Indore (Madhya Pradesh): Taxpayers must prepare to transition to the new income tax regime under the Income Tax Act, 2025, which aims to be simpler for compliant taxpayers while strengthening action against evasion. The provisions of the new Act will come into effect from April 1.
The Free Press explains key provisions of the Act with inputs from senior chartered accountant SN Goyal. Here are 16 key changes that taxpayers and professionals should note:
Replaces 1961 Act
The new Act replaces the Income Tax Act, 1961. The number of sections has been reduced from over 800 to 536.
Tax Year Introduced
The concept of “assessment year” has been removed and replaced with a single “tax year”.
No Change in Tax Slabs
Existing tax rates remain unchanged.
Tax Rebate Continues
The rebate under Section 87A remains, keeping tax liability at zero for incomes up to Rs12 lakh. The rebate is available up to Rs 60,000.
New Tax Regime Default
The new tax regime remains the default, with lower rates and fewer deductions. The old regime continues as an option.
Increase in Allowances
Education allowance: Rs100 to Rs3,000 per month per child
Hostel allowance: Rs300 to Rs9,000 per month per child
Interest-free loan limit increased from Rs20,000 to Rs2,00,000
Revised Compliance Forms
Form 16 becomes Form 130
Form 16A becomes Form 131
Form 26AS becomes Form 168
Simplified ITR Timeline
ITR-1/2: July 31
ITR-3/4 (non-audit): August 31
Updated return (ITR-U): Window extended up to four years, deadline March 31
STT Increased for Derivatives
Higher Securities Transaction Tax (STT) on options premiums and futures trades, increasing costs for active traders.
Buyback Tax Shifted to Investors
Tax on buybacks will now be treated as capital gains in the hands of investors.
Reduced TCS Rates
LRS (education/medical): 5% reduced to 2%
Overseas tour packages: up to 20% reduced to 2%
Simplified TDS/TCS System
Centralised Form 15G/15H system
Automated lower or nil TDS certificates
PAN-based transaction tracking
Foreign Asset Disclosure Scheme
Applicable for undisclosed foreign assets up to Rs1 crore, with a one-time six-month window and immunity from prosecution upon disclosure.
Crypto Reporting Tightened
Tax remains at 30%, with penalties up to 200% of the tax amount for non-reporting.
Fully Digital Tax Administration
Faceless assessment
Automated processing
Reduced manual interface
PAN Rules
PAN mandatory for transactions exceeding Rs10 lakh in a financial year
Vehicle purchases above Rs5 lakh
Property purchases above Rs20 lakh
Payments to restaurants and hotels exceeding Rs1 lakh annually
