosecution in case of failure to pay the tax collected at source (TCS) to the credit of the Central Government.

Q2. What amendment has been made in Section 276BB in Finance Bill 2025?
➡️ The amendment states that prosecution shall not be instituted if the person has paid TCS to the credit of the Central Government on or before the prescribed time for filing the TCS statement under proviso to Section 206C(3).

Q3. What happens if the person does not pay TCS even after the due date?
➡️ The present provisions of Section 276BB shall continue to apply, meaning prosecution can be initiated.

Q4. How does this amendment benefit taxpayers?
➡️ Taxpayers who miss the TCS payment deadline but pay before filing the TCS statement will now be exempt from prosecution, reducing litigation risks.

6. Removal of Higher TDS/TCS for Non-Filers of Income Tax Return

 

Q1. What are Sections 206AB and 206CCA of the Act?
➡️ Section 206AB mandates higher TDS rates for non-filers of income tax returns.
➡️ Section 206CCA mandates higher TCS rates for non-filers of income tax returns.

Q2. What changes were made in Finance Bill 2025?
➡️ Both sections are proposed to be omitted from 01.04.2025 onwards.

Q3. How does this benefit taxpayers?
➡️ Deductors and collectors no longer need to verify whether the deductee/collectee has filed an income tax return, reducing compliance burdens.
➡️ However, higher TDS/TCS rates for invalid PAN or no-PAN cases will continue to apply.

Q4. From when will these sections be omitted?
➡️ From 1st April 2025, these provisions will no longer be applicable.

7. Updated Tax Return (ITR-U) Deadline Extended

The deadline for filing an Updated Tax Return (ITR-U) has been extended from 12 months to 48 months (4 years). Additional tax liability depends on when the ITR-U is filed:

If ITR-U filed within Additional Tax
12 months from relevant AY 25% of additional tax (tax + interest)
24 months from relevant AY 50% of additional tax (tax + interest)
36 months from relevant AY 60% of additional tax (tax + interest)
48 months from relevant AY 70% of additional tax (tax + interest)

8. Benefits for IFSC Units

  • Sunset date extended: IFSC units can now commence operations until 31st March 2030 to claim tax benefits.
  • Life insurance policies issued by IFSC offices to non-residents are fully exempt under Section 10(10D), with no limit on premium amount.

9. Tax Exemptions for Start-ups

Start-ups incorporated before 1st April 2030 can avail 100% tax exemption on profits for three consecutive years out of ten years under Section 80-IAC, subject to conditions.

10. Tax Deduction for NPS Vatsalya

1. What is NPS Vatsalya?

  • A pension scheme launched on 18.09.2024, allowing parents/guardians to maintain an NPS account for minor children.

2. Existing 80CCD Provisions

  • Deduction available for contributions to NPS by employees, employers, or any assessee.
  • Withdrawals are taxable, subject to certain conditions.

3. Key Amendments in Finance Bill 2025

✅ Tax Deduction Extended: Parents/guardians can now claim deduction for contributions to NPS Vatsalya (for up to 2 minor children) under the old tax regime.
✅ Allowed under Section 80CCD(1B) with an overall cap of ₹50,000 (including self & children’s contributions).
✅ Partial withdrawal (up to 25%) is tax-exempt under Section 10(12BA).
✅ Final withdrawal is taxable if a deduction was claimed earlier.

4. Effective Date

📅 Applicable from AY 2026-27 (PY 2025-26).

 

11. Tax Exemption for Withdrawals from National Savings Scheme (NSS):

1. Previous NSS Provisions

  • Section 80CCA allowed deduction for deposits in National Savings Scheme (NSS).
  • Withdrawals (with interest) were taxable if a deduction was claimed earlier.
  • No deduction was allowed under Section 80CCA since AY 1992-93.
  • No tax on withdrawals after the depositor’s demise.

2. Key Change in NSS (DEA Notification – 29.08.2024)

✅ No interest will be credited to NSS accounts from 01.10.2024.

3. Benefits under Finance Bill 2025

✅ Tax exemption granted on withdrawals made on or after 29.08.2024.
✅ Exemption applies only to deposits for which deduction under Section 80CCA was claimed earlier.
✅ Allows depositors to withdraw funds without tax liability.

4. Effective Date

📅 Applicable for withdrawals made on or after 29.08.2024.

12. Deduction on Remuneration Paid to Partners

The maximum deduction available for partners’ remuneration will be:

Book Profit Deduction Limit
First ₹6,00,000 of book profit or loss ₹3,00,000 or 90% of book profit, whichever is higher
Remaining book profit 60% of book profit

13. Clarity in Taxation of Income on Redemption of Unit Linked Insurance Policy (ULIP)

Q1. What are the provisions relating to amounts received under a life insurance policy?

Ans. Section 10(10D) provides income-tax exemption on the sum received under a life insurance policy, including any bonus, subject to certain conditions.

Q2. What conditions must be fulfilled to claim exemption under Section 10(10D)?

Ans. To claim the exemption, the following conditions must be met:

  • The annual premium for any year during the policy term should not exceed 10% of the actual sum assured (for policies issued on or after 01.04.2012).
  • For policies issued after 01.02.2021, the total premium must not exceed ₹2,50,000 (for ULIPs) or ₹5,00,000 (for other life insurance policies) to qualify for exemption.

Q3. What happens if the conditions under Section 10(10D) are not fulfilled?

Ans. If the above conditions are not met, then:

  • For ULIP policies, the amount received will be taxed as capital gains under Section 45(1B).
  • For other life insurance policies, the income will be taxed under “Income from Other Sources”.

Q4. What changes have been introduced through the Finance Bill 2025?

Ans.

  • Previously, even if the ULIP premium exceeded 10% of the sum assured, the redemption amount was not explicitly taxed under “Capital Gains.” This led to ambiguity regarding its tax treatment.
  • Finance Bill 2025 clarifies that any sum received from a non-exempt ULIP policy will be taxed as capital gains.
  • This ensures uniform tax treatment for all ULIP policies, eliminating any confusion.

Thus, if the exemption under Section 10(10D) does not apply, the income received will be taxed as:

  • Capital Gains (for ULIP policies)
  • Income from Other Sources (for non-ULIP life insurance policies)

14. Changes for Charitable Trusts & Institutions

1. Extended Registration Validity

  • Trusts with income below ₹5 crores now get 10-year registration validity instead of 5 years.

2. Flexibility for Incomplete Applications

  • Incomplete registration applications will no longer lead to automatic cancellation. Trusts can now rectify mistakes before rejection.

3. Changes in ‘Specified Persons’ Definition

  • Higher contribution threshold:
    • A person is considered a “specified person” if they contribute ₹1 lakh in a financial year (earlier ₹50,000) OR ₹10 lakh in total (earlier no such limit).
  • ‘Relatives’ and ‘concerns’ of specified persons are excluded from the definition.
  • Founders, trustees, and managers remain fully covered under existing restrictions.

15.Obligation to Furnish Information on Crypto Assets

1. Definition of Crypto Asset

  • Crypto assets are defined under Section 2(47A) as part of the Virtual Digital Asset (VDA) definition in the Income Tax Act.

2. Key Amendments in Finance Act 2025

✅ Reporting entities must furnish prescribed information on crypto transactions.
✅ Information must be reported within the prescribed time and manner to the Income Tax Authority.

3. Reporting Obligations

  • Who must report? A prescribed reporting entity under Section 285BAA (to be defined in Income Tax Rules).
  • What information? Details of crypto transactions (as specified in Income Tax Rules).
  • To whom? The Income Tax Authority (as prescribed).

4. Why is this Reporting Necessary?

✅ India is among 52 jurisdictions adopting the Crypto-Asset Reporting Framework (CARF).
✅ CARF mandates Automatic Exchange of Tax-Relevant Information (AEOI) on crypto assets.
✅ The G20 Leaders’ New Delhi Declaration called for swift CARF implementation.

5. Implementation Date

📅 Reporting entities must start providing information from the prescribed date (to be notified in rules).

 

16. Annual Value of Self-Occupied Property : Deemed Let out property

✅ The taxation of self-occupied property has been simplified.
✅ Relaxation in conditions under Section 23(2) for determining annual value as nil.

Previous Conditions

  • The annual value of a self-occupied house was considered nil if:
    1️⃣ The owner resided in it.
    2️⃣ The owner could not reside due to business, profession, or employment reasons.

New Relaxations in Finance Act 2025

✅ Now, the annual value will be nil if the property is self-occupied, regardless of the reason for not residing in it.
✅ No longer necessary to prove that the owner couldn’t reside due to work-related reasons.

4. How Many Properties Can Be Considered as Nil?

🏠 Up to two self-occupied properties, at the owner’s option, can have nil annual value (if no rent or benefit is derived).

5. Example Scenario

  • House 1 (Bangalore) – Mother resides.
  • House 2 (Mumbai) – Owner resides.
  • House 3 (Delhi) – Vacant.

👉 The owner can choose two houses to be treated as self-occupied with nil annual value for tax purposes.

6. Effective Date

📅 Applies from Previous Year 2024-25 (Assessment Year 2025-26 onwards).

Attention – Advisory on IMS
Attention – Advisory on IMS

Oct 14th, 2024

 

      • Invoice Management System (IMS) is made available to taxpayers from Today, 14th Oct, 2024. The new system shall facilitate taxpayers in matching their records/invoices vis a vis issued by their suppliers for availing the correct Input Tax Credit (ITC). Taxpayers can make use of this system to take action on the invoices reflecting on IMS from 14th Oct, 2024. The first GSTR-2B would be generated for the return period Oct’24 on 14thNovember, 2024 considering action taken on Invoice Management System. It may be noted that it is not mandatory to take action on invoices in IMS dashboard for GSTR-2B generation.

 

Thanking You,
Team GSTN

Important advisory for GSTR-9/9C

Important advisory for GSTR-9/9C

Oct 15th, 2024

Starting FY 2023-24, GST system will auto-populate eligible ITC for domestic supplies (excluding reverse charge and imports ITC) from table 3(I) of GSTR-2B to table 8A of GSTR-9. These changes in GSTR-9 and 9C for the FY 2023-24 will be available on the GST portal from today i.e.,15th October 2024 onwards.
Further, a validation utility will be executed progressively (for validation by taxpayers) to complete the auto population of GSTR-9 from GSTR-2B for Apr-23 till Mar-24.

Thanking You,
Team GSTN

GST Invoicing Rules Updated: Time Limit for RCM Invoices Effective November 2024

New GST Invoicing Rules: CBIC Introduces Rule 47A and Amends Rule 46 of CGST Rules

The Central Board of Indirect Taxes and Customs (CBIC) has issued Notification No. 20/2024 – Central Tax on October 8, 2024, introducing key changes to the Central Goods and Services Tax (CGST) Rules, 2017. These changes will be effective from November 1, 2024, and primarily concern the introduction of Rule 47A, the omission of the second proviso in Rule 46, and amendments to the third proviso of Rule 46. These changes aim to streamline the invoicing process, particularly for transactions under the Reverse Charge Mechanism (RCM).

 

 

Key Changes Introduced

1. Insertion of Rule 47A: Time Limit for Issuing Tax Invoices

With the insertion of Rule 47A, a time limit has been set for issuing tax invoices where the recipient is required to issue the invoice. This rule primarily impacts transactions under the Reverse Charge Mechanism (RCM), where the recipient, rather than the supplier, is liable to pay tax.Rule 47A reads as follows:

“Notwithstanding anything contained in rule 47, where an invoice referred to in rule 46 is required to be issued under clause (f) of sub-section (3) of section 31 by a registered person, who is liable to pay tax under sub-section (3) or sub-section (4) of section 9, he shall issue the said invoice within a period of thirty days from the date of receipt of the said supply of goods or services, or both, as the case may be.”

This rule ensures that invoices under RCM must be raised within 30 days of receiving goods or services, thereby offering clarity to businesses regarding the time frame for compliance.

 

2. Amendment to Rule 46: Omission of the Second Proviso

The second proviso in Rule 46 has been omitted. This omission helps streamline the rules and remove any redundant provisions.

  • Before: The rule contained a second proviso after clause (s).
  • After: The second proviso is now omitted, making the rule more concise and removing unnecessary language.

3. Amendment to the Third Proviso in Rule 46

The third proviso in Rule 46 has been amended for better clarity and language structure. Specifically, the phrase “Provided also that in the case of” has been replaced with “Provided further that in the case of”.

This change is primarily structural, intended to harmonize the structure of the provisos in Rule 46.

Comparative Overview: Before and After Amendments

Provision Before After
Rule 47A (New) Not applicable (no such provision existed before) Time limit of 30 days for issuing tax invoice by the recipient under RCM, effective from November 1, 2024.
Omission of Second Proviso in Rule 46 Second proviso existed after clause (s) in Rule 46. Second proviso has been omitted to streamline the rule.
Amendment to Third Proviso in Rule 46 “Provided also that in the case of…” “Provided further that in the case of…” (structural change for better clarity)

Example: Impact of Rule 47A on Reverse Charge Invoices

Under the Reverse Charge Mechanism (RCM), the liability to pay GST shifts from the supplier to the recipient. With the introduction of Rule 47A, a registered person liable to pay tax under sub-section (3) or (4) of section 9 (i.e., under RCM) must issue a tax invoice within 30 days of receiving the goods or services.

For example:

  • Scenario: A company, XYZ Ltd., receives legal services from a lawyer, which falls under the RCM category.
  • Action Before: There was no specific rule governing the time frame for issuing the invoice by XYZ Ltd. under RCM.
  • Action After (Rule 47A): XYZ Ltd. must issue the tax invoice within 30 days of receiving the legal services.

This rule ensures that tax compliance timelines are clearly defined, preventing delays in invoicing and potential penalties.

Note : 

The CBIC’s introduction of Rule 47A and the amendments to Rule 46 aim to create a more structured and organized framework for invoicing under GST, particularly concerning the Reverse Charge Mechanism (RCM). These amendments have the following implications:

  1. Clarity for Businesses: The time limit for issuing invoices under RCM is now clearly defined, making it easier for businesses to comply.
  2. Streamlined Rules: By omitting the second proviso and refining the language in the third proviso, the CGST Rules are more concise, reducing potential confusion.
  3. Coherent Structure: The harmonization of language and structure in Rule 46 and the addition of Rule 47A contribute to a more organized legal framework under the GST regime.

These changes are expected to improve overall compliance and reduce legal ambiguities, benefiting both businesses and tax authorities.

CBIC_notified_the_Central_Goods_and_Services_Tax_Second_Amendment_Rules_2024
TDS Rules for Salaried Individuals as per Budget 2024

The Union Budget 2024 introduced several significant changes in the tax deduction at source (TDS) on salary, specifically under the new tax regime. While the old regime remains unchanged, the new regime has undergone various amendments aimed at providing relief to taxpayers. Below are the key changes and their implications.

 

New Tax Regime

The new tax regime has revised the slab rates for the financial year 2024-25. The updated slabs are as follows:

 

Income Range (₹) Tax Rate (%)
Up to 3,00,000 Nil
3,00,001 to 7,00,000 5%
7,00,001 to 10,00,000 10%
10,00,001 to 12,00,000 15%
12,00,001 to 15,00,000 20%
Above 15,00,000 30%

Increase in Standard Deduction

The standard deduction has been increased from ₹50,000 to ₹75,000 under the new regime.

Increase In Exemption of Family Pension:

The deduction u/s 57 increased from 15000 to 25000 under New Tax Regime

Employer’s Contribution to Pension Fund

The limit for the employer’s contribution to the pension fund under Section 80CCD(2), which is allowed as a deduction under both the old and new regimes, has been increased from 10% to 14% of the salary.

TDS Deduction Based on TCS Collection : Change in section 192

 

A new provision has been introduced where if TCS (Tax Collected at Source) is collected from an employee on any transaction and the employee declares this to the employer, the employer must consider this TCS for TDS deduction on salary. Previously, only TDS deducted was considered by the employer.

Old Tax Regime

For Individuals Below 60 Years

  • Up to ₹2.5 lakh: Nil
  • ₹2,50,001 to ₹5 lakh: 5%
  • ₹5,00,001 to ₹10 lakh: 20%
  • Above ₹10 lakh: 30%

For Senior Citizens (60 to 80 Years)

  • Up to ₹3 lakh: Nil
  • ₹3,00,001 to ₹5 lakh: 5%
  • ₹5,00,001 to ₹10 lakh: 20%
  • Above ₹10 lakh: 30%

For Super Senior Citizens (Above 80 Years)

  • Up to ₹5 lakh: Nil
  • ₹5,00,001 to ₹10 lakh: 20%
  • Above ₹10 lakh: 30%

Rebate u/s 87A:

This is available only to Resident individual, not to non resident individual or any other person.

Rebate is allowed:

Under Old Tax Regime: only if total income is not exceeding Rs.500000, Rebate shall be allowed upto Rs.12500

Under New Tax Regime: only if total income is not exceeding Rs.700000, Rebate shall be allowed upto Rs.25000

Note:

  • Rebate shall not be allowed from LTCG u/s 112A
  • Not Allowed to HUF
  • Not allowed to NR
  • Allowed for LTCG/STCG u/s 111A, Casual Income ex. Lottery – under Old Regime Only

Examples to Illustrate the Changes

Example 1: Standard Deduction and New Slab Rates

Scenario:

  • Annual salary: ₹12,00,000
  • Applicable under the new regime

Calculation:

  1. Gross Salary: ₹12,00,000
  2. Standard Deduction: ₹75,000
  3. Taxable Income: ₹12,00,000 – ₹75,000 = ₹11,25,000

Tax Computation:

  • Up to ₹3,00,000: Nil
  • ₹3,00,001 to ₹7,00,000: 5% of ₹4,00,000 = ₹20,000
  • ₹7,00,001 to ₹10,00,000: 10% of ₹3,00,000 = ₹30,000
  • ₹10,00,001 to ₹11,25,000: 15% of ₹1,25,000 = ₹18,750

Total Tax Payable:

  • ₹20,000 + ₹30,000 + ₹18,750 = ₹68,750

So TDS to be deducted in whole year based on this in equal amount.

Example 2: TDS Deduction Considering TCS

Scenario:

  • Annual salary: ₹10,00,000
  • TCS collected: ₹5,000
  • Employee declares TCS to the employer

Calculation:

  1. Gross Salary: ₹10,00,000
  2. Standard Deduction: ₹75,000
  3. Taxable Income: ₹10,00,000 – ₹75,000 = ₹9,25,000

Tax Computation:

  • Up to ₹3,00,000: Nil
  • ₹3,00,001 to ₹7,00,000: 5% of ₹4,00,000 = ₹20,000
  • ₹7,00,001 to ₹9,25,000: 10% of ₹2,25,000 = ₹22,500

Total Tax Payable:

  • ₹20,000 + ₹22,500 = ₹42,500

TDS Deduction Adjustment:

  • TCS Declared: ₹5,000
  • Adjusted TDS Deduction: ₹42,500 – ₹5,000 = ₹37,500

So TDS to be deducted in whole year based on this in equal amount.

The Budget 2024 has introduced several changes aimed at providing relief to taxpayers under the new tax regime. The increase in standard deduction, revised tax slab rates, higher deduction limits for employer contributions to pension funds, and adjustments for TCS collection are significant steps towards simplifying tax compliance and providing financial benefits to salaried individuals. Taxpayers should ensure their employers are informed about TCS collections to benefit from accurate TDS deductions on salary.