Direct Taxes
As Finance Bill 2025 has been enacted with notification of Finance Act 2025, here are key changes in the Income Tax will come into effect from Tuesday and will be reflected in the Income Tax Returns for Assessment Year 2026-27:
Income Tax Rebate
For individuals opting for the new Income Tax regime, the limit of total income to avail of rebate under section 87A will now be ₹12 lakh as against ₹7 lakh. This means an individual earning up to ₹12 lakh will not be required to pay income tax. In other words, any individual earlier was required to pay a tax of ₹80,000 (in the new regime) for an income of ₹12 lacs. Now, he will not be required to pay tax on such income. However, this does not mean they will be out of the Income Tax net. they will continue to file Income Tax Returns.
Salaried person
The limit on total income, added by the standard deduction of ₹75,000, will mean a salaried person will not have to pay income tax on total annual income up to ₹12.75 lakh under the new Income Tax Regime. However, she/he will be required to file an Income tax Return.
Marginal Relief
This will be applicable for individuals who earn (after total deductions) a total income of more than ₹12 lakh but up to ₹12.75 lakh . These individuals will get the benefit of marginal relief and will be required to pay only marginal a amount of tax equal to the amount of income above ₹12 lakh so that their carry-home is also ₹12 lakh. For example, if total income is ₹12.10 lakh, then tax liability will be ₹10,000, and so on.
The maximum rebate available is ₹60,000 which is there for a taxpayer having income of ₹12 lakh on which tax is payable as per the new slabs.
Reworked structure under new IT regime
Along with rebates, slabs and rates under the new IT regime have also been changed. Now, there will be 7 slabs (₹0-4 lakhs, ₹4-8 lakhs, ₹8-12 lakhs, ₹12-16 lakhs, ₹16-20 lakhs, ₹20-24 lakhs and more than ₹24 lakhs). This means there will not be tax on income up to ₹4 lakh (earlier ₹3 lakh) and maximum rate will come into effect for income above ₹24 lakhs (earlier ₹15 lakhs)
Please note there is no change in rates for corporate tax and old Income Tax regime
End of Equalisation Levy
There will be no equalisation levy (EL) or digital tax on online advertisements starting April . The levy is charged at 6 per cent in respect of the sum received or receivable by a non-resident for online advertisement services. In 2020, EL was also imposed on non-resident e-commerce operators. The rate was 2 per cent, but it was removed in 2024.
TDS on interest income
Threshold for TDS (Tax Deducted at Source) on bank interest for senior citizen (individual with 60 years of age or more) will now be Rs 1 lakh as against Rs 50.000. For non senior citizen, the threshold will be Rs 50,000 as against Rs 40,000. Similarly, dividend/income threshold for TDS has been doubled to Rs 10000.
TCS on money sent abroad
Threshold for TCS (Tax calculated at source) for remittance under LRS (Liberalised Remittance Scheme, which allows sending $250000 abroad without approval from RBI) has been raised to Rs 10 lakhs as against till date limit of Rs 7 lakhs. Same threshold will be applicable for spending on overseas tour program.
Indirect Taxes: GST
Mandatory new Input Service Distributor mechanism
It will be effective from April 1. It will be mandatory for offices receiving tax invoices towards receipt of input services (including RCM transactions) for or on behalf of distinct persons. These offices must obtain ISD registration and distribute credit through prescribed documents in accordance with the GST framework. Till date, businesses had the flexibility to distribute common input tax credits through either the ISD mechanism or a cross-charge model.
Multi-Factor Authentication (MFA)
It will be mandatory for all GST assesses for the generation of e-way bills and e-invoices. This required login using a username, password, and OTP (sent to the registered mobile number, Sandes app, or similar platforms)
