The Indian government has introduced a series of significant income tax reforms effective from April 1, 2025, aimed at simplifying the tax structure and providing relief to taxpayers. This article provides a comprehensive overview of these changes, including revised tax slabs, enhanced deductions, and procedural updates.

Revised Income Tax Slabs Under the New Tax Regime

The new tax regime has undergone substantial revisions to make it more taxpayer-friendly. The updated tax slabs are as follows:

• Income up to ₹4,00,000: Nil tax rate
• ₹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%

These adjustments aim to reduce the tax burden on middle-income earners and encourage higher compliance. (en.wikipedia.org)

Enhanced Rebate Under Section 87A

To further alleviate the tax liability for individuals, the rebate under Section 87A has been increased:

• Eligibility: Taxpayers with a total income up to ₹12,00,000 are eligible for a rebate.
• Rebate Amount: The maximum rebate available is ₹60,000.

This means that individuals earning up to ₹12,00,000 will have no tax liability after accounting for the rebate. (en.wikipedia.org)

Standard Deduction for Salaried Individuals and Pensioners

The standard deduction has been increased to provide additional relief:

• Previous Deduction: ₹50,000
• Revised Deduction: ₹75,000

This enhancement benefits salaried individuals and pensioners by reducing their taxable income. (en.wikipedia.org)

Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) Revisions

Several changes have been made to TDS and TCS provisions:

• TDS on Rent (Section 194-I): The threshold for TDS deduction on rent has been increased from ₹2,40,000 per annum to ₹6,00,000 per annum.
• TDS on Interest (Section 194A):
  • For Senior Citizens: Threshold increased from ₹50,000 to ₹1,00,000 per annum.
  • For Others: Threshold increased to ₹50,000 for interest from banks and cooperative societies, and ₹10,000 for others.
• TDS on Insurance Commission (Section 194D): Threshold increased from ₹15,000 to ₹20,000.
• TDS on Payments to Partners (Section 194T): A new provision requiring firms and LLPs to deduct TDS at 10% on payments exceeding ₹20,000 to partners, including remuneration, interest, and bonus.
• TCS on Foreign Remittances under Liberalised Remittance Scheme (LRS): The exemption limit has been raised from ₹7,00,000 to ₹10,00,000.

These revisions aim to streamline tax collection and reduce compliance burdens. (en.wikipedia.org)

Extension of Time Limit for Filing Updated Tax Returns (ITR-U)

To encourage voluntary compliance, the time limit for filing updated tax returns has been extended:

• Previous Time Limit: 12 months from the end of the relevant assessment year.
• Revised Time Limit: 48 months (4 years) from the end of the relevant assessment year.

This extension allows taxpayers more time to rectify omissions or errors in their tax filings. (en.wikipedia.org)

Tax Relief on Second Self-Occupied House Property

Previously, only one self-occupied house property was exempt from notional rent taxation. Effective April 1, 2025, individuals can claim tax exemption on two self-occupied properties, thereby eliminating tax on notional rental income for the second property. (en.wikipedia.org)

Tax Deduction for Contributions to NPS Vatsalya Accounts

A new deduction has been introduced under Section 80CCD(1B):

• Deduction Amount: Up to ₹50,000 for contributions to NPS Vatsalya accounts.
• Total Deduction Limit: Including the existing ₹1,50,000 under Section 80CCD(1), the total deduction can now be up to ₹2,00,000.

This encourages savings for retirement through the National Pension System. (en.wikipedia.org)

Taxation of Unit Linked Insurance Plans (ULIPs)

Changes have been made to the taxation of ULIPs:

• Previous Taxation: Income from ULIPs was exempt under Section 10(10D).
• Revised Taxation: For ULIPs with annual premiums exceeding ₹2,50,000 or 10% of the policy value, the income will now be taxed as capital gains.
• Tax Rate: ULIPs held for more than a year will be treated as long-term capital gains and taxed at 12.5%.

This aligns the taxation of high-premium ULIPs with other investment products. (en.wikipedia.org)

Conclusion

The income tax reforms effective from April 1, 2025, represent a significant shift towards simplifying the tax regime and providing relief to taxpayers. By revising tax slabs, enhancing deductions, and extending compliance timelines, the government aims to increase disposable income, encourage savings, and boost economic growth. Taxpayers are advised to familiarize themselves with these changes to optimize their tax planning strategies.