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:

• Other TDS sections remain unchanged

4. TCS Changes (Effective April 2025)

• 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.

📌 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.

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Akash Kanojia

Finance Manager | VCFO | [email protected]

Specializes in accounting, corporate taxation, and VAT/GST compliance, with expertise in financial reporting and both direct and indirect tax advisory. Proficient in blending financial acumen with legal perspectives to offer comprehensive solutions.