Tax Planning for Individuals

INCOME TAX PLANNING FOR FY 2025-26

KEY TAX CHANGES FOR FY 2025-26

HIGHLIGHTS OF CHANGES IN TAX RULES FOR FY 2025-26

Here are some of the key changes to income tax laws and rules expected to take effect on April 1, 2025, in India :

NEW TAX RATES / SLABS UNDER NEW TAX REGIME

• New Income Tax Slabs and Rates:

  • The new tax regime will have revised income tax slabs, offering more granularity across income levels. The new tax regime has been revised to make it more attractive, especially for middle-income taxpayers. Here are the new income tax slabs:

    Income up to Rs 4,00,000: No tax

    • Rs 4,00,001 to Rs 8,00,000: 5%

    • Rs 8,00,001 to Rs 12,00,000: 10%

    • Rs 12,00,001 to Rs 16,00,000: 15%

    • Rs 16,00,001 to Rs 20,00,000: 20%

    • Rs 20,00,001 to Rs 24,00,000: 25%

    • Above Rs 24,00,000: 30%

• INCREASED TAX REBATE LIMIT

• Increased Rebate Under Section 87A:

  • The rebate limit under Section 87A is set to increase. This will result in a higher income threshold for which individuals can have zero tax liability, specifically within the new tax regime.

  • Increased Rebate Limit: The maximum rebate under Section 87A has been increased to ₹60,000.

  • Higher Income Limit: The income limit to be eligible for the rebate has been increased to ₹12 lakh. This means individuals with income up to ₹12 lakh can potentially pay zero tax.

  • No Rebate on Specific Incomes: The Budget 2025 clarifies that the rebate under Section 87A will not be available for certain types of income, including:

    • Capital gains

    • Lottery winnings

    • Horse race winnings

    • Any other income on which a special tax rate is applicable like LTCG

• CHANGES IN TDS / TCS RULES

• TDS Rule Modifications:

  • There will be revisions to Tax Deducted at Source (TDS) thresholds across various income categories.

  • Notably, there are changes to the TDS limit on interest income, especially for senior citizens.

• Major changes in TDS :

• Section 193 : Threshold on Interest on Securities Rs 10,000 ( Earlier NIL )

• Section 194A : Interest other than Interest on securities When payer is bank, cooperative society and post office:

  (i) 1 lakh for senior citizen ( Earlier Rs 50,000 )

• (ii) 50,000/- in case of others ( Earlier Rs 40,000 )

• In case the payer is others , Threshold is RS 10,000/- ( Earlier Rs 5,000 )

• 194 – Dividend, for an individual shareholder Threshold now Rs 10,000 ( Earlier 5,000 )

• 194K - Income in respect of units of a mutual fund Threshold now Rs 10,000 ( Earlier 5,000 )

• 194-I - Rent Threshold of Rs 50,000 in month ( Earlier Rs 2,40,000 in a year )

• Changes in TCS Rules:

  • The rules governing Tax Collected at Source (TCS) are also being updated, including changes to the threshold for foreign remittances.e new tax regime.

• The threshold for collecting tax at source on remittances under various schemes has been increased to Rs 10 lakh from Rs 7 lakh.

• Waiver for Education Loans: TCS on remittances will be waived if the loan is taken for education purposes.

• Decriminalization of Delay: The delay in the payment of TCS up to the due date has been decriminalized. This will reduce the burden on businesses.

• Removal of Sections 206AB and 206CCA:

  • These sections, which mandated higher TDS/TCS rates for non-filers of income tax returns, are being removed to simplify compliance.

• Extended Time Limit for Filing Updated Tax Returns:

  • The time window for filing an Updated Income Tax Return (ITR-U) will be extended.

• Start-up Tax Exemptions:

  • Eligible start-ups will have benefits regarding tax exemptions.

• Cap on Salary Paid to Partners:

  • A new cap will be placed on the salary payable to partners in partnership firms.

• Introduction of Section 194T:

  • This new section mandates Tax Deducted at Source (TDS) on payments made to partners of partnership firms and Limited Liability Partnerships (LLPs).

  • This includes payments such as:

    • Salary

    • Remuneration

    • Commission

    • Bonus

    • Interest on capital

  • The TDS rate is set at 10%.

  • TDS is applicable if the total payments to a partner exceed ₹20,000 in a financial year.

  • It is important to understand that this means that if total payments exceed that 20,000 rupee mark in the finacial year, then the TDS of 10% is taken from the entire amount paid to the partner, and not just the amount above the 20,000 rupee threshold.

• ULIP Taxation Aligned with Capital Gains:

  • Unit Linked Insurance Plans (ULIPs) with certain premium thresholds will now be taxed as capital gains.

THIS ARTICLE CARRIES INFORMATION ON VARIOUS TAX PROVISIONS WHICH ARE GENERALLY USEFUL . YET IT DOES NOT CARRY ALL THE PROVISIONS AND HENCE YOU ARE ADVISED TO GO THROUGH INCOME TAX DEPARTMENT WEBSITES FOR AUTHENTIC COMPLETE INFORMATION , ESPECIALLY FOR THOSE WHO HAVE GOT MULTIPLE STREAMS OF INCOME OR COMPLEX INVESTMENTS . YOU MAY ALSO CONSULT A QUALIFIED TAX CONSULTANT / CHARTERED ACCOUNTANT FOR ANY CLARIFICATION. READERS ARE ALSO WELCOME TO SEND FEEDBACK , FORM AVAILABLE BELOW . WE ARE OPEN FOR CORRECTION IF NEEDED