Major New Income Tax Rules Highlights changes from April 1

Major New Income Tax Rules Highlights changes from April 1

As the new financial year begins on April 1, 2025, several significant financial and tax regulations have come into effect in India, impacting income, spending, and compliance requirements. These below changes reflect the government’s efforts to simplify tax structures, enhance compliance, and provide relief to taxpayers. It’s advisable to consult with a tax professional to understand how these changes may specifically impact your financial situation. Here’s an overview of the summary of the key financial and tax changes effective from April 1, 2025:​

Revised Income Tax Slabs and Increased Exemption Limits

Higher Tax Exemption Threshold: The basic exemption limit has been raised, allowing individuals with an annual income up to INR 12 lakh to be exempt from income tax. Additionally, a standard deduction of INR 75,000 has been introduced, effectively making income up to INR 12.75 lakh tax-free under the new tax regime. ​ Income up to INR 12.75 lakh is now tax-free under the new tax regime (INR 12 lakh exemption + INR 75,000 standard deduction).

Revised Tax Slabs: For incomes exceeding INR 12.75 lakh, the tax slabs have been adjusted as follows:​

• Up to INR 4 lakh: Nil​
• INR 4 lakh to INR 8 lakh:              5%​
• Rs. 8 lakh to INR 12 lakh:            10%
• INR 12 lakh to INR 16 lakh:          15%​
• Rs. 16 lakh to INR 20 lakh:          20%​
• INR 20 lakh to INR 24 lakh:          25%​
• Above INR 24 lakh:                        30%​

New Income Tax Regime as Default

The new tax regime is now the default option for taxpayers. Individuals wishing to continue with the old tax regime must explicitly opt for it when filing their income tax returns. ​

Increased Rebate U/s 87A

The rebate u/s 87A has been increased to INR 60,000 from the previous limit of INR 25,000, providing additional relief to taxpayers under the new tax regime.

GST E-Invoicing Compliance

Businesses with an AATO of INR 10 crore and above are now required to report their e-invoices within 30 days of invoice generation on the Invoice Registration Portal. Late submissions will be automatically rejected, potentially leading to penalties and affecting ITC claims. ​ GST portal security enhanced with mandatory multi-factor authentication (MFA). E-way bills can only be generated for documents less than 180 days old The 180-day limit on e-way bill document issuance could create compliance challenges for businesses with longer invoice cycles.

Relief for Homeowners with Multiple Properties

Taxpayers can now claim tax exemption for two self-occupied house properties. Previously, the annual value of a second property was considered taxable unless specific conditions were met. This change provides relief to individuals owning multiple properties. ​

Increased TDS Threshold on Dividend Income

The threshold limit for TDS on dividend income has been raised from INR 5,000 to INR 10,000. This means TDS will only be deducted when dividend income exceeds INR 10,000, allowing investors to retain more income from dividends. ​Higher TDS exemption for senior citizens: Interest income up to INR 1 lakh is now exempt from TDS. PAN-Aadhaar linking mandatory: Non-linking by March 31, 2025, will result in higher TDS and loss of credit in Form 26AS.

Tax-Free Employer-Provided Medical Treatment Abroad

Expenditures incurred by employers for an employee’s medical treatment abroad, including travel expenses for the employee and a family member, are now considered tax-free perquisites. This provides significant tax relief for employees receiving medical treatment overseas.

Stricter Reporting for High-Value Digital Transactions

High-value transactions made via UPI and credit cards are now subject to stricter reporting under the SFT rules. UPI IDs to be deactivated for security reasons. Positive Pay System for cheques INR 50,000+ to prevent fraud. Taxpayers should be cautious of large digital payments, as they may be scrutinized for TDS or TCS purposes. Inactive Minimum balance requirements updated for major banks like SBI, PNB, Canara Bank.

Mandatory Dematerialization of Physical Share Certificates

Physical share transfers are no longer permitted unless the shares are converted to dematerialized (demat) form by the specified due date. Shareholders must ensure their physical shares are dematerialized to facilitate seamless transfers. ​ KYC mandatory for mutual funds and demat accounts (Nominee details must be re-verified).

Enhanced Support for Micro and Small Enterprises

Payments to MSEs beyond 45 days will not be allowed as deductions under Income Tax. This measure aims to ensure timely payments to MSEs and improve their financial health. ​

Pensions & Loans

New Unified Pension Scheme: Govt employees with 25+ years of service will get 50% of their last 12 months’ average basic salary as pension.

Priority Sector Lending home loan limits increased: INR 50 lakh for metro cities, INR 45 lakh for Tier-2, INR 35 lakh for smaller cities.