The Indian government has introduced important income tax rule changes for FY 2025-26 that every taxpayer should know. These updates impact salaried professionals, investors, and small business owners. Let’s explore what’s new and how it could affect your financial planning.
New Default Tax Regime with Adjusted Slabs:
The new tax regime is now the default choice for taxpayers in India. While you can still opt for the old regime, the government is pushing for a simplified structure. Key Highlights:
- No tax on income up to ₹7 lakh under the new regime (including rebate under Section 87A).
- Revised tax slabs reduce complexity and encourage compliance.
- However, most exemptions and deductions (like HRA, LTA) are not allowed under this regime.
This shift aims to streamline taxation and reduce dependency on paperwork-heavy exemptions. However, salaried individuals who claim multiple deductions may still benefit more under the old regime.
Higher TDS/TCS Thresholds & Property Relief:
As part of the Latest Income Tax Updates, authorities raised thresholds for TDS and TCS to ease compliance. TDS on rent now applies only beyond ₹6 lakh/year (vs ₹2.4 lakh earlier). TDS on bank interest is ₹50,000 for regular taxpayers and ₹1 lakh for senior citizens. TCS on foreign remittances via LRS rises to ₹10 lakh, with no TCS on educational remittances. Notional rent on a second self-occupied or vacant property has been removed, giving huge relief to property owners.
On the property front, “notional rent” on self‑occupied or vacant homes is gone—tax relief now covers both properties equally
Extended ITR Filing & Corrections Window:
In addition, the time window for correcting ITRs is extended. Taxpayers can now file an updated return (ITR‑U) for up to 48 months—double the previous 24-month allowance—offering ample opportunity to correct omissions or claim refunds. Furthermore, ITR filing deadlines have shifted: non-audit cases now have until September 15, 2025—an extension that eases filing pressure.
Mutual Fund Taxation:
- Equity Mutual Funds: LTCG exemption has been raised to ₹1.25 lakh (up from ₹1 lakh), and LTCG tax rate increased to 12.5%, while STCG has gone up to 20%—but these apply only for transactions from 23 July 2024 onward.
- Debt Mutual Funds: If purchased before 1 April 2023 and held long term, gains were taxed at 20% with indexation. However, gains sold after 23 July 2024 will now attract 12.5% without indexation. For units bought on or after 1 April 2023, all gains—even long-term—are taxed at slab rates, as indexation has been removed.
- NRIs and Other Asset Classes: New unified capital gains tax applies across equity, hybrid, gold, international, and FoFs for NRIs—TDS, STCG, and LTCG vary by fund type.
Simplified Tax Law:
The government withdrew the Income‑Tax Bill, 2025, following a parliamentary committee’s call for clarity on corporate and trust taxation. At the same time, the new Income‑Tax Act, 2025, has been notified and will come into force from April 1, 2026. ax tribunals also weighed in: Mumbai ITAT ruled that indexed cost and stamp-duty based fair market valuations are valid for long‑term capital gains—offering clarity for property sellers.
Conclusion:
These income tax rule changes reflect the government’s push for a cleaner, tech-driven, and transparent tax system. Whether you’re a salaried professional, business owner, or investor, staying updated is crucial to avoid penalties and optimize your finances. Ready to manage your taxes? Explore more financial insights now!
– Ketaki Dandekar (Team Arthology)
Read more about Latest Income Tax Rules here –