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December 11, 2025

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Income Tax Rules: Latest Updates Every Taxpayer Should Know

The 2025 income tax bill, recently presented in Lok Sabha, aims to modernise and streamline India‘s longstanding direct taxation system by simplifying provisions, eliminating outdated references, and establishing a more concise and straightforward legal framework. Following approval by Parliament, the revised legislation is expected to be implemented on April 1, 2026.

The government has maintained the structure and core principles of the bills closely aligned with the current Income-Tax Act. Simplification of provisions and removal of redundant and outdated sections have been implemented. Additionally, formulas and tables have been incorporated to improve comprehensibility and readability for all stakeholders.

The Income Tax Bill 2025 maintains continuity and stability in the direct taxation structure, with no major changes affecting taxes and personal taxation. The income tax return filing deadlines, income tax slabs, and capital gains taxation remain unchanged, as outlined in Budget 2025, to provide tax certainty for taxpayers.

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Changes Taxpayers Should Take Note

TaxYears and no Assessment Year

Taxpayers need to note that the financial year will be continue to start on April 1 and end on March 31, with no changes to this concept. The new income tax bill will not align with the calendar year as the tax year.

The tax year, as outlined in section 3 of the new bill, is defined as 12 months of the financial year starting on April 1. In the event of a newly established business or profession, or a newly created source of income within a financial year, the tax year will begin on the date the business or profession is set up, or the date the new source of income comes into existence, and will end with the conclusion of the financial year.

No Alteration in Tax Rates and Slabs

The latest income tax legislation does not suggest any adjustment to the tax slabs and rates that are relevant to taxpayers. The primary objective of the new bill is to simplify the structure of income-tax laws in order to enhance user-friendliness and clarity.

Up to Rs 4,00,000: No tax to be levied.

From Rs 4,00,001 to Rs 8,00,000: The tax rate is 5%.

From Rs 8,00,001 to Rs 12,00,000: The tax rate is 10%.

From Rs 12,00,001 to Rs 16,00,000: The tax rate is 15%.

From Rs 16,00,001 to Rs 20,00,000: The tax rate is 20%.

From Rs 20,00,001 to Rs 24,00,000: The tax rate is 25%.

Above Rs 24,00,000: The tax rate is 30%

No Changes is Salary Heads

There have been no alterations made to the heads of income under the Income Tax Act Under the new Bill 1961, the income subject to taxation is categorized into five distinct heads of income, as listed below:

Wages

Annuity or pension

Gratuity

Fees or commission

Perquisites

Profits in lieu of, or in addition to, any salary or wages

Advance salary

Leave encashment’

Contribution to the provident fund beyond the tax-free limit

Contribution by the central government or any other employer to employee's pensio

scheme accounts

Contribution by the Central Government to the agniveer corpus

Despite expectations of changes in the heads of income, the new bill specifies that they will remain the same.

TDS/TCS Provisions

The new legislation at source will be enforced on specific transactions, such as the sale of alcohol, tendu leaves, minerals, and scrap materials (1%-5%), the sale of motor vehicles above Rs 10 lakh (1%), and foreign remittances exceeding Rs 7 lakh (5%).

Penalties for failure to comply with TDS/TCS regulations include being considered in default for neglecting to deduct or pay TDS/TCS, as well as incurring a monthly interest charge of 1% on outstanding TDS/TCS amounts.

In accordance with the Income Tax Act, 1961, there are various sections pertaining to Tax Deducted at Source (TDS) such as 194A (interest), 194I (rent), 194J (professional fees, fees for technical services, royalty payments), 194H (commission), 194C (contracts), etc. While most sections have similar provisions, the differences lie in the applicable tax rates and thresholds.

To streamline and simplify the TDS provisions (excluding salaries), the Income Tax Board (ITB) has consolidated these provisions under section 393 of the ITB in a concise and tabular format.

Presumptive Taxation Regime

The proposed bill includes changes to the presumptive taxation regime under sections 44AD, 44AE, and 44ADA. This includes an increase in turnover thresholds for businesses and professionals eligible for the scheme, with limits raised to Rs 5 crore for businesses and Rs 75 lakh for professionals. To simplify understanding of TDS and TCS provisions, tables have been provided for easy reference. Separate tables are available for payments to residents and non-residents, as well as for situations where no deduction at source is necessary.

‍Suggested Read: GST Rule 86B Explained

Salaried Employees and Taxpayers

The salary provisions have been consolidated into one section for easier comprehension. eliminating the need to search through separate chapters when filing an income tax return. Deductions previously permitted under section 10 of the Income Tax Act, 1961, such as gratuity, leave encashment, pension commutation, VRS compensation, and retrenchment compensation, have now been incorporated into the salary chapter. Certain allowances, like HRA, are now outlined in Schedule II of the updated Bill, which is referenced within the salary provisions. The goal was to enhance readability by including tables and formulas.

Changes in Finance Bill 2025

There are no changes to rates in the new income tax bill 2025. The income tax Tax Act, 1961 has undergone regular amendments, including those proposed in the Finance Bill, 2025, keeping the Act updated from a policy perspective. All amendments up to the Finance Bill 2025 have been properly included in the new Income Tax Bill 2025. While there have been no major policy-related changes in the Bill, the aforementioned factors have resulted in proposed 'material' changes in the current law.

Conclusion

Staying updated with the latest income tax rules is no longer optional; it's essential for every taxpayer who wants to remain compliant, avoid penalties, and make smarter financial decisions. With frequent changes in slabs, deductions, and filing procedures, keeping track of new updates helps you plan your taxes more efficiently and take advantage of available benefits. As India’s tax system continues to move toward greater transparency and digitalisation, staying informed empowers you to manage your finances with confidence. Whether you’re a salaried individual, business owner, or investor, following these latest updates ensures that your tax planning remains accurate, optimised, and future-ready.

Suggested Read: GST Audit

FAQs

What is the latest income tax exemption limit for FY 2025- 26?

Under the new tax regime, income up to ₹12 lakh can become tax-free after applying the updated Section 87A rebate.

Are the new tax slabs applicable to all taxpayers?

Yes, the revised slabs apply to individual taxpayers under the new tax regime, which is now the default regime. You may still opt for the old regime while filing your return.

What has changed in TDS rules from April 2025?

Several TDS thresholds have been increased, including those on interest income, professional fees, and property-related compensation, reducing unnecessary deductions for small payments.

What is the new deadline for filing Income Tax Returns?

For FY 2024–25 (AY 2025–26), the ITR filing deadline for non-audit taxpayers has been extended to 15 September 2025.

Can I file a revised or updated return if I made a mistake?

Yes. With the recent update, taxpayers can now file an Updated Return (ITR-U) up to 48 months (4 years) from the end of the relevant assessment year to correct errors or omissions.

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