Income Tax, TDS & TCS Changes from 1st April 2025: What You Need to Know

The Union Budget 2025 introduced a series of major changes in the Indian tax landscape, applicable from 1st April 2025. These updates significantly impact individuals, startups, and businesses — with revised income tax slabs, increased thresholds for TDS and TCS, and extended exemptions for start-ups and IFSC units.

Here’s a comprehensive breakdown of the key changes and what they mean for you:

1. Revised Income Tax Slabs (New Tax Regime)

Under the default New Tax Regime (Section 115BAC), income tax slabs have been revised for FY 2025-26 onwards:

• 0%: Income up to ₹4,00,000
  
• 5%: ₹4,00,001 – ₹8,00,000
  
• 10%: ₹8,00,001 – ₹12,00,000
  
• 15%: ₹12,00,001 – ₹16,00,000
  
• 20%: ₹16,00,001 – ₹20,00,000
  
• 25%: ₹20,00,001 – ₹24,00,000
  
• 30%: Above ₹24,00,000
  

🔍 Note: The Old Tax Regime remains optional and unchanged.

2. Higher Rebate Under Section 87A

The rebate limit under the New Tax Regime has been increased to ₹60,000 (from ₹25,000). This means individuals earning up to ₹12,00,000 annually will have zero tax liability under the new regime.

The rebate for the Old Regime remains unchanged at ₹12,500 (up to ₹5 lakh income).

3. Increased TDS Thresholds

Multiple TDS sections now have higher deduction limits, reducing unnecessary withholding and easing compliance:

Section	Nature of Payment	Old Threshold	New Threshold
193	Interest on Securities	NIL	₹10,000
194A	Interest (Senior Citizens)	₹50,000	₹1,00,000
194A	Interest (Others – Banks)	₹40,000	₹50,000
194A	Interest (Others – Non-Banks)	₹5,000	₹10,000
194	Dividend (Individual Shareholder)	₹5,000	₹10,000
194K	Mutual Fund Units	₹5,000	₹10,000
194B/194BB	Lottery, Crossword, Horse Race Winnings	Aggregate > ₹10,000/year	₹10,000 (per transaction)
194D	Insurance Commission	₹15,000	₹20,000
194G	Lottery Commission/Prize	₹15,000	₹20,000
194H	Commission or Brokerage	₹15,000	₹20,000
194-I	Rent	₹2,40,000/year	₹50,000/month
194J	Professional/Technical Fees	₹30,000	₹50,000
194LA	Enhanced Compensation	₹2,50,000	₹5,00,000
194T	Remuneration to Partners	NIL	₹20,000

• Other TDS sections remain unchanged

4. TCS Changes (Effective April 2025)

Section	Nature of Transaction	Old Threshold	New Threshold
206C(1G)	Remittance under LRS & Overseas Tour Package	₹7,00,000	₹10,00,000
206C(1G)	LRS for Education (via Educational Loan)	₹7,00,000	Exempt (No TCS)
206C(1H)	Purchase of Goods	₹50,00,000	Exempt (No TCS)

• Other TCS provisions remain unchanged.

5. Capital Gains Tax on ULIPs

Redemption proceeds from ULIPs (Unit Linked Insurance Plans) will now be taxed as capital gains if:

• The premium exceeds 10% of the sum assured, or
  
• The annual premium is more than ₹2.5 lakhs
  

This ends the long-standing ambiguity and brings parity with mutual fund taxation.

6. Higher LRS Limit & TCS Relief on Education Loans

• The threshold for TCS on foreign remittances under Section 206C(1G) has been raised from ₹7 Lakhs to ₹10 Lakhs per financial year.
  
• No TCS will be applicable on remittances for education, if funded through educational loans from specified financial institutions.
  
• These changes aim to ease compliance and reduce the tax burden on students and families funding overseas education.

7. Updated Return (ITR-U) – 4-Year Filing Window

The time limit for filing Updated Tax Returns (ITR-U) has been extended to 48 months (4 years) from the end of the relevant assessment year.

This move encourages voluntary disclosure of previously missed or under-reported income.

Time of Filing ITR-U	Additional Tax Payable
Within 12 months	25% of additional tax (tax + interest)
Within 24 months	50% of additional tax (tax + interest)
Within 36 months	60% of additional tax (tax + interest)
Within 48 months	70% of additional tax (tax + interest)

📌 Applicable from FY 2025-26 onwards

8. Start-up Tax Exemption Extended

Start-ups can now avail 100% tax exemption for 3 consecutive years out of 10 years from the year of incorporation under Section 80-IAC if they are:

• Incorporated on or before 1st April 2030
• Eligible under DPIIT criteria and other prescribed conditions

9. Extended Tax Benefits for IFSC Units

• The sunset date for starting operations to claim tax concessions in IFSC units has been extended to 31st March 2030.
  
• Under Section 10(10D), the entire maturity amount of a life insurance policy purchased by a non-resident from an IFSC office is fully exempt, with no premium limit.

Final Thoughts

These updates signal a shift toward simplification, transparency, and digital compliance in India’s tax ecosystem. But with so many rule changes across income tax, TDS, TCS, and capital gains — staying compliant is more critical than ever.