Upcoming Amendments to the Income Tax Act Effective from April 1, 2025
The Government of India has introduced significant amendments to the Income Tax Act, which will come into effect from April 1, 2025. These amendments encompass changes in tax slab rates, modifications in Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) provisions, an extension of deadlines, and new taxation rules for partnership firms and Limited Liability Partnerships (LLPs). This article provides a comprehensive and detailed breakdown of these amendments to help taxpayers understand and comply with the new regulations effectively.
1. Revised Income Tax Slab Rates
The revised income tax slabs for individuals are as follows:
| Income Slab (INR) | Tax Rate |
| Up to 4,00,000 | 0% |
| 4,00,001 – 8,00,000 | 5% |
| 8,00,001 – 12,00,000 | 10% |
| 12,00,001 – 16,00,000 | 15% |
| 16,00,001 – 20,00,000 | 20% |
| 20,00,001 – 24,00,000 | 25% |
| Above 24,00,000 | 30% |
Key Highlights:
- The rebate under Section 87A has been increased to ₹60,000, up from the previous ₹25,000.
- If total taxable income does not exceed ₹12 lakh, tax-free income will be allowed up to ₹12 lakh.
- These changes aim to provide relief to middle-class taxpayers by reducing the tax burden on lower income brackets.
2. Changes in TDS Thresholds
To simplify compliance and reduce the tax burden, the government has revised TDS thresholds across multiple sections:
| Section | Purpose | Old Threshold (₹) | New Threshold (₹) |
| 193 | Interest on securities | Nil | 10,000 |
| 194A | Interest (Senior Citizens) | 50,000 | 1,00,000 |
| 194 | Dividend | 5,000 | 10,000 |
| 194-I | Rent (Yearly) | 2.4L | 50,000/month |
| 194J | Professional Fees | 30,000 | 50,000 |
| 194LA | Compensation | 2.5L | 5L |
Impact of These Changes:
- Increased thresholds will reduce the frequency of TDS deductions for small taxpayers and businesses.
- Senior citizens will benefit significantly from the enhanced exemption on interest income.
- Professionals and landlords will find it easier to manage cash flows without immediate tax deductions.
3. TCS Amendments
The government has also revised the Tax Collected at Source (TCS) provisions to ease financial burdens on certain transactions:
| Section | Scenario | Old Threshold (₹) | New Threshold (₹) |
| 206C(1G) | LRS/Overseas Tour | 7L | 10L |
| 206C(1G) | Education Loan (LRS) | 7L | Nil (No TCS) |
| 206C(1H) | Purchase of Goods | 50L | Nil (No TCS) |
Significance:
- The higher threshold for Liberalized Remittance Scheme (LRS) will encourage international travel and investment.
- Removing TCS on education loans under LRS will reduce the financial strain on students studying abroad.
- Eliminating TCS on purchase of goods removes unnecessary compliance for businesses and traders.
4. Updates on ITR-U (Updated Return)
The government has extended the deadline for filing an Updated Return (ITR-U) from 24 months to 48 months (4 years) from the end of the relevant assessment year.
Example:
For FY 2021-22 (AY 2022-23), an updated return can now be filed until FY 2027-28.
Benefits:
- This extension allows taxpayers more time to rectify errors, declare missed income, and avoid penalties.
- Provides flexibility to taxpayers who may have inadvertently underreported income.
5. New Limits for Partner Remuneration
To ensure fair compensation for partners in firms, the government has revised the remuneration limits:
| Book Profit (₹) | Old Limits | New Limits |
| Up to 3,00,000 | Higher of ₹1,50,000 or 90% of book profit | Higher of ₹3,00,000 or 90% of book profit |
| Above 3,00,000 | 60% of book profit | 60% of book profit |
Implications:
- Partners will receive higher allowable remuneration, promoting better income distribution and financial planning.
- Small and medium enterprises (SMEs) benefit from greater financial flexibility.
6. Introduction of Section 194-T (New TDS Provision)
A new TDS provision, Section 194T, has been introduced, impacting partnership firms and LLPs.
Key Highlights:
- Applicability: TDS deduction on payments to partners, including:
- Salary & Remuneration
- Commission & Bonus
- Interest on Capital
- Threshold: If total payments exceed ₹20,000 per year.
- TDS Rate: 10%
- Effective Date: April 1, 2025
Reason for Introduction:
- Ensures compliance and tax transparency on income distributed to partners.
- Helps in tracking financial transactions within partnership firms.
7. Other Key Changes
Apart from the above modifications, the government has introduced additional tax incentives and reforms:
Startups:
- Tax holiday under Section 80-IAC extended till March 31, 2030, encouraging more startup investments.
International Financial Services Centre (IFSC) Benefits:
- Tax concessions extended till March 31, 2030, promoting global financial activities in India.
Unit Linked Insurance Policies (ULIPs):
- Proceeds taxed as capital gains if the premium exceeds 10% of the sum assured or ₹2.5 lakh per year.
Higher TDS Provisions Removed:
- Sections 206AB/206CCA omitted, removing the requirement for higher TDS for non-filers.
Conclusion
These tax reforms introduced by the Government of India aim to enhance transparency, ease compliance, and provide relief to taxpayers. The revised tax slab rates, increased TDS/TCS thresholds, extended deadlines, and new tax provisions for partnership firms and LLPs will have a significant impact on taxpayers, particularly businesses and professionals.
Actionable Steps for Taxpayers:
- Review the new tax slabs and plan investments accordingly.
- Verify changes in TDS/TCS provisions relevant to your financial activities.
- Consult a tax professional to ensure compliance with the updated tax structure.
- File updated returns within the new extended deadline if necessary.
By staying informed and proactive, taxpayers can maximize benefits while ensuring compliance with the new regulatory landscape.
