The Indian government has announced significant income tax changes from 1st April 2025. These updates are expected to impact taxpayers across various income brackets. Whether you are a salaried individual, business owner, or investor, understanding these changes will help you plan your finances effectively. Let’s see the key updates in the new financial year.
Revised Tax Slabs:
One of the most notable changes from 1st April 2025 is the revision of income tax slabs. The government is introducing lower tax rates to benefit the middle class and encourage higher disposable income. The existing tax slabs will see reductions across various income ranges, aiming to make taxes more affordable for taxpayers.
The tax-free limit jumps to ₹12 lakh, up from ₹7 lakh, thanks to a ₹60,000 rebate under Section 87A. For example, income between ₹4 lakh and ₹8 lakh now faces just 5% tax. Above ₹24 lakh, it’s 30%. Salaried folks get a ₹75,000 standard deduction, making ₹12.75 lakh tax-free. Per IBEF, mutual fund assets hit ₹50 lakh crore in 2023, hinting at growing financial awareness these slabs could fuel.
Changes in Tax Deductions and Exemptions:
Starting from 1st April 2025, the government has also revised certain income tax deductions and exemptions. The most notable among these is the increase in the maximum limit for deductions under Section 80C. The limit will rise from ₹1.5 lakh to ₹2 lakh. This means individuals can now save more through investments in tax-saving instruments such as PPF, NSC, and life insurance premiums.
The government has also announced a new exemption for long-term capital gains from stocks, mutual funds, and real estate investments, where gains up to ₹1 lakh per year will be completely tax-free. This change aims to promote investments and increase participation in India’s growing financial markets.
Higher TDS and TCS Thresholds:
Another big income tax change from 1st April, 2025 is relaxed TDS rules. Senior citizens now enjoy a ₹1 lakh TDS limit on interest income, up from ₹50,000. Rent and commission thresholds also rise, easing the burden on small taxpayers. Moreover, TCS on foreign remittances under the Liberalised Remittance Scheme jumps to ₹10 lakh from ₹7 lakh. This helps frequent travelers and investors.
Simplified Tax Filing and Compliance:
To improve compliance and simplify the filing process, the government will roll out a new scheme that allows salaried employees to file income tax returns with minimal paperwork. This new system, introduced from 1st April 2025, will automatically calculate tax liability based on the details provided by employers in the Form 16, thus reducing the effort required for tax filing.
This new system promises to reduce tax-related stress for salaried individuals and eliminate common mistakes in returns, especially with regards to claiming deductions. In addition, the introduction of pre-filled tax return forms will help streamline the process for taxpayers.
Impact on Businesses and Corporates:
For businesses, the tax rates on companies have been reduced as well. The corporate tax rate for small businesses with annual turnover up to ₹100 crore will be reduced by 3%, making it more favorable for small and medium enterprises (SMEs). In contrast, large corporates will benefit from a streamlined tax filing process, including the introduction of e-filing options that allow for faster processing of claims and assessments.
The government is also offering tax credits to firms investing in technology upgrades and research, encouraging growth in innovation-driven sectors. As per the new changes, startups will benefit from enhanced tax holidays and exemptions on profits for the first five years of operation.
Conclusion:
In conclusion, income tax changes from 1st April, 2025 offer relief and flexibility. Middle-income earners save more with wider slabs and rebates. Seniors and startups gain from higher thresholds and benefits. Property rules ease up, and compliance gets simpler. These steps reflect a push for a taxpayer-friendly system. Learn more at the Income Tax Department website.
– Ketaki Dandekar (Team Arthology)
Read more about Income Tax Changes from 1st April, 2025 here – https://cleartax.in/income-tax