Category: Income Tax

Decoding the Direct Tax Landscape: Budget 2025 Insights

Posted on by Hatim Bharmal

The Union Budget 2025 brings a fresh wave of reforms to India’s direct tax framework, aiming to balance economic growth with taxpayer relief. With a focus on simplification, compliance, and incentivizing investments, the latest proposals introduce key changes in tax slabs, deductions, corporate taxation, and digital compliance. Whether you’re an individual taxpayer, a business owner, or a financial professional, understanding these shifts is crucial for strategic tax planning. In this blog, we break down the most significant direct tax updates, their implications, and what they mean for you.

 

1. Rates of Income Tax

  • (a) For Individual, HUF, association of persons, body of individuals, artificial juridical person.
  • •  Section 115BAC (1A) – New scheme – Default Scheme
Sr. No Total income Rate of tax
1. Upto Rs. 4,00,000 Nil
2. From Rs. 4,00,001 to Rs. 8,00,000 5%
3. From Rs. 8,00,001 to Rs. 12,00,000 10%
4. From Rs. 12,00,001 to Rs. 16,00,000 15%
5. From Rs. 16,00,001 to Rs. 20,00,000 20%
6. From Rs. 20,00,001 to Rs. 24,00,000 25%
7. Above Rs. 24,00,000 30%
  • •  No Deduction are available under the New Tax Regime except the following:
    • (i) Standard Deduction of Rs. 75,000/- u/s. 16(ia)
    • (ii) Family Pension of 25,000 or 1/3 of total pension, whichever is less u/s 57(iia)
    • (iii) Contribution to NPS u/s. 80CCD(2) – 14% of salary
    • (iv) Deposit in Agniveer Corpus Fund u/s. 80CCH(2)
    • (v) Deduction for Employment of New Employees u/s. 80JJAA
  • • An individual, HUF, AOP, BOI or artificial judicial person can opt for old scheme on or before due date of filing income tax return as per section 139(1) of the Act. (i.e. 31st July and 31st October)
Sr. No Total income Rate of tax
1. Upto Rs. 2,50,000 Nil
2. From Rs. 2,50,001 to Rs. 5,00,000 5%
3. From Rs. 5,00,001 to Rs. 10,00,000 10%
4. Above Rs. 10,00,000 30%
  • • For resident senior citizen, who is of the age of 60years or more but less than 80 years – Nil rate of Tax upto 3,00,000.
  • • For resident senior citizen, who is of the age of 80years or more – Nil rate of Tax upto 5,00,000
  • • Above tax amount shall be further increased by surcharge at the rate of –
Income level % of Surcharge Remarks
Above 50 lakh to 1 cr 10% Including all special tax rate income i.e. STCG and LTCG

Including all special tax rate income i.e. STCG and LTCG
Above 1 cr – 2 cr 15%
Above 2 cr to 5 cr 25% Excluding Dividend Income, STCG and LTCG – i.e. surcharge is restricted upto 15%

On total income above 2 Cr.
Above 5 cr

(Not applicable to New Scheme)

 37%

(For New scheme surcharge is restricted upto 25% on total income above 2 Cr.)

* Marginal relief shall be provided in case of surcharge

  • • Rabate u/s. 87A – Allowed to Resident Individuals only
Particulars Old Scheme New Scheme (Default)
Rebate Amount (Maximum) Rs. 12,500 Rs. 60,000
Threshold limit of Total Income Less than 5,00,000 Less than 12,00,000
Rebate for Special Tax income Allowed against STCG and LTCG (Except 112A) Not Allowed against STCG and LTCG

 

  • (b) For Partnership Firms/LLP
  • • Tax Rate – 30% + Surcharge & Education Cess of 4% equivalent to 31.2%
  • • Surcharge of 12% if total income exceeds 1 cr.

 

  • (c) For Companies
Section Conditions Rate of Tax (including Health and Education cess) Surcharge on tax
Income >1 cr < 10 cr Income > 10cr
115BA Turnover for F.Y. 2023-24 does not exceed 400 cr 26% 7% 12%
115BA Turnover for F.Y. 2023-24 exceed 400 cr 31.2% 7% 12%
115BAA No deductions or additional depreciation is allowed except 80JJA or 80M 25.17% – –
115BAB New manufacturing Domestic Companies. No deductions or additional depreciation is allowed except 80JJA or 80M 17.16% – –
Foreign Companies Other than foreign companies chargeable at special rates 35% 2% 5%
MAT Not applicable for companies who opted 115BAA and 115BAB 15.60% 7% 12%

 

2. Annual value of the self-occupied property simplified

  • • Under section 23 of the Act, owner of the house property can take Annual value of 2 House properties to be Nil due to reason that owner cannot occupy the house property for employment or business carried out at any other place.
  • • Now it is amended 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. The provision of sub-section (4) of section 23 of the Act which allows this benefit only in respect of two of such houses shall continue to apply as earlier.

 

3. Bringing clarity in income on redemption of Unit Linked Insurance Policy (ULIP)

  • •  Exemption u/s. 10(10D) on sum received under life policy including bonus on such policy is not applicable if amount of premium or aggregate amount of premium payable during the term of such policy or policies exceeds Rs. 2,50,000/-
  • •  It is now proposed to amend provisions related to ULIP so as to provide that ULIP to which exemption does not apply will be treated as capital asset u/s 2(14). And it will be included in definition of equity oriented fund.

 

4.Deduction under section 80CCD for contributions made to NPS Vatsalya

  • • Deduction is now available to contribution made to NPS on account of minor. The amount will be charged to tax when withdrawn in case where deposit was made in account of minor. No Tax when withdrawn due to death of the minor.
  • • Clause 12BA of section 10 inserted to provide partial withdrawal upto 25% of the amount contributed shall not be included in the total income of the parent/guardian. NPS Vatsalya Scheme also allows for partial withdrawal from the minor’s account to address certain contingency situations like education, treatment of specified illnesses and disability (of more than 75%) of the minor.

 

5. Extending the time-limit to file the updated return u/s. 139 (8A)

Sr. No. Period from the end of relevant assessment year Additional tax % of total tax and interest paid
1. Upto 12 months 25%
2. From 12 months upto 24 months 50%
3. From 24 months upto 36 months 60%
4. From 36 months upto 48 months 70%

*No updated return can be filed where any notice u/s. 148A has been issued after 36 months from the end of the relevant assessment year

 

6.Amendment in TDS Provisions

  • •  All the proposed amendment in the TDS sections are depicted in the below table:
Sr. No. Section Current Threshold Proposed Threshold Rate of TDS
1. 193 – Interest on securities

Nil

Rs. 10,000/-

10%
2. 194A – Interest other than Interest on securities (i) Rs. 50,000/- for senior citizen;

(ii) Rs. 40,000/- in case of others when payer is bank, cooperative society and post office

(iii) Rs. 5,000/- in other cases

 (i) Rs. 1,00,000/- for senior citizen;

(ii) Rs. 50,000/- in case of others when payer is bank, cooperative society and post office

(iii) Rs. 10,000/- in other cases

10%
3. 194 – Dividend for an individual shareholder

Rs. 5,000/-

Rs. 10,000/-

10%
4. 194K – Income in respect of units of a mutual fund or specified company or undertaking

Rs. 5,000/-

Rs. 10,000/-

10%
5. 194B – Winnings from lottery, crossword puzzle, etc. Aggregate of amounts exceeding Rs. 10,000/- during the financial year Rs. 10,000/- in respect of a single transaction

30%
6. 194BB – Winnings from horse race
7. 194D – Insurance commission

Rs. 15,000/-

Rs. 20,000/-

2%
8. 194G – Income by way of commission, prize etc. on lottery tickets

Rs. 15,000/-

Rs. 20,000/-

2%
9. 194H – Commission or brokerage

Rs. 15,000/-

Rs. 20,000/-

2%
10. 194-I Rent

Rs. 2,40,000/- during the financial year

Rs. 50,000/- per month or part of a month

(i)2% – Plant & Machinery.

(ii) 10% -Land, Building and Furniture.
11. 194J – Fee for professional or technical services

Rs. 30,000/-

Rs. 50,000/-

 (i)10% – Professional Fees

(ii)2% – Technical Fees

(iii) 2% – Royalty in case sale/distribution/exhibition of cinematographic

(iv)10% – All other Royalty

(v) 2% – Payee is in business of call centre
12. 194LA – Income by way of enhanced compensation

Rs. 2,50,000/-

5,00,000/-

10%
13. Section 194LBC -Income in respect of investment in securitization trust

–

–

10%

(Old Rate 25% for Individual, HUF and 30% for others)
13. 206C – TCS

(i)Timber or any other forest produce (not being tendu leaves) obtained under a forest lease

(ii) Timber obtained by any mode other than under a forest lease

–

–

2%
14. 206 (1H) – TCS on sale consideration exceeding 50 lakh

0.1%

Omitted

 Section omitted w.e.f. 1st April 2025
15. 206C(1G) – TCS Amount remitted for education and medical Treatment

7,00,000

10,00,000

0.5%
16. 206C(1G) – TCS Amount remitted for repayment of education loan taken from abroad from specified Financial institute

7,00,000

Omitted

Applicability omitted w.e.f. 1st April 2025

 

7.Removal of higher TDS/TCS for non-filers of return of income

  • •  Currently, Section 206AB and 206CCA of the Act requires higher deductions or collections of TDS or TCS respectively in case of deductee or collectee are non-filer of Income Tax return.
  • •  To reduce compliance burden for the deductor/collector, it is proposed to omit section 206AB of the Act and section 206CCA of the Act.

 

8. Obligation to furnish information in respect of crypto-asset

  • • It is proposed to insert new section 285BAA with effect from 01.04.2026, to obligate reporting entity i.e. platform providing trading in cryptocurrency or any digital currency, to furnish information in respect of transactions in such crypto asset in statement, for such period, within such time, in such form and manner as may be prescribed.
  • • This will ensure that information related to cryptocurrency and virtual digital currency will be reported to the AIS statement of the person who have transacted in such cryptocurrency and virtual digital currency.

 

9. Rationalisation of taxation of capital gains on transfer of capital assets by non-residents

  • • The provisions of Section 115AD of the Act provides that where the total income of a specified fund or Foreign Institutional Investor includes income by way of long term capital gains, if any, tax shall be calculated at 10%. Long Term capital referred in section 112A is taxed at 12.5% irrespective of resident or non-resident.
  • • Therefore, it is proposed to amend the provisions of section 115AD to provide that income-tax on the income by way of long-term capital gains on transfer of securities not referred to in section 112A, if any, included in the total income, shall be calculated at the rate of 12.5%

 

10.Amendment related to Charitable Trust

  • • It is proposed to amend Explanation to sub-section (4) of section 12AB so as to provide that the situations where the application for registration of trust or institution is not complete, shall not be treated as specified violation for the purpose of the said sub-section. As even minor default in the application may lead to cancellation of registration of trust or institution resulting in tax on accreted income.
  • • Further 12AB is amended to increase the validity of registration of trust from 5 years to 10 years where trust has made an application under sub clause (i) to (v) of the clause (ac) of section 12A(1) and total income of such trust without giving effect of section 11 and 12 does not exceed 5 crores during each of the two previous years preceding the previous year in which application is made.
  • • Section 13 (3) amended to excludes application of income of trust or institution if such income or property of trust or institution is used or applied directly or indirectly to any person – whose contribution to trust or institution exceeds 1 lakh or aggregate contribution exceeds 10 lakhs during the financial year. Amendment also removes relatives or concern in which such person has substantial interest from the said section.

 

11.Amendment of Definition of ‘Capital Asset’

  • • Section 2(14) of the Act defines capital Asset which is amended to include any security held by investment funds referred to in Section 115UB (Alternative Investment Funds) which has invested in such security in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 would be treated as capital asset only so that any income arising from transfer of such security would be in the nature of capital gain.

 

12.Harmonisation of Significant Economic Presence applicability with Business Connection

  • • It is proposed to amend Explanation 2A to Section 9 so that transactions or activities of a non-resident in India which are confined to the purchase of goods in India for the purpose of export shall not constitute significant economic presence of such non-resident in India. This will bring parity to Clause (i) of section 9(1) which states that no income shall be deemed accrue or arise in India to non -resident from operations confined to purchase of goods in India for the purpose of export.

 

13. Rationalisation of provisions related to carry forward of losses in case of amalgamation

  • • As per section 72A and 72AA of the Act provides carry forward and set off of accumulated loss and unabsorbed depreciation allowance in case of amalgamation or reorganisation for 8 assessments years immediately succeeding the assessment year for which the loss was first computed.
  • • This leads into evergreening of loss of the predecessor entity resulting from successive amalgamation to take benefit of 8 years of carry forward and set off of business loss or depreciation allowance.
  • • It is now proposed to amend section 72A and section 72AA of the Act to provide that any loss forming part of the accumulated loss of the predecessor entity, which is deemed to be the loss of the successor entity, shall be eligible to be carried forward for not more than eight assessment years immediately succeeding the assessment year for which such loss was first computed for original predecessor entity.

 

14. Exemption to withdrawals by Individuals from National Savings Scheme from taxation

  • • Section 80CCA amended to provide exemption to the withdrawals made by individuals from these deposits for which deduction was allowed, on or after 29th day of August 2024. This exemption is provided to the deposits, with the interest accrued thereon, made before 01.04.1992.

 

15.Incentives to International Financial Services Centre (IFSC)

  • • Section 9A – It is proposed to rationalize the condition under Clause (c) of subsection (3), determining aggregate participation or investment on 1st April and 1st October of the previous year. If the condition is not met on either date, the fund will have four months to comply. Additionally, the deadline for IFSC based fund managers to commence operations is extended to 31st March 2030, continuing the benefits under Subsection (8A).
  • • To avoid deemed dividend u/s. 2(22)(e) for borrowings by the corporate treasury centre in IFSC from its group entities – It is proposed to amend clause (22) of section 2 to provide that any advance or loan between two group entities, where one of the group entity is a “Finance company” or a “Finance unit” in IFSC set up as a global or regional corporate treasury centre for undertaking treasury activities or treasury services and the ‘parent entity’ or ‘principal entity’ of such ‘group entity’ is listed on stock exchange in a country or territory outside India, other than the country or territory outside India as may be specified by the Board in this behalf, shall not be treated as ‘dividend’. The conditions for a ‘group entity’, ‘principle entity’ and the ‘parent entity’ shall be prescribed
  • • Section 10 – Clause 4(E) – Benefit extended to FPI in addition to banking unit of IFSC. It is proposed to amend clause (4E) of section 10 to provide that the income of a non-resident on account of transfer of non-deliverable forward contracts or offshore derivative instruments or over the-counter derivatives, or distribution of income on offshore derivative instruments, entered into with Foreign Portfolio Investors being an IFSC unit shall also not be included in the total income subject to certain conditions as may be prescribed.
  • • Section 10 – Clause 23FE – Benefits extended to SWP or Pension Funds – Section provides exemption in the nature of dividend, interest and long-term capital gains on investment made in India. It is now proposed to amend that long term gains (irrespective of deemed short term capital gain as per section 50AA) shall not be included in the total income of a SWP or Pension Fund. Further date of investment under the said clause extended from 31st Day of March 2025 to 31st Day of March 2030.
  • • Section 10 – Clause 10D – Exemption on sum received from Life Insurance policy. – It is amended to provide that proceeds received on life insurance policy issued by IFSC insurance intermediary office shall be exempted without the condition related to the maximum premium payable on such policy as mentioned in the clause. (i.e. 2.5 lakh for Unit linked insurance and 5 lakh for other insurance.)
  • • Section 10 – Clause 4H – Extended Capital Gain or Dividend Exemption to Ship leasing units in IFSC – It is proposed to amend clause to provide exemptions to non-residents or units of IFSC engaged in ship leasing on capital tax on transfer of equity shares of domestic companies being units of IFSC and dividends paid by such company being unit of IFSC.
  • • Section 47 (viiad) – provides exemption on transfer of asset being share or unit or interest held in the original fund in consideration for the share or unit of interest in the resultant fund located in IFSC and granted a certificate Category I, II, III AIF. It is now amended to include ETF and retail schemes within the definition of Resultant Fund.
  • • The sunset dates for commencement of operations of IFSC units for several tax concessions, or relocation of funds to IFSC, in clause (d) of sub-section (2) of section 80LA, clause (4D), clause (4F), clause (4H) of section 10 and clause (viiad) of section 47, is proposed to be extended to 31st day of March, 2030.

 

16.Rationalisation in taxation of Business trusts

  • • As per Section 115UA Real Estate Investment Trust (REIT) and Infrastructure Investment Trust (InVIT) enjoys pass through status in respect of interest, dividend and rental income. Therefore, income of REIT and InVIT shall be charged at maximum marginal rate subject to provisions of section 111A and section 112.
  • • Reference of section 112A was not available in the existing provision. Which is now proposed to be amended to include reference to section 111A, 112A and 112 of the Act.

 

17. Rationalisation of transfer pricing provisions for carrying out multi-year arm’s length price determination

  • • It is proposed to amend section 92CA of the Act to provide that the ALP determined in relation to an international transaction or a specified domestic transaction for any previous year shall apply to the similar transaction for the two consecutive previous years immediately following such previous year.
  • • For this purpose, assesse shall required to exercise such option within the time as may be prescribed and Transfer pricing officer may order within 1 month from the end of the month in such option is exercised, declare whether such option is valid or not.
  • • The option cannot be exercised if any proceedings is related to search cases.

 

18. Scheme of presumptive taxation for non-resident providing services for electronics manufacturing facility

  • • It is proposed to insert a new section 44BBD, which deems twenty-five per cent (25%) of the aggregate amount received/ receivable by, or paid/ payable to, the non-resident, on account of providing services or technology to the resident company under a scheme notified by the Central Government, as profits and gains of such non-resident.

 

19. Extension of benefits of tonnage tax scheme to inland vessels

  • • To promote inland water transportation in the country and to attract investments in the sector, it is proposed to extend the benefits of tonnage tax scheme to Inland Vessels registered under Inland Vessels Act, 2021. Accordingly inland vessels have been included in the section 115VD for being eligible to be a qualified ship. Further, inland vessels have been defined in section 115V of the Act in the same manner as provided in the Inland Vessels Act, 2021. Other corresponding amendments have been made to extend the tonnage tax scheme to inland vessels.

 

20. Other Administrative Amendments

  • • Extension of timeline for tax benefits to start-ups – The existing provisions of Section 80-IAC of the Act, inter alia, provide for a deduction of an amount equal to hundred percent of the profits and gains derived from an eligible business by an eligible start-up for three consecutive assessment years out of ten years, beginning from the year of incorporation, at the option of the assessee. It is proposed to amend the above section so as to extend the benefit for another period of five years, i.e. the benefit will be available to eligible start-ups incorporated before 01.04.2030.
  • • Amendments proposed in provisions of Block assessment for search and requisition cases under Chapter XIV-B
    • It is proposed to insert the term “virtual digital asset” to the definition of “undisclosed income” in section 158B.
    • Clause (i) of Section 158BB (1) will replace “total income disclosed” with undisclosed income.
    • Clause (iv) will clarify that income for a previous year, if the return due date hasn’t passed before the search, will be taxed under normal provisions.
    • As per section 158BE – the time limit for completing a block assessment is proposed to be made as 12 months ending from the quarter in which last authorisations for search or requisition has been executed.
  • • It is proposed to amend the Section 144BA, section 153, section 153B, section 158BE, section 158BFA, section 263, section 264 and Rule 68B of Schedule-II of the Act,of the Act so as to exclude the period commencing on the date on which stay was granted by an order or injunction of any court and ending on the date on which certified copy of the order vacating the stay was received by the jurisdictional Principal Commissioner or Commissioner.
  • • Certain penalties to be imposed by the Assessing Officer
    • Sections 271C, 271CA, 271D, 271DA, 271DB and 271E of the Act, inter-alia, provide that penalty under these sections shall be imposed by the Joint Commissioner. Though, assessment in such cases were being made by the Assessing Officer, penalty under these sections were being imposed by the Joint Commissioner.
    • In order to rationalize the process, it is proposed to amend sections 271C, 271CA, 271D, 271DA, 271DB and 271E of the Act so that penalties under these sections shall be levied by the Assessing Officer in place of Joint Commissioner, subject to the provisions of sub-section (2) of section 274 of the Act. Thus, Assessing Officer shall take the prior approval of Joint Commissioner for the passing of penalty order, where penalty amount exceeds Rs. 10,000 or 20,000 if AO is ACIT/DCIT as specified in sub-section (2) of section 274 of the Act.
  • • Provisions related to notifying faceless scheme under section 92CA (Transfer Pricing Proceedings), 144C (Dispute Resolution proceedings) 253 and 255 (Appellate Proceedings) are omitted so as to provide that Central Government may issue directions beyond the cut-off date of 31st day of March, 2025, if required.
  • • It is proposed to amend the section 270AA, which inter alia provides the procedure of granting the immunity by the AO from imposition of penalty and prosecution, to process the application within 3 months from the end of month in which application is received instead of current 1 month time.
  • • It proposed to amend section 275 of the Act to provide that any order imposing a penalty under Chapter XXI shall not be passed after the expiry of six months from the end of the quarter in which the connected proceedings are completed, or the order of appeal is received by the jurisdictional Principal Commissioner or Commissioner, or the order of revision is passed, or the notice for imposition of penalty is issued, as the case maybe.
  • • Section 276BB of the Act is amended to provide that the prosecution shall not be instituted against a person covered under the said section, if the payment of the tax collected at source has been made to the credit of the Central Government at any time on or before the time prescribed for filing the quarterly statement respect of such payment.

 

Conclusion:

To conclude, the direct tax proposals in Budget 2025 introduce a mix of structural changes and rationalization measures aimed at fostering compliance, simplifying tax administration, and promoting economic growth. With revised tax slabs, enhanced deductions under the new tax regime, and targeted incentives for businesses, the government continues to refine the tax landscape to balance revenue mobilization with taxpayer relief. Additionally, amendments in capital gains taxation, IFSC incentives, and rationalization of exemptions reflect a strategic push towards modernization and global competitiveness. As these provisions take effect, individuals and businesses must assess their financial planning strategies to align with the evolving tax framework. Staying informed and proactive will be key to optimizing tax efficiency in the coming fiscal year.

 

Disclaimer:

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Understanding Income Tax Deduction from Salaries for FY 2024-25: Key Updates for Employers and Employees

Posted on by CA Meet Dhrangadhariya

Understanding Income Tax Deduction from Salaries for FY 2024-25: Key Updates for Employers and Employees

The Central Board of Direct Taxes (CBDT) has issued Circular No. 3/2025, dated February 20, 2025, outlining the guidelines for income tax deduction from salaries under Section 192 of the Income-tax Act, 1961, for the Financial Year 2024-25. This circular provides clarity on the latest amendments introduced through the Finance (No.2) Act, 2024, Finance (No.1) Act, 2024, and the Finance Act, 2023. Here’s a detailed breakdown of the key updates affecting salaried individuals and their employers.

Definition of Salary and Perquisites

  1. Expanded Salary Definition: Salary now includes contributions made by the Central Government to the Agniveer Corpus Fund under the Agnipath Scheme (Section 80CCH).
  2. Perquisites Inclusion: The definition of perquisites now encompasses rent-free accommodations and accommodations provided at a concessional rate by employers.

Revised Tax Rates Under the Old and New Regimes

Surcharge Rates (Old Tax Regime)

  • 10% on income between ₹50 lakh – ₹1 crore
  • 15% on income between ₹1 crore – ₹2 crore
  • 25% on income between ₹2 crore – ₹5 crore (excluding dividend income and capital gains under Sections 111A, 112, 112A)
  • 37% on income above ₹5 crore (excluding dividend income and capital gains under Sections 111A, 112, 112A)
  • 15% on income above ₹2 crore (including dividend income and capital gains under Sections 111A, 112, 112A)

Tax Slabs Under the New Tax Regime (Section 115BAC)

  • ₹0 – ₹3,00,000 – Nil
  • ₹3,00,001 – ₹7,00,000 – 5%
  • ₹7,00,001 – ₹10,00,000 – 10%
  • ₹10,00,001 – ₹12,00,000 – 15%
  • ₹12,00,001 – ₹15,00,000 – 20%
  • Above ₹15,00,000 – 30%

Additional Key Amendments

  1. Form No. 16 & 24Q Updates:
    • The Health and Education Cess has replaced the Education Cess.
    • New provisions added to Form No. 24Q, including a dedicated field for other tax deducted or collected at source.
  2. Leave Encashment Exemption Increased:
    • The exemption limit for leave encashment for non-government employees has been raised to ₹25 lakh.
  3. Agniveer Corpus Fund Tax Exemption:
    • Payments from the Agniveer Corpus Fund under the Agnipath Scheme are fully tax-exempt.
  4. Rebate Under Section 87A:
    • For those opting for the new tax regime, total income up to ₹7 lakh qualifies for a rebate, ensuring zero tax liability.
  5. Penalty & Prosecution for TDS Defaults:
    • Penalty under Section 271C: Failure to deduct/pay TDS can result in a penalty equal to the tax not deducted.
    • Prosecution under Section 276B: Non-payment of deducted TDS can attract imprisonment of 3 months to 7 years.

Employer Responsibilities

Employers must ensure:

  • Accurate TDS deductions based on employees’ selected tax regimes.
  • Compliance with the revised Form 16 & 24Q formats.
  • Prompt deposit of deducted taxes to avoid penalties.
  • Timely issuance of Form 16 to employees.

Conclusion

With these new amendments, employees should evaluate which tax regime suits them best. Employers, on the other hand, must align their payroll and tax deduction processes with these updates to ensure compliance and avoid penalties. For further details, refer to the official circular here.

For expert tax planning and compliance guidance, consult a Chartered Accountant today!

Disclaimer:

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Understanding Notice under Section 142(1) of the Income Tax Act

Posted on by CA Meet Dhrangadhariya

Understanding Notice under Section 142(1) of the Income Tax Act

The Income Tax Act, 1961, is a comprehensive legislation that governs the taxation of income in India. One of the key provisions of this Act is Section 142, which deals with the assessment of income tax. Specifically, Section 142(1) empowers the Assessing Officer to issue a notice to the taxpayer, requiring them to file their income tax return.

What is a Notice under Section 142(1)?

A notice under Section 142(1) is a formal communication issued by the Assessing Officer to the taxpayer, requiring them to file their income tax return. This notice is typically issued when the taxpayer has not filed their income tax return or has not furnished the required documents or information.

Why is a Notice under Section 142(1) issued?

A notice under Section 142(1) is issued for several reasons, including:

1. Non-filing of income tax return: If the taxpayer has not filed their income tax return, the Assessing Officer may issue a notice under Section 142(1) to require them to file their return.
2. Non-furnishing of documents or information: If the taxpayer has not furnished the required documents or information, the Assessing Officer may issue a notice under Section 142(1) to require them to furnish the same.
3. Discrepancies in income tax return: If there are discrepancies in the income tax return filed by the taxpayer, the Assessing Officer may issue a notice under Section 142(1) to require them to explain the discrepancies.

What to do if you receive a Notice under Section 142(1)?

If you receive a notice under Section 142(1), it is essential to take immediate action to avoid any penalties or consequences. Here are some steps you can take:

1. Respond to the notice: Respond to the notice within the specified time limit, typically 15 days from the date of receipt of the notice.
2. Furnish the required documents or information: Furnish the required documents or information, such as financial statements, tax audit reports, or other relevant documents.
3. File your income tax return: If you have not filed your income tax return, file it immediately, along with any necessary documents or information.
4. Seek professional help: If you are unsure about how to respond to the notice or need help with filing your income tax return, seek the advice of a tax professional or chartered accountant.

Conclusion

A notice under Section 142(1) is a formal communication issued by the Assessing Officer to the taxpayer, requiring them to file their income tax return or furnish the required documents or information. If you receive such a notice, it is essential to respond promptly and take necessary action to avoid any penalties or consequences. By understanding the purpose and implications of a notice under Section 142(1), you can ensure that you comply with the requirements of the Income Tax Act and avoid any unnecessary complications.

Disclaimer:

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Understanding the Income Tax Slab Rates for AY 2025-26 in India

Posted on by CA Meet Dhrangadhariya

Understanding the Income Tax Slab Rates for AY 2025-26 in India

Introduction The income tax slab rates are an essential component of the financial planning process for individuals and businesses alike. This blog aims to provide an overview of the income tax slabs and their significance.

What are Income Tax Slabs?

Income tax slabs represent the ranges of income that are taxed at different rates. In India, the progressive tax system ensures that higher income is taxed at a higher rate, thereby promoting equitable distribution of income.

Income Tax Slab Rates AY 2025-26:

New Tax Regime:

Tax Slab Tax Rate
Up to Rs 3 lakh Nil
Rs 3 lakh – Rs 7 lakh 5%
Rs 7 lakh – Rs 10 lakh 10%
Rs10 lakh – Rs 12 lakh 15%
Rs 12 lakh – Rs 15 lakh 20%
Above Rs 15 lakh 30%

Old Tax Regime:

Income Slabs Age < 60 years & NRIs Age of 60 to 80 years (Resident Individuals) Age above 80 Years        (Resident Individuals)
Up to ₹2,50,000 NIL NIL NIL
₹2,50,001 – ₹3,00,000 5% NIL NIL
₹3,00,001 – ₹5,00,000 5% 5% NIL
₹5,00,001 – ₹10,00,000 20% 20% 20%
₹10,00,001 and above 30% 30% 30%
Up to ₹2,50,000 NIL NIL NIL
₹2,50,001 – ₹3,00,000 5% NIL NIL

Importance of Knowing Tax Slab Rates Staying updated with the latest tax slab rates helps in:

  • Effective financial planning.
  • Maximizing tax savings through available exemptions.
  • Avoiding last-minute tax filing hassles.

Conclusion

The income tax slab rates for AY 2025-26 will play a crucial role in shaping the financial decisions of millions of taxpayers in India. Keeping an eye on the Union Budget and related announcements is essential. Stay tuned for updates as we bring you the latest information once the slabs are officially declared.

Disclaimer:

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Landmark Tax Reform: Income Tax Bill 2025 Introduced in Parliament – 10 Crucial Takeaways

Posted on by CA Meet Dhrangadhariya

The Indian government has introduced the Income Tax Bill, 2025, aiming to modernize and simplify the nation’s tax framework. This proposed legislation seeks to replace the six-decade-old Income Tax Act of 1961, which has become increasingly complex due to numerous amendments over the years.

10 Key Highlights of the Income Tax Bill, 2025:

  1. 1. Simplified Language and Structure:

    • The bill emphasizes clarity by using straightforward language, eliminating complex legal jargon, and presenting provisions in a more organized manner. It comprises 536 sections and 23 chapters, condensed into 622 pages, compared to the 298 sections and 14 schedules in the existing Act.

  2. 2. Introduction of ‘Tax Year’:

    • The traditional terms ‘previous year’ and ‘assessment year’ have been replaced with ‘tax year,’ defined as the 12-month period starting from April 1. This change aims to simplify the tax filing process by aligning the period of income earning and assessment.

  3. 3. Elimination of Redundant Provisions:

    • Obsolete sections and redundant provisions have been removed to streamline the tax code, reducing ambiguities and potential legal disputes. This effort is expected to enhance compliance and foster voluntary tax adherence.

  4. 4. Inclusion of Taxpayer’s Charter:

    • A new ‘Taxpayer’s Charter’ has been introduced, outlining the rights and obligations of taxpayers. This initiative aims to build trust between taxpayers and the administration, ensuring transparency and fairness in tax proceedings.

  5. 5. Simplified Tax Calculation:

    • The bill presents tax rates and computations in tabular formats, making it easier for taxpayers to understand their liabilities. Complex terms like ‘notwithstanding’ have been replaced with simpler alternatives such as ‘irrespective,’ further enhancing readability.

  6. 6. Capital Gains Taxation:

    • Specific provisions have been made for the computation of capital gains, particularly concerning market-linked debentures, to provide clarity and reduce litigation in such cases.

  7. 7. Digital Transactions and Virtual Assets:

    • The definition of digital transactions has been broadened to encompass virtual digital assets, including cryptocurrencies and non-fungible tokens (NFTs). This inclusion aims to provide clear guidelines on the taxation of emerging digital assets.

  8. 8. Empowerment of the Central Board of Direct Taxes (CBDT):

    • The CBDT has been granted authority to establish tax administration rules, implement compliance measures, and enforce digital tax monitoring systems without requiring frequent legislative amendments. This move is expected to make tax governance more dynamic and responsive.

  9. 9. No Changes to Tax Rates:

    • The bill does not propose any alterations to existing tax brackets or rates. The focus remains on simplifying the law and improving compliance without impacting the current tax structure.

  10. 10. Implementation Timeline:

    • Once enacted, the new Income Tax Bill is expected to come into effect from April 1, 2026, providing taxpayers and professionals ample time to familiarize themselves with the changes.

Conclusion:

The introduction of the Income Tax Bill, 2025, marks a significant step towards a more transparent, efficient, and taxpayer-friendly system. By focusing on simplification and clarity, the government aims to reduce legal disputes, encourage voluntary compliance, and align India’s tax framework with global best practices.

Refer related blog for Income Tax Bill 2025 by clicking here.

Disclaimer:

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

New Income Tax Bill 2025: Key Insights and Expectations

Posted on by CA Meet Dhrangadhariya

The Indian government is set to introduce a new Income Tax Bill in Parliament, with a focus on overhauling the current Income Tax Act of 1961. This move comes as part of an effort to simplify the tax framework, which has grown increasingly complex over the past six decades. The existing Act, with its 298 sections, has undergone continuous modifications, particularly through annual amendments in the Union Budget. These changes, which range from adjustments to tax rates to the introduction and removal of exemptions, have made the Income Tax Act far more intricate than its original version.

Given the extensive revisions over time, the Act no longer reflects the straightforward intentions of the 1961 legislation. In response, tax professionals and taxpayers have long advocated for a comprehensive overhaul—a new, streamlined law that incorporates existing provisions while addressing modern-day needs. After careful deliberation, the Union Cabinet approved the new bill on February 8, 2025, and it is expected to be presented in Parliament by February 10, 2025.

Budget 2025 and the New Bill

Following the announcement in the 2025 Union Budget, the Cabinet has endorsed the new Income Tax Bill, signaling that it will be tabled in Parliament during the current session, likely by February 13, 2025. Key highlights of the bill include a proposed reduction in the number of sections by approximately 30%, which will significantly cut down the length of the Act by nearly half. Despite these changes, there will be no adjustments to the income tax slab rates outlined in the 2025 Budget.

Purpose of the New Income Tax Bill

In her Budget speech for 2024, Finance Minister Nirmala Sitharaman announced the government’s intention to undertake a comprehensive review of the Income Tax Act of 1961. The objective was clear: to make the Act more concise and accessible, ensuring taxpayers can easily understand their obligations.

A central aim of this revision is to reduce disputes and litigation, promoting a system that offers more clarity and certainty. The government has also emphasized the importance of compliance simplicity, making the tax process more transparent and less burdensome for individuals and businesses alike.

As part of the reform process, the Income Tax Department initiated a public consultation period, encouraging taxpayers to provide feedback and suggest changes they would like to see in the new law. This inclusive approach reflects the government’s commitment to taking public input into account while shaping tax reforms.

In her address during the 2025 Budget, the Finance Minister reaffirmed the government’s dedication to reforming tax law, aligning the new bill with the principles of fairness and justice, similar to the goals outlined in the recently enacted Bharatiya Nyaya Sanhita, which repealed the Indian Penal Code of 1860 in July 2024.

Key Changes in the New Income Tax Bill

The new Income Tax Bill is expected to significantly simplify the existing tax structure and reduce the number of provisions currently in place. The aim is to make the law more digestible for both taxpayers and tax authorities, thereby increasing compliance and reducing litigation. Some of the key changes expected include:

  • Simplified Residence Rules: The rules for determining the residential status of individuals are expected to be made more straightforward, offering clearer guidance.
  • Streamlined Tax Structure: The new bill will drastically reduce the number of provisions from the current Act, making it more concise and user-friendly.
  • Easier Compliance: The bill is designed to simplify the process of compliance for taxpayers, cutting down on the administrative burden for both individuals and businesses.

Expected Benefits of the New Income Tax Bill

  1. Reduction in Complexity: By eliminating many of the current exemptions and deductions, the new bill is expected to significantly simplify the tax code, making it easier to navigate for both individuals and businesses.
  2. Improved Compliance: A more transparent and straightforward tax system will help reduce confusion, encouraging greater adherence to tax obligations across the board.
  3. Rationalized Tax Rates: The simplification of tax rates is expected to bring India’s tax system closer in line with global standards, potentially making the country a more attractive destination for both domestic and international businesses.
  4. Decreased Legal Disputes: By clarifying tax laws and reducing ambiguities, the new bill is expected to minimize the frequency of disputes between taxpayers and the tax authorities, fostering a more harmonious and efficient tax environment.

 

Conclusion

The introduction of the New Income Tax Bill in 2025 marks a significant step toward modernizing India’s tax system. With an emphasis on simplicity, transparency, and fairness, the new bill aims to enhance the ease of doing business in India and streamline the tax compliance process. As the government moves forward with this transformative reform, both taxpayers and tax professionals will benefit from a more predictable, less contentious tax environment. The proposed changes are set to make India’s tax laws more aligned with global best practices while reducing the administrative burdens that currently exist under the outdated provisions of the 1961 Act.

Download: Draft Income Tax Bill 2025.

Refer our latest blog related to Income Tax Bill 2025 by clicking here

Disclaimer:

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.