Call Budget 2025- Changes in Income Tax
The Union Budget 2025, unveiled by Finance Minister Nirmala Sitharaman on February 1, sets a fresh direction for India’s economic growth, with a strong focus on inclusivity. It aims to empower vulnerable groups such as the poor, youth, farmers, and women, while fostering sustainable development through reforms in taxation, infrastructure, agriculture, and digitalisation. This budget introduces key measures across these areas to bolster long-term growth.
Now, let’s take a closer look at the key changes in Income Tax outlined in the budget!
Income Tax slabs for new regime
Income Tax slab rates for AY 2026-27 for new tax regime u/s 115BAC are as follows:
| Income | Tax rate |
| 0- 4 Lakhs | – |
| 4 Lakhs to 8 Lakhs | 5% |
| 8 Lakhs to 12 Lakhs | 10% |
| 12 Lakhs to 16 Lakhs | 15% |
| 16 Lakhs to 20 Lakhs | 20% |
| 20 Lakhs to 24 Lakhs | 25% |
| Above 24 Lakhs | 30% |
87A rebate for new regime
For new tax regime u/s 115BAC, threshold limit for claiming 87A rebate is increased from Rs. 7,00,000 to Rs.12,00,000 for AY 2026-27. However, the rebate can be claimed only against normal rate income and tax is to be paid on special rate incomes such as capital gains.
The rebate available is 100% of the normal rate tax.
Marginal relief is available for income slightly above ₹12 lakh.
House property can be “Self occupied” even if assessee cannot actually occupy it due to any reason
Sub-section (2) of said section provides that where house property is in the occupation of the owner for the purposes of his residence or owner cannot actually occupy it due to his employment, business or profession carried on at any other place, in such cases, the annual value of such house or part of the house shall be taken to be nil. Further, sub-section (4) of the said section provides that provisions of sub-section (2) of the Act will be applicable in respect of 2 houses only.
It is proposed to substitute the sub-section (2) of the said section so as 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.
This amendment will take effect from 1st April, 2025 and shall apply to assessment year 2025-26 onwards.
Time limit for Updated Returns
The time limit for filing Updated Returns u/s 139(8A) is increased from 24 months from the assessment year to 48 months from the assessment year. However, if any person has received notice to show-cause under section 148A, this time limit is 36 months.
The additional tax payments u/s 140B are as under:
| Period of filing | Additional tax liability |
| 24 months to 36 months | 60% |
| 36 months to 48 months | 70% |
NSS withdrawals exempt for senior citizens:
It is proposed to exempt withdrawals made from NSS by senior citizens on or after the 29th of August, 2024. Similar treatment to NPS Vatsalya accounts as is available to normal NPS accounts, subject to overall limits.
No higher TDS rate for non-filers:
Section 206AB for higher TDS in case of non-filers is proposed to be omitted. The provisions of the higher TDS deduction will now apply only in non-PAN cases.
Changes in TDS rates FY 2025-26:
Following are the changes in TDS thresholds for FY 2025-26 i.e. AY 2026-27:
| TDS/TCS section | Conditions | Old Threshold | New Threshold |
| 194A- Interest other than “Interest on securities”. | Deductee Age below 60 years AND payer is Bank, Co-op society or Post office | Rs.40,000 | Rs.50,000 |
| Deductee Age below 60 years AND payer is other than above | Rs.5,000 | Rs.10,000 | |
| Deductee Age above 60 years AND payer is Bank, Co-op society or Post office | Rs.50,000 | Rs.1,00,000 | |
| Deductee Age above 60 years AND payer is other than above | Rs.5,000 | Rs.10,000 | |
| 194- Dividends | – | Rs.5,000 | Rs.10,000 |
| 194B- Winnings from lottery or crossword puzzle | – | Rs.10,000 in aggregate in a Financial Year | Rs.10,000 for a single transaction |
| 194BB- Winnings from horse race | – | Rs.10,000 in aggregate in a Financial Year | Rs.10,000 for a single transaction |
| 194D- Insurance commission | – | Rs.15,000 | Rs.20,000 |
| 194G- Commission, etc., on sale of lottery tickets | – | Rs.15,000 | Rs.20,000 |
| 194H- Commission or brokerage | – | Rs.15,000 | Rs.20,000 |
| 194-I- Rent | Plant & Machinery | Rs.2,40,000 during the Financial Year | Rs.50,000 for a month or part of the month |
| Land or building or furniture or fitting | |||
| 194J- Fees for professional or technical services | Fees for technical services | Rs.30,000 | Rs.50,000 |
| Royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films | Rs.30,000 | Rs.50,000 | |
| Any other sum | Rs.30,000 | Rs.50,000 | |
| 194K- Income in respect of units payable to resident person | – | Rs.5,000 | Rs.10,000 |
| 194LA- Payment of compensation on acquisition of certain immovable property | – | Rs.2,50,000 | Rs.5,00,000 |
| 194LBC- Income in respect of investment made in a securitisation trust | Payee is Individual/HUF | – | – |
| Payee is other | – | – | |
| 206C | Timber or any other forest produce (not being tendu leaves) | – | – |
| Timber obtained by any mode other than under a forest lease | – | – | |
| Any other forest produce not being timber or tendu leaves | – | – | |
| Remittances under LRS- out is a education loan obtained from any financial institution | Rs.7 Lakhs | – | |
| Remittances under LRS- others | Rs. 7 Lakhs | Rs.10 lakhs | |
| Sale of any goods | Rs. 50 Lakhs | – |
Other changes
- Presumptive taxation regime for non-residents who provide services to a resident company that is establishing or operating an electronics manufacturing facility. It is further proposed to introduce a safe harbour for tax certainty for non-residents who store components for supply to specified electronics manufacturing units.
- The benefits of existing tonnage tax scheme are proposed to be extended to inland vessels registered under the Indian Vessels Act, 2021 to promote inland water transport in the country.
- Extend the period of incorporation by 5 years to allow the benefit available to start-ups which are incorporated before 1.4.2030.
- Specific benefits to ship-leasing units, insurance offices and treasury centres of global companies which are set up in IFSC. Further, to claim benefits, the cut-off date for commencement in IFSC has also been extended by five years to 31.3.2030.
- Category I and category II AIFs are undertaking investments in infrastructure and other such sectors. It is proposed to provide certainty of taxation to these entities on the gains from securities.
- To promote funding from Sovereign Wealth Funds and Pension Funds to the infrastructure sector, it is proposed to extend the date of making an investment by five more years, to 31st March, 2030.
- It is proposed to reduce the compliance burden for small charitable trusts/institutions by increasing their period of registration from 5 years to 10 years. It is also proposed that disproportionate consequences do not arise for minor defaults, such as incomplete applications filed by charitable entities.
