Overview of Income Tax Changes in Finance Bill 2025

The Finance Bill 2025 introduces several pivotal amendments to India’s income tax framework, aiming to simplify compliance and provide relief to taxpayers.

Revised Tax Structure Under Section 115BAC

A new tax regime under Section 115BAC has been proposed, offering an alternative to the existing tax structure. The revised tax slabs are as follows:

Income up to ₹4,00,000: No tax
₹4,00,001 to ₹8,00,000: 5%
₹8,00,001 to ₹12,00,000: 10%
₹12,00,001 to ₹16,00,000: 15%
₹16,00,001 to ₹20,00,000: 20%
₹20,00,001 to ₹24,00,000: 25%
Above ₹24,00,000: 30%

This structure provides taxpayers with the option to choose between the new and old regimes based on their financial situations.

Enhanced Tax Rebate Under Section 87A

The income threshold for availing tax rebates under Section 87A has been increased to ₹12,00,000, with a maximum rebate of ₹60,000. This adjustment effectively reduces the tax burden for middle-income earners. However, incomes taxable at special rates, such as capital gains under Sections 111A and 112, are excluded from this rebate.

Amendments in TDS and TCS Provisions

To streamline tax compliance, the Bill proposes several changes:

Increased Thresholds: The limits for tax deduction under various sections, including Sections 193 and 194A, have been significantly raised, reducing the compliance burden for taxpayers.
Reduced TDS Rate: For income from securitisation trusts under Section 194LBC, the TDS rate has been reduced to 10%.
Withdrawal of Certain Sections: Sections 206C(1H), 206AB, and 206CCA, which dealt with TCS on goods sales and higher tax rates for non-filers, are proposed to be withdrawn, simplifying the tax structure.

Adjustments for Salaried Individuals

The Bill proposes updates to perquisite thresholds under Section 17(2) to reflect current economic conditions. Benefits such as travel expenses for medical treatment abroad are among the perquisites affected by these changes.

Clarifications on House Property Income

The provisions related to house property income have been clarified, allowing up to two properties to have a nil annual value if not rented out. This offers relief to individuals with multiple self-occupied or vacant properties.

Extended Timeline for Updated Return Filing

The deadline for filing updated returns under Section 139(8A) has been extended to 48 months, providing taxpayers with more flexibility to rectify omissions or errors in their tax filings. Staggered rates of additional tax will apply based on the delay in filing.

These comprehensive changes in the Finance Bill 2025 aim to simplify the tax system, reduce compliance burdens, and provide clarity on various tax provisions, benefiting a wide spectrum of taxpayers.